Restricting the Freedom of Contract: A Fundamental Prohibition

Abstract

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 immigration status as a proxy for race, national origin or alienage satisfies the Arlington Heights test for disparate impact and therefore qualifies for strict scrutiny. In a modern, mercantile society, the right to contract is ubiquitous and now should be found to be fundamental. Laws such as the Hammon-Beason Alabama Taxpayer and Citizen Protection Act which purport to discriminatorily restrict or prohibit the right to contract should be struck down on multiple statutory and constitutional grounds.