Report from superior court, Essex county; Charles S. Lilley, Judge.

Action by Cordelia A. Silsbee against Parker J. Webber. A verdict was directed for plaintiff, and case reported, on request of the parties, for determination of the supreme judicial court. Verdict set aside.

[171 Mass. 379]J.H. Sisk, for plaintiff.

W.H. Niles & Geo. J. Carr, for defendant.

Field, C.J., and Knowlton and Lathrop, JJ., dissenting.

HOLMES, J.

This is an action to recover money alleged to have been got from the plaintiff by duress. In the court below, a verdict was directed for the defendant, and the case was reported. The plaintiff's son had been in the defendant's employ, had been

[50 N.E. 556]

accused by him of stealing the defendant's money, had signed a confession (whether freely or under duress is not material), and had agreed to give security for $1,500. There was a meeting between the plaintiff and the defendant, in the course of which, as the plaintiff testified, the defendant said he should have to tell the young man's father, the plaintiff's husband. At that time, according to her, her husband had trouble in his head, was melancholy, very irritable, and unable to sleep, so that she feared that, if he were told, the knowledge would make him insane. The plaintiff further testified that she previously had talked with the defendant about her husband's condition, and that she begged him not to tell her husband, and told him that he knew what her husband's condition was; but that he twice threatened to do it in the course of his inquiries as to what property she had, and that, to prevent his doing so, she, the next day, went, by agreement, to the office of the defendant's lawyer, and executed an assignment of her share in her father's estate. Her son was present, and, as he says, protested that this was extortion and blood money. It is under this assignment that the money sued for was collected. In the opinion of a majority of the court, if the evidence above stated was believed, we cannot say that the jury would not have been warranted in finding that the defendant obtained and knew that he was obtaining the assignment from the plaintiff solely by inspiring the plaintiff with fear of what he threatened to do; that the ground for her fear was, and was known to be, her expectation of serious effects upon her husband's health if the defendant did as he threatened; that the fear was reasonable, and a sufficiently powerful motive naturally to overcome self-interest; and, therefore, that the plaintiff had a right to avoid her act. [171 Mass. 380]Harris v. Carmody, 131 Mass. 51, 53, 54;Morse v. Woodworth, 155 Mass. 233, 250, 27 N.E. 1010, and 29 N.E. 525.

It is true that it has been said that the duress must be such as would overcome a person of ordinary courage. We need not consider whether, if the plaintiff reasonably entertained her alleged belief, the well-grounded apprehension of a husband's insanity is something which a wife ought to endure, rather than to part with any money, since we are of opinion that the dictum referred to is taken literally in an attempt to apply an external standard of conduct in the wrong place. If a party obtains a contract by creating a motive from which the other party ought to be free, and which, in fact, is, and is known to be, sufficient to produce the result, it does not matter that the motive would not have prevailed with a differently constituted person, whether the motive be a fraudulently created belief or an unlawfully created fear. Even in torts,-the especial sphere of external standards,-if it is shown that in fact the defendant, by reason of superior insight, contemplated a result which the man of ordinary prudence would not have foreseen, he is answerable for it; and, in dealing with contributory negligence, the personal limitations of the plaintiff, as a child, a blind man, or a foreigner unused to our ways, always are taken into account. Late American writers repudiate the notion of a general external measure for duress, and we agree with them. Clark, Cont. 357; Bish.Cont. (Ed. 1887) § 719. See James v. Roberts, 18 Ohio, 548, 562;Eadie v. Slimmon, 26 N.Y. 9, 12.

