Does The Individual Mandate Violate Contract Law?


An interesting point from the Institute For Justice (via Hot Air)

If government-mandated health insurance is upheld by the U.S. Supreme Court after the Patient Protection and Affordable Care Act (PPACA) case is argued in March 2012, the Institute for Justice warns in its amicus brief that there will be dire and predictable threats to individual liberty and voluntary relations that have been the foundation of American contract law for centuries.

Constitutional law professor Elizabeth Price Foley, who is the executive director of the Institute’s Florida Chapter and who co-authored IJ’s brief, said, “The individual mandate violates a cardinal rule of contract law–to be enforceable, all agreements must be voluntary. The Framers understood this, and would never have given the federal government the power to force individuals into lifelong contracts of insurance. The Court should not allow the government to exercise this unprecedented and dangerous power.”

As IJ’s brief shows, the principle of mutual assent, under which both parties must consent for a contract to be valid, is a fundamental principle of contract law that was well understood during the Founding era and is still a cornerstone of contract law today. Indeed, contracts entered under duress have long been held to be invalid. Yet the mandate forces individuals to enter into contracts of insurance that would never be valid under this longstanding principle. (For a copy of IJ’s brief, visit: www.ij.org/PPACAbrief.)

If the U.S. Supreme Court fails to strike down the individual mandate, there will be nothing to stop Congress from forcing people into other contracts against their will–employment contracts or union membership, for example. If we still have a constitutional republic in which the federal government’s powers are limited, then the Court should strike down this law.

The Institute for Justice’s brief is the only amicus brief filed with the Court that examines this case in the context of the history of contract law. The brief illustrates how the Supreme Court has recognized the principle of consent in commercial relations in its Commerce Clause and Tenth Amendment cases, and it explains why the U.S. Supreme Court has a key role in acting as a check against this unconstitutional power grab by the federal government.

So, if you’re forced to sign a contract under duress, said contract has been deemed voided the vast majority of time, including in court. As Ed Morrissey at the Hot Air link points out

If the individual mandate passes muster because duress does not apply when the federal government applies it, then the courts will have given carte blanche to tyranny. Where does that power end? Buying cars certainly implicates interstate commerce; will the government have the power to force us to sign purchase contracts for Chevy Volts? What would be the difference between that and health insurance? Thanks to the bailouts, the government has an enduring stake in GM, and at some point in time every person needs transportation, even if they are perfectly satisfied with riding a bike or hailing a cab now.

What would there be to stop the Central Government? When you purchase health insurance, you are signing a legal contract to purchase an item, with a legal obligation to pay. Signed under duress, knowing you could be fined/taxed otherwise, how valid is that contract? And, as Ed highlights, the insurance companies would also be under no obligation to fulfill the terms of the contract, since it was not a legally binding one.

And, does the Mandate violate the Constitution vis a vis contract law? Article I, section 10, clause 1.

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Contract law has primarily been the domain of the States, though the 14th Amendment did tend to normalize them throughout the nation (you can read a bit more here). The Framers were concerned that States could pass laws that relieved certain favored citizens of their debt obligations, as well as favoring colonial interest over foreign interests (they understood the country would need international capital flowing in to the new country). And, certainly, they never envisioned the federal government becoming as powerful as it has. Hell, they wrote a document, with a follow up, to stop that.

That said, while there is no Constitution provision that prohibits the Federal government passing laws that impair the obligation of contracts (there are laws) the States are clearly being forced to enter into a law impairing the obligation of contracts.

Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach.

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