Fletcher v. Peck

Fletcher v. Peck, 10 U.S. 87 (decided March 16, 1810), was the first Supreme Court decision that overruled a state law, doing so by means of the United States Constitution's Contract Clause.

Background
In what is now known as the Yazoo Scandal, the government of Georgia sold a vast amount of land to a private entity at low prices in 1795. It came to light that nearly all the legislators had been bribed, and in the next election most of the incumbents were replaced by the Georgia voters. The 1795 sale was repealed in 1796.

Several years later, in 1800, John Peck bought a piece of the land in question, and then sold it to Robert Fletcher in 1803. Fletcher then sued Peck, saying that Georgia's repeal of the original sale made his title worthless.

Decision
Chief Justice John Marshall held that Georgia had entered into a valid contract in 1795, even though that contract was the result of bribery and fraud. Thus, he held that under the Contract Clause Georgia could not invalidate it.

Kevin Gutzman argues that this decision went against the common understanding of the obligation of contracts, quoting the language of the Northwest Ordinance as evidence that contracts arising out of fraud were invalid:

""in the just preservation of rights and property, it is understood and declared, that no law ought ever to be made or have force in said territory, that shall, in any manner whatever, interfere with or affect private contracts, or engagements, bona fide, and without fraud previously formed.""

- Northwest Ordinance

Marshall's decision marked the first time a state law was overturned by the United States government. In the Constitutional Convention, the ability of Congress to veto state laws had been suggested and rejected, and Gutzman argues that "no one intended to grant federal courts such authority."