• Last updated on November 11, 2022

The Supreme Court limited the amount of protection granted to corporate charters under the contracts clause.

Rhode Island granted a bank charter to Providence Bank in 1791 and in 1822 sought to impose a tax on the capital stock of all banks including Providence, which claimed it was exempt because no tax was included in its charter. Providence claimed protection under the contracts clause of Article I of the Constitution, but the Supreme Court, by a 7-0 vote, held that the contracts clause protected only explicit contractual commitments. In his opinion for the Court, Chief Justice John MarshallMarshall, John;Providence Bank v. Billings[Providence Bank v. Billings] wrote that because taxing was so basic to all governments, the government could not have been expected to abdicate its right to tax without making an explicit provision in a charter or contract. This view of strictly construed contracts was further developed in Charles River Bridge v. Warren Bridge[case]Charles River Bridge v. Warren Bridge[Charles River Bridge v. Warren Bridge] (1837).Private corporation chartersContracts clause;Providence Bank v. Billings[Providence Bank v. Billings]Corporations;Providence Bank v. Billings[Providence Bank v. Billings]Private corporation charters

Charles River Bridge v. Warren Bridge

Contracts clause

Corporations

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