New Jersey v. Wilson, 11 U.S. 7 Cranch 164 164 (1812)
Are the terms of a contract inviolate? Can a contract run in perpetuity and affect something other than the parties involved? Can contracts be impaired (modified or broken) without the consent of both parties? These were the questions facing the Court in 1812 when they accepted an appeal of New Jersey v. Wilson.
Following the form in which Chief Justice Marshall outlined them in the opinion, the facts were these:
The remnant of the tribe of Delaware Indians had claims to a considerable portion of land in New Jersey which they desired to eventually be rid of. In 1758, the Indians and commissioners appointed by New Jersey met and the Indians proposed to designate a portion of the land that they would continue to live on; release their claim to all other land; and appoint certain chiefs to meet with NJ commissioners to draft plans for the eventual release of the entire claim.
This was agreed to by the state’s commissioners, and the legislature passed an act to that effect that same year.
This act, among other provisions, stipulated “that the lands to be purchased for the Indians shall not hereafter be subject to any tax, any law usage or custom to the contrary thereof, in any wise notwithstanding.” (Emphasis added)
The state paid for the land, conveyed it to the Indians, and the Indians released their claim to the rest of their holdings.
In 1801, the Indians decided to join a related tribe living at Stockbridge, New York. They applied for, and obtained an act of the legislature of New Jersey, authorizing the sale of their New Jersey land.
This new act made no mention of the exemption from taxation which was part of the original agreement and the original act of the legislature.
In 1803, the land in question was broken up and sold to several new owners.
In October, 1804, the legislature repealed the section of the 1758 act, which had exempted the lands from taxes. The lands were then assessed and the taxes demanded of the new owners. The new owners, aware of the agreement made in 1758 regarding tax exemption of the land, sued New Jersey for breach of contract. The New Jersey Supreme Court ruled that the 1804 repeal act was valid and that the land was indeed taxable. The plaintiffs appealed to the Supreme Court.
The question presented to the Court was this: did New Jersey’s act of 1804, repealing the tax exemption of the land, violate the Impairment of Contracts clause of the Constitution?
The Court, in a unanimous decision delivered by Chief Justice John Marshall, said it did; the grant of tax immunity was a contract protected by Article 1 Section 10, which reads:
“No State shall … pass any Law impairing the Obligation of Contracts.”
The Court opined that: “This is certainly a contract clothed in forms of unusual solemnity. The privilege, though for the benefit of the Indians, is annexed, by the terms which create it, to the land itself, not to their persons.”
The tax exemption increased the value of the land, and though the 1801 act made no mention of continued tax exemption, neither did it repeal such exemption, that occurred in the 1804 act, after the land had been sold to new owners — who no doubt considered the tax exemption in their assessment of the sale price.
Leonard W. Levy, author of numerous books and articles on the Constitution, including The Origins of the Bill of Rights, called this a “breathtaking expansion of the contract clause” involving “some species of metaphysics.” “The Court simply extended the contract clause beyond the intentions of its framers to protect vested rights and promote business needs.” I disagree.
While I’m not a lawyer, and have never seen the wording of the original agreements and acts in this matter, the Supreme Court Justices were, and did.
Citing Fletcher v. Peck as precedent, the court decided that the original agreement with the Indians represented a valid contract, and contracts, with few exceptions, remain in force unless and until the terms have been met or they are severed by mutual agreement of both parties. “Hereafter” as a contract specification can be a long time. New Jersey’s modification of that contract, even though the Indians were no longer owners of the land (or still in the state) was precisely what the Impairment of Contracts Clause was intended to prevent.
During the Articles of Confederation period state legislatures and courts meddled in contracts willy-nilly, sometimes making life easier for debtors, sometimes for creditors. The post-war economy was a mess and debtors and creditors alike faced hard times. But to bring stability and predictability to the economy, such “impairment” of contracts had to stop, thus Article 1, Section 10.
A contract is a contract.
New Jersey v. Wilson (1812) Supreme Court decision:
Gary Porter is Executive Director of the Constitution Leadership Initiative (CLI), a project to promote a better understanding of the U.S. Constitution by the American people. CLI provides seminars on the Constitution, including one for young people utilizing “Our Constitution Rocks” as the text. Gary presents talks on various Constitutional topics, writes a weekly essay: Constitutional Corner which is published on multiple websites, and hosts a weekly radio show: “We the People, the Constitution Matters” on WFYL AM1140. Gary has also begun performing reenactments of James Madison and speaking with public and private school students about Madison’s role in the creation of the Bill of Rights and Constitution. Gary can be reached at email@example.com, on Facebook or Twitter (@constitutionled).
 New Haven, Connecticut: Yale University Press, 1999