The strongest objection to holding the defendant's alleged action illegal duress is that, if he had done what he threatened, it would not have been an actionable wrong. In general, duress going to motives consists in the threat of illegal acts. Ordinarily, what you may do without liability you may threaten to do without liability. See Vegelahn v. Guntner, 167 Mass. 92, 107, 44 N.E. 1077; Allen v. Flood [1898] App.Cas. 1, 129, 165. But this is not a question of liability for threats as a cause of action; and we may leave undecided the question whether, apart from special justification, deliberately and with foresight of the consequences, to tell a man what you believe will drive him mad, is actionable if it has the expected effect. Spade v. Railroad, 168 Mass. 285, 290, 47 N.E. 88;White v. Sander, 168 Mass. 296, 47 N.E. 90. If it [171 Mass. 381]should be held not to be, contrary to the intimations in the cases cited, it would be only on the ground that a different rule was unsafe in the practical administration of justice. If the law were an ideally perfect instrument, it would give damages for such a case as readily as for a battery. When it comes to the collateral question of obtaining a contract by threats, it does not follow that, because you cannot be made to answer for the act, you may use the threat. In the case of the threat, there are no difficulties of proof, and the relation of cause and effect is as easily shown as when the threat is of an assault. If a contract is extorted by brutal and wicked means, and a means which derives its immunity, if it have immunity, solely from the law's distrust of its own powers of investigation, in our opinion the contract may be avoided by the party to whom the undue influence has been applied. Some of the cases go further, and allow to be avoided contracts obtained by the threat of unquestionably lawful acts. Morse v. Woodworth, 155 Mass. 233, 251, 27 N.E. 1010, and 29 N.E. 525;Adams v. Bank, 116 N.Y. 606, 23 N.E. 7; Williams v. Bayley, L.R., 1 H.L. 200, 210.

In the case at bar there are strong grounds for arguing that the plaintiff was not led to make the assignment by the duress alleged. They are to be found in the fact that the plaintiff sought the defendant; in her testimony that when she made the assignment she wanted the defendant to have full security for all her son owed him; and in the plaintiff's later conduct; but we are considering whether there was a case of duress for the jury.

[50 N.E. 557]

The assignment was on October 10, 1894. Before March 12, 1895, the plaintiff had joined with her sisters in employing a lawyer to secure her share in her father's estate, intending it to be paid over to the defendant. On March 12, 1895, to the same end, she signed a petition for distribution, setting forth the assignment, and afterwards took some further steps, and never made any claim that the assignment was not valid until December 19, 1895, before which time it had come to the knowledge of her husband. Apart from the weight which these facts may give to the argument that the plaintiff did not act under duress, they found an independent one,-that, if she did act under duress, she has ratified her act. The assignment was formally valid. The only objection to it, if any, was the motive for it. [171 Mass. 382]Fairbanks v. Snow, 145 Mass. 153, 154, 13 N.E. 596. Therefore it might be ratified by the plaintiff when she was free. But the acts relied on were done in connection with a member of the bar, who had been the defendant's lawyer before he undertook to act for the plaintiff, and who plainly appeared to be acting for the plaintiff only in the defendant's interest. We cannot say that the jury might not find that the later acts of the plaintiff, if not done under the active influence of her supposed original fear, at least were done before the plaintiff had gained an independent foothold, or realized her independence or her rights. We are of opinion that the case should have been left to the jury. Adams v. Bank, 116 N.Y. 606, 614, 615, 23 N.E. 7.

Verdict set aside. Case to stand for trial.

KNOWLTON, J. (dissenting).

The report shows no evidence which seems to me to warrant a finding for the plaintiff. It is not contended that she can prevail in this action on the ground that the parties agreed to compound a felony. The defendant had detected his trusted clerk in embezzling from him. He could not certainly know how long the embezzlement had been going on, or how much money had been taken; but very likely he thought that it had been for a long time, and that the amount was large. The clerk had been in his employment for six years, as chief salesman. It was proper that the defendant should obtain reimbursement if he could. On account of what her son said, the plaintiff visited the defendant at his home. She testified that she wanted him to have full security for all her son owed him, and for anything he had stolen, and that her son had agreed to give security for the $1,500 which he admitted that he had stolen. In all the defendant's dealings with the plaintiff there is not a suggestion that he made a threat, unless it be called a threat to say, when she proposed to give him a chamber set as security, “I do not think that will do. I will have to tell his father;” and to say again, once or twice before the interview ended, that he would tell her husband about the matter. Ordinarily, it would be right and proper for the defendant, if not his duty, to tell the young man's father what had happened.

