Private corporation charters Summary

  • Last updated on November 11, 2022

Agreements granted by states or the federal government considering a group of people to be a single entity for the purpose of maintaining an organization or institution beyond the life span of the people in question.

Initially given to charitable organizations to operate schools, churches, or hospitals, private corporations charters were issued by state governments in the early nineteenth century to promote American industry and business. Charters promoted industrialization by permitting companies to exist as abstract entities beyond the life spans of their owners. Private corporation charters occasionally came with the power of eminent domain, local tax exemptions, or limited liability for stockholders. In Dartmouth College v. Woodward [case]Dartmouth College v. Woodward [Dartmouth College v. Woodward](1819), the Supreme Court extended the contract clause of the U.S. Constitution to apply to a corporate charter such as that granted to Dartmouth College. Chief Justice John Marshall ruled that the college was a private corporation and therefore not subject to the state of New Hampshire’s regulatory power. However, in Charles River Bridge v. Warren Bridge[case]Charles River Bridge v. Warren Bridge[Charles River Bridge v. Warren Bridge] (1837), the Court, citing the contract clause, held that a corporate charter did not imply exclusive, monopoly privileges and that states could reserve a right to amend charters that they had issued. The Court further ruled that charters should not be given a broad construction and that state governments, using their police powers, had the authority to safeguard the rights of the public against the claims of corporations.

Charles River Bridge v. Warren Bridge

Commerce, regulation of

Contract, freedom of

Corporations

Dartmouth College v. Woodward

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