The Constitution And Liberty Of Contract
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Politics and Activism

The Constitution And Liberty Of Contract

The liberty of contract is not explicitly in the Constitution but has allowed for the Courts to strike down regulation on businesses.

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The Constitution And Liberty Of Contract
Caglar Law

The liberty of contract is nowhere to be found in the Constitution, but this has caused the Supreme Court to decide cases in a certain manner starting with the 1905 case Lochner v. New York.

New York passed the Bakeshop Act in 1895, which prohibited bakers from working more than ten hours per day or 60 hours per week. Joseph Lochner, a baker in Utica, challenged the law citing the "liberty" part of the Fourteenth Amendment. The state government argued that the law fell under the police powers of the Tenth Amendment. In a split 5-4 decision, the Supreme Court rendered that New York violated Lochner's freedom of contract. The Supreme Court justified that the power for an individual to bargain with contracts heavily outweighed the state's right to regulate. As a result, the Bakeshop Act was struck down.

Justice John Marshall Harlan dissented by stating that the liberty of contract should be regulated when a state has a legitimate and constitutional law based on its reserved police powers under the Tenth Amendment. Justice Oliver Wendell Holmes decried the decision as judicial activism that ascribed the Constitution to a "particular economic theory."

As a result of the decision, the Supreme Court has generally struck down laws that regulated business practices as it would interfere with profits and the liberty of contract. As in Adkins v. Children's Hospital, the Supreme Court struck down state minimum wage laws as it interfered with the operations of businesses. The Supreme Court finally scaled back on its attacks on regulations after it struck down many of Franklin Delano Roosevelt's New Deal programs as unconstitutional. Roosevelt threatened to pack the Supreme Court by increasing the size of the judiciary body in order to appoint his own supporters and uphold his programs. Under pressure, the Supreme Court gave a favorable ruling in West Coast Hotel Co. v. Parrish, which overturned Adkins v. Children's Hospital and allowed states to enact minimum wage laws. The court also expanded federal regulatory powers over labor relations in National Labor Relations Board v. Jones & Laughlin Steel Corporation, thus weakening liberty of contract.

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