[171 Mass. 383]In 2 Greenl.Ev. § 301, is this clause: “By duress, in its more extended sense, is meant that degree of severity, either threatened and impending or actually inflicted, which is sufficient to overcome the mind and will of a person of ordinary firmness. *** Duress per minas is restricted to fear of loss of life or mayhem or loss of limb; or, in other words, to remediless harm to the person. If, therefore, duress per minas is pleaded in bar to an action upon a debt, the plea must state a threat of death or mayhem or loss of limb. *** A fear of mere battery or of destruction of property is not technically duress, and, therefore, is not pleadable in bar.” Bishop, in his work on Contracts, at section 715, defines “duress” as “any physical force, applied or threatened to the person of the party, or of the party's husband, wife, parent, or child, through constraint of which he, in form, consents to what he otherwise would not.” While the law in regard to duress per minas in some of the late cases is less strict than that stated by Greenleaf, in none of them, so far as I am aware, is this ground of avoiding a contract changed in its general character, or in the principles on which it is founded. The distinction still remains between threats of grievous injury and legitimate arguments founded on disclosed intentions of the party using the argument as to his lawful conduct affecting the other party. The word “threat” implies intentional detriment. The fundamental reason for depriving one of the benefits of his contract in such cases is that he was guilty of a wrong in obtaining it, and that his wrong was injurious to the other party in inducing the making of it. No contract can be set aside on the ground of duress per minas without the concurrence of these conditions. It is not enough to set aside a contract that the maker of it yielded to motives founded on legitimate arguments, even though the inducements rested in part upon statements by the other party of what would be done if the contract should not be made. It must be shown that the will is overcome by an improper and wrongful influence, producing fear which he has not sufficient strength to withstand. If the other party to the contract is innocent, his defense cannot prevail. Fairbanks v. Snow, 145 Mass. 153, 13 N.E. 596. The cases in which it is held, in this jurisdiction and elsewhere, that one [171 Mass. 384]whose will is overcome, and who is induced to execute a contract by threats of prosecution and imprisonment for a crime, made by one who reasonably believes him to be guilty of the crime, may avoid the contract on the ground of duress, rest upon the principle that it is an abuse of process, and a misuse of the machinery of the law, which the law

[50 N.E. 558]

will not permit, to extort the collection of a private debt, or to procure any other private benefit by proceedings intended only to impose punishment in the interest of the public. It is equally a wrong and an injury to accomplish the same result through threats of such an abuse of process. Morse v. Woodworth, 155 Mass. 233-250,27 N.E. 1010, and 29 N.E. 525.

The burden of proof is on the plaintiff to show that the defendant obtained the contract by threatening to inflict injury upon her husband. A fair interpretation of the evidence indicates that the defendant's reference to her husband was in no sense a threat, but merely a natural statement, when the plaintiff offered inadequate security, that he should see whether the young man's father, who was an owner of houses and lands, was willing to furnish the security which his son had promised. If it was more than that, and was also a legitimate appeal to a motive which the plaintiff might have had to save her husband from the grief and sorrow that knowledge of the facts would be likely to bring to him, or to save herself from additional pain by sharing her husband's trouble, it would hardly be contended that the contracts would thereby be rendered voidable. A party endeavoring to obtain a contract from another may legitimately appeal to all proper motives which will induce the other to agree to his terms.

The only element in this case, as it seems to me, on which a doubt in regard to the proper decision of it can arise, is the testimony as to the condition of the plaintiff's husband. The plaintiff's testimony on this point was as follows: “He was suffering with a mental trouble, which made him very irritable. He suffered pain continually in the head, was melancholy, and unable to sleep. *** He was attending to his business at the time of the trouble with Webber. He had various estates about town, and was collecting rents and looking after his business every day.” There was testimony from other members of the plaintiff's family in regard to the husband's condition, but none more [171 Mass. 385]favorable to her than this. They all agreed that he was collecting his rents, taking charge of repairs, and attending to his business generally, at the time when the contracts were made. She testified that she believed that knowledge of the charges against her son would make her husband insane; but there is not a word of testimony to show that the defendant knew of this belief if she entertained it. She testified that she had previously talked with the defendant about her husband's