Fletcher v. Peck Establishes Judicial Protection for Fraudulent Contracts and Corrupt Land Deals

The U.S. Supreme Court rules in Fletcher v. Peck that Georgia’s attempt to rescind the fraudulent 1795 Yazoo land sale violates the Constitution’s contract clause, marking the first time the Court strikes down a state law. Chief Justice John Marshall writes that while the bribery of Georgia legislators was “deplorable,” subsequent purchaser Robert Fletcher was an “innocent third party” whose contract must be honored despite the corruption underlying the original transaction. The decision prioritizes property rights and contract sanctity over democratic efforts to remedy systematic legislative corruption, establishing that fraudulent deals become legally protected once resold to third parties.

Marshall’s opinion holds that Georgia’s 1796 Rescinding Act, passed by a reform legislature to nullify the corrupt Yazoo land sale, unconstitutionally impairs the obligation of contracts. This ruling effectively rewards corruption by making it impossible to retroactively invalidate transactions tainted by bribery and fraud once they enter commercial circulation. The Court acknowledges that all but one Georgia legislator accepted bribes to pass the original Yazoo Act, yet prioritizes contractual stability for speculators over accountability for wholesale government corruption. The decision forces federal taxpayers to establish a $5 million reimbursement fund in 1814 to compensate investors, socializing the costs of private fraud while corrupt legislators and initial conspirators escape consequences.

Fletcher v. Peck establishes dangerous precedents for elite impunity and institutional capture through judicial protection of corrupt transactions. The ruling creates a framework where systematic bribery of legislatures can produce legally enforceable contracts that courts will defend, incentivizing corruption by guaranteeing profits even when fraud is exposed. Marshall’s contract clause interpretation hints that Native Americans lack complete title to their lands (fully realized in Johnson v. McIntosh), combining elite economic protection with dispossession of indigenous peoples. The decision demonstrates how courts serve property and commercial interests over democratic accountability, establishing patterns where judicial intervention protects corrupt elites while constraining popular efforts at reform—a dynamic recurring throughout American history from Gilded Age court protection of monopolies to modern immunity for financial fraud when losses are transferred to “innocent” investors and taxpayers bear remediation costs.