Restricting the freedom of contract: a fundamental prohibition.

AuthorWeber, David P.
PositionI. Introduction through II. Contract as a Fundamental Right C. Status - To What Extent May the Right to Contract Be Lawfully Limited? 2. Gender as Status - An Evolution of Contractual Suffrage, p. 51-76

This article argues that the general right to contract, that is to say the ability of one to obligate himself in exchange for another's obligation in return, is a fundamental (or basic) though not all-encompassing right and one that is subject to additional legal protections especially when limitations are sought to be imposed discriminatorily or based on status rather than capacity or subject matter of the contract. While post-Lochner decisions have given states considerable leeway to regulate the scope of freedom of contract, restrictions based on status, especially the status of unauthorized immigrants, are invidious and go beyond the ambit of the type of state regulation previously permitted. This article concludes that a prohibition on the right to contract based solely on unauthorized immigration status in the United States likely violates the Civil Rights Act and the U.S. Constitution on preemption, due process and equal protection grounds, and, to the extent executed contracts are involved, on Contract Clause grounds as well. The article analyzes other circumstances in which states and the federal government have previously restricted the right to contract based on status, and finds in nearly every case that the restriction of the right to contract affected members of a suspect class based on immutable characteristics such as race, national origin, alienage, gender, or servitude. While the Supreme Court has previously concluded immigration status is not a suspect class, this article argues that states' illicit use of immigration status as a proxy for race, national origin or alienage suffices to meet the Arlington Heights test for disparate impact and therefore qualities for strict scrutiny.

[T]he movement of the progressive societies has hitherto been a movement from Status to Contract. (1)

--Sir Henry Maine

The first principle of a civilized state is that power is legitimate only when it is under contract. (2)

--Walter Lippmann

[F]reedom of contract is a qualified, and not an absolute, right. (3)

--Chief Justice Charles Hughes

  1. INTRODUCTION

    The right to contract is one of those fundamental rights in our society that is frequently lauded and rightly receives primary credit for the establishment of a functional, market-based economy in which predictability is prized. (4) This right is so ingrained that whenever we do hear about infringement of the right to contract, it is usually historical, such as limitations on women's right to contract prior to the nineteenth and twentieth centuries (5) or the rights of slaves or indentured servants preceding the twentieth century. (6) In addition, the supremacy of contract in our society has evolved from solely a mercantile instrument to one that encompasses transactions that are either not commercial or only tangentially so. Common examples include child custody agreements which are essentially court-affirmed contracts, surrogacy agreements, cohabitation agreements (prenuptials without the nuptials), divorce settlements, etc. (7) Given the prevalence of contract in modern society, it is difficult to imagine how anyone could live without that right. (8)

    This article focuses on the larger question of the role states should play in determining the right of persons to contract and whether federal limitations should operate to curtail state action in this arena. While in some contexts states have successfully limited the right to contract based on status, (9) or capacity, (10) those limitations are an exception to the general rule of the freedom of contract. This is especially true in cases of status, whereby a state could declare a contract invalid because of who was entering into the contract, rather than for what purpose the contract was executed.

    Alabama's Hammon-Beason Alabama Taxpayer and Citizen Protection Act, HB 56, provides that a contract is void based on the immigration status of one of the parties. (11) This article focuses on only two sections of the law (12) which strike at the heart of the viability of an individual's existence in a modern society by eliminating his right to contract. (13) Even without discussing work authorization or the ability to obtain employment, eliminating the basic right to contract would likely have rapid, severe consequences as individuals find their ability to contract for necessities nonexistent. Under the Hammon-Beason Act, housing agreements (in excess of one night), transportation agreements, airfare or vehicle purchase agreements (other than a contract to return the immigrant to his country of origin), service agreements, purchase agreements, etc. would all be subject to nullification. (14)

    This article argues that the general right to contract, that is to say the ability of one to obligate himself in exchange for another's obligation in return, is a fundamental (or basic) though not all-encompassing right and one that is subject to additional legal protections especially when limitations are sought to be imposed based on status rather than capacity or subject matter of the contract. (15) The more difficult question then becomes the determination of legitimate versus illegitimate restrictions on the right to contract when the restrictions are based on status. This article concludes that restrictions on the right to contract based solely on status should generally not be upheld, on multiple legal grounds.

    Applying the foregoing analysis in the context of the Hammon-Beason Act, this article argues that a prohibition on the right to contract based solely on unauthorized immigration status in the United States likely violates the Civil Rights Act and the U.S. Constitution on preemption, due process and equal protection grounds, and, as originally conceived, on Contract Clause grounds as well. In addition, giving judicial imprimatur to a legal framework which would eliminate a fundamental right of a vulnerable class of individuals would further harm and destabilize that group and exacerbate underlying racial tensions which are not dissimilar to those experienced during the civil rights struggle, which eventually culminated in the Civil Rights Era of the 1960s.

  2. CONTRACT AS A FUNDAMENTAL RIGHT

    Throughout this article I will refer to status versus capacity. Status, as defined by Black's Law Dictionary, has a variety of meanings which can include a person's legal condition, (16) a person's capacity and incapacity, (17) or "a person's legal condition ... imposed by the law without the person's consent, as opposed to a condition that the person has acquired by agreement." (18) It is this last definition of status that this paper focuses on. Perhaps tellingly, the example provided by Black's for that definition is "the status of a slave." (19) In prior generations, individuals prevented from contract on the basis of status alone have been so treated due to race, gender, religion, national origin, etc. (20) It seems unlikely that it is mere coincidence that many of those denied the right to contract are the same groups that largely comprise our suspect classes under the law of equal protection. In fact, status is now generally only used

    ... in English Law, in connection ... with those comparatively few classes of persons in the community who, by reason of their conspicuous differences from normal persons, and the fact that by no decision of their own can they get rid of these differences, require separate consideration in an account of the law. (21) In contrast, when this Article mentions capacity, it uses the term applying its standard meaning. Capacity is, generally stated, the legal ability of an individual to enter into a binding agreement. (22) Under current law, contractual incapacity generally focuses on the age of the contracting party (whether the party is a minor), (23) or potential impairment of one's mental capacity to contract. (24)

    In both instances the right to contract has in the past been lawfully restricted depending on the identity of the individual as a member of a class or specific qualities of the individual. Those restrictions would seem to imply that the right to contract may not be as fundamental a right as is here suggested. Nevertheless, even if it is not deemed a fundamental right, the right to contract should be subject to additional constitutional or statutory protections because of the discriminatory and arbitrary consequences restrictions on that right impose on unauthorized immigrants. This Article agrees that freedom of contract is subject to some limitation; however, the general right of an individual to contractually obligate himself and receive corresponding obligations in return is so pervasive and necessary for our society as to make it a fundamental right, and as such, to be entitled to a significantly higher level of protection.

    1. Freedom of Contract as "Fundamental"

      Most people never consider the importance of the right to contract, which is essentially the ability to gain and dispose of possessions and services, alter legal relationships, and act with some guaranty as to future obligations and rights. (25) It is not until one is faced with the prospect of not having that right that its value becomes more readily apparent. To be sure, this article is not arguing for a return to Lochnerian jurisprudence based on a laissez faire approach to the market in which wage and hour laws, child labor laws, and the like were invalidated as impositions on the "freedom of contract." (26) Rather, the freedom to contract argued for is the basic right of an individual to enter into agreements that gain or dispose of possessions, services or otherwise alter legal...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT