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OGDEN v. SAUNDERS 12 Wheaton 213 (1827)

Ogden established the doctrine that a state bankruptcy act operating on contracts made after the passage of the act does not violate the OBLIGATION OF A CONTRACT. The majority reasoned that the obligation of a contract, deriving from positive law, is the creature of state laws applicable to contracts. A contract made after the enactment of a bankruptcy statute is, therefore, subject to its provisions; in effect the statute enters into and becomes part of all contracts subsequently made, limiting their obligation but not impairing it.

For a minority of three, Chief Justice JOHN MARSHALL dissented, losing control of his Court in a constitutional case for the first and only time during his long tenure. He would have voided all state bankruptcy acts that affected the obligation of contracts even prospectively. Grounding his position in the immutable HIGHER LAW principles of morality and natural justice, he maintained that the right of contract is an inalienable right not subject to positive law. The parties to a contract, not society or government, create its obligation. Marshall believed that the majority's interpretation of the CONTRACT CLAUSE would render its constitutional prohibition on the states "inanimate, inoperative, and unmeaning." Had his opinion prevailed, contractual rights of property vested by contract would have been placed beyond government regulation, making the contract clause the instrument of protecting property that the Court later fashioned out of the DUE PROCESS clause substantively construed. Until then, despite Marshall's fears, the contract clause remained the principal bastion for the DOCTRINE of VESTED RIGHTS. This case, however, ended the Court's doctrinal expansion of that clause. Ogden prevented constitutional law from confronting the nation with a choice between unregulated capitalism and socialism.