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  S upreme Cases That Changed America DRAMA C ourt SDC-ttlpgs.v411/271/15/022:27PMPage1  S upreme Cases That Changed America DRAMA C ourt Daniel E. Brannen, &Dr. Richard Clay Hanes Elizabeth Shaw, Editor VOLUME 4 BUSINESS LAWFEDERALPOWERS ANDSEPARATION OF POWERSFEDERALISM AND STATE POWERSLABOR AND LABOR PRACTICESMILITARYLAWNATIVE AMERICANSTAXATION SDC-ttlpgs.v411/271/15/022:27PMPage3  L aw that addresses business activities cover a broad rangeof economic topics including laws related to contracts, corporations, andtrusts and monopolies. Responsibility for governmental oversight hasgreatly changed through time and is split between various governmentalparts. For example, the Supreme Court has had relatively little affect oncontract and corporate law where states have the primary responsibilityfor oversight. The federal government has responsibility in certain situa-tions, such as interstate commerce. Early History of Corporation and Contract Law One of the most common types of business worldwide is the corporation.A corporation is a business that has been formally chartered (grant of ownership rights) by a state. It gains its own identity apart from the own-ers and investors. Chartering corporations has a long history. In the six-teenth century English merchants faced the dangers of the high seas both ANTITRUST,BUSINESS,CORPORATE ANDCONTRACT LAW Supreme Court Drama821  from weather and pirates. The shipping businesses sought protectionfrom financial responsibility for cargo losses. As a result, early corporatecharters granted by the English monarchy limited liability (financialresponsibility) for any losses of corporate property. Many of these earlycorporations were also given monopoly (one company dominates a par-ticular market) powers over territories and industries that the crown con-sidered critical to English interests. In fact, English law had grantedmonopolies to specific trade and craft guild organizations by decree evenin the Middle Ages. Some of the best known early English corporationsin the eighteenth century were the East Indian Company and Hudson’sBay Company. The American colonies, with settlement beginning in theseventeenth century, were also chartered corporations. However, draftedin 1787, the U.S. Constitution makes no mention of corporations. Theywere primarily subject to state regulation. By 1800 the states had grantedabout 200 corporate charters.To enforce business agreements including contracts, the EnglishParliament passed the Statute of Frauds in 1677. The law establishedstandards for settling legal disputes over contracts. Later after Americanindependence, all U.S. states adopted various forms of the English actestablishing the basis for U.S. contract law. The only mention of con-tracts in the Constitution was the Contract Clause of Article I whichreads, “No State shall ... make any ... Law impairing the Obligation[responsibility] of Contracts.” Early in U.S. history, the Supreme Courtapplied the Contract Clause in ruling a state law unconstitutional in  Fletcher v. Peck (1810). The Court gave a broad definition to what acontract is. Thus, employers were quite free to contract for labor withtheir employees and establish agreements with other businesses. Casesinvolving the Contract Clause were numerous in the nation’s early years.In 1819 the Court in  Dartmouth College v. Woodward  first recog-nized private profit-making corporations by extending protection of theContract Clause to corporate charters. The Court considered the corpo-rate charter a form of contract between the state and the private corpora-tion. Protection of corporations by the Clause from unreasonable stateregulation provided assurance to individuals to invest money in corpora-tions and spur economic growth of the nation. In Charles River Bridge v.Warren Bridge (1837) the Court further defined a balance between a stateinterest in regulating corporations and protecting corporations from arbi-trary (inconsistent) laws. Supreme Court Drama822
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