This obligation, which the States are forbidden to impair, must be the natural one, for the still further reason, that otherwise that large class of contracts—by far the largest part of all the contracts, which men enter into, and which courts recognize as valid, but in regard to which no special “obligation” has ever been prescribed by legislation—would, in the view of the constitution, have no validity or obligation at all.
Still further. Inasmuch as the natural obligation is necessarily the only real obligation, which, in the nature of things, contracts can possibly have; and inasmuch as all artificial or unnatural obligations are inevitably spurious, false, and unjust, that paramount rule of legal interpretation, which requires that a meaning favorable to justice, rather than injustice, shall be given to the words of all instruments, that will bear such a meaning, requires that “the obligation,” which the constitution forbids to be impaired, should be held to be the natural and true obligation, rather than any one of those innumerable false obligations, which legislatures are in the habit of prescribing in its stead.
Finally. Inasmuch as the artificial obligations of contracts are innumerable; and inasmuch as this constitutional provision does not particularly describe the obligation it designs to protect, that obligation must be presumed to be the natural one, or else the provision itself, on account of its indefiniteness, must utterly fail of protecting any obligation at all.
The natural obligation of a contract, then, being the only one, which courts are at liberty to regard, their first duty, on this subject, obviously is to ascertain what the natural obligation of contracts is. When they shall have done this, they will have discovered an universal law for all contracts; a law, that must nullify all those State laws—absurd, vexatious, tyrannical, and unjust—with which the statute books of the States are filled, having for their objects to destroy or impair men’s natural right of making obligatory contracts, and to prescribe what obligations, different from the natural and true one, men’s contracts shall have.
Strictly speaking, courts have no rightful authority either to enforce or annul a single contract, of any name or nature whatever, until they shall have ascertained what this constitutional, or natural, obligation of contracts is. But, if they will continue to do so, it is manifestly sheer mendacity, or sheer stupidity, for them to declare that the contracts of private bankers, and contracts now termed usurious—contracts naturally obligatory as any that men ever enter into, or as any that courts ever enforce—have no obligation; or that anybody can be lawfully punished for entering into such contracts.
Furthermore, if the natural obligation of contracts is the only obligation, which courts are at liberty to regard, they are bound to disregard all those State laws, or acts of incorporation, of any and every kind, whether for banking purposes or any other, which attempt to limit the liability of stockholders to any thing less than the natural obligation of their contracts.
In short, the only constitutional power, now existing in this country, to prohibit any contract whatever, that is naturally obligatory, or to impair the natural obligation of any contract whatever, is the single power given to Congress “to establish uniform laws on the subject of bankruptcies, throughout the United States.”8
There is, therefore, no legal obstacle in the way of the immediate adoption of the banking system now proposed; nor any occasion to consult the State legislatures, or ask their permission, in the matter. Nor, in loaning the currency, will there be any occasion to pay any regard to usury laws.
Endnotes
1. With a single exception, (provided for in Article XXVII, of the Articles of Association,) not affecting the general rule.
2. See Article XIX, of the Articles of Association.
3. Even if the rate of dividend, fixed for the Secondary Stockholders to receive, were such as to make their Stock worth more than par of specie, that would not be likely to make the bills worth more than par of specie; because a person, by returning his bills for redemption, would not be sure of getting Productive Stock for them. He might be paid in specie, instead of Productive Stock.
Furthermore, even if his bills should be redeemed by Productive Stock, instead of specie, he would not be likely to hold it a very long time, before it would be bought back by the bank, by simply paying its face in specie.
There would, therefore, be likely to be no scramble for bills (in order to get Productive Stock for them) even though the rate of dividend, fixed for the Secondary Stockholders to receive, should be such as to make the Productive Stock worth, in their hands (supposing they could retain it a length of time) more than par of specie.
4. The New York bank would not redeem them by paying specie for them, but by receiving them in payment of debts, and by giving its own bills in exchange.
5. The author does not concede the constitutional power of the State governments to prohibit any kind of banking, that is naturally just and lawful. And he fully believes all existing restraints upon private banking to be unconstitutional. But, be they so, or not, it seems plain enough that government has constitutionally no more power to forbid men’s selling an invested dollar, than it has to forbid the selling of a specie dollar. It has constitutionally no more power to forbid the sale of a single dollar, invested in a farm, than it has to forbid the sale of the whole farm.
The currency here proposed is not in the nature of a credit currency, (as the word credit is now legally understood,) and could not be prohibited on that ground, even if any credit currency can constitutionally be prohibited.
The currency proposed consists simply of bona fide certificates of Stock, which the owners have the same right to sell, that they have to sell any other Stocks.
6. Diamonds would not answer well as a currency, because, although they have a market value, that value is known only to a few.
7. The sale of them, as a currency, is not a use of them; any more than the sale of a horse is a use of the horse.
8. Independently of the injustice of all laws impairing the natural “obligation of contracts,” there was a very weighty reason why the States should have no power to enact bankrupt laws. If they had this power, each State might have the motive to pass such a law for the purpose of liberating her own citizens from their obligations to the citizens of other States; when, if the law were to operate only as between her own citizens, she might not choose to pass the law. This power of passing bankrupt laws was, therefore, confided solely to the general government; and its laws were required to be “uniform throughout the United States.”
In this connection, it may not be impertinent for the writer to say, that, if the natural “obligation of contracts” were known, he apprehends there would be no occasion for any bankrupt or insolvent laws at all. He apprehends there is a natural limit to the obligation of contracts; that, in the case of ordinary credit contracts, time is an essential element of the contracts; that, if there be no other limit to the natural obligation of such contracts, the principle, that the law requires impossibilities of no one, fixes such a limit; and that, therefore, the most that the law can require, in the way of the fulfilment of a time contract, is that the debtor shall exercise due integrity and diligence during the time his contract has to run; and that, if he do this, he can absolve himself from the obligation of his contract, by paying to the extent of his ability, when the contract becomes due.
This writer