Also known as “liberty of contract,” the doctrine that individual persons and business firms should be free to enter into contracts without undue interference from government.
The Supreme Court recognized that the Fifth Amendment’s due process
After debating the concept on numerous occasions, a majority of the Court finally accepted the idea that the Fourteenth Amendment protected a substantive freedom of contract in Allgeyer v. Louisiana
Through the four decades following Allgeyer, the Court looked on freedom of contract as a normative ideal and required states to assume a high burden for proving that any restraint on the liberty was justified on the basis of accepted police powers, such as protecting the public’s safety, health, or morality. The most prominent cases usually involved legislation regulating terms of employment, such as maximum working hours and minimum wages. In Lochner v. New York
Nevertheless, the freedom of contract doctrine was used in ways that would later be considered progressive. In Buchanan v. Warley
The Court often accepted the constitutionality of restraints on the freedom of contract, but only when a majority concluded that a restraint was a reasonable means for enforcing legitimate police powers. For example, the Court in Holden v. Hardy
The Court began to moderate its position on freedom of contract after Charles Evans Hughes became chief justice in 1930. During President Franklin D. Roosevelt’s first term, nevertheless, four conservative justices dubbed the “Four Horsemen
After the Court reversed itself in 1937, it never again struck down a public policy based on the freedom of contract doctrine. In effect, it almost entirely abandoned any judicial supervision based on the doctrine a development that is part of its movement toward exercising only minimal scrutiny of all economic regulations. Since then, the Court has upheld economic regulations only when they have appeared to be rationally related to legitimate governmental interests. The Court might resurrect the freedom of contract doctrine if it were to find some governmental regulation of contracts totally unreasonable or arbitrary. Although the Court lost interest in freedom of contract after 1937, it did not entirely stop reading substantive due process guarantees into the Fifth and Fourteenth Amendments.
Cefrey, Holly. The Sherman Antitrust Act: Getting Big Business Under Control. New York: Rosen Publishing Group, 2004. Corwin, Edward. Liberty Against Government: The Rise, Flowering, and Decline of a Famous Judicial Concept. Reprint. Westport, Conn.: Greenwood Press, 1978. Ely, James, Jr. The Guardian of Every Other Right: A Constitutional History of Property Rights. New York: Oxford University Press, 1992. Price, Polly J. Property Rights: Rights and Liberties Under the Law. Santa Barbara, Calif.: ABC-Clio, 2003. Seigan, Bernard. Economic Liberties and the Constitution. Chicago: University of Chicago Press, 1980.
Due process, substantive
Privacy, right to
Private corporation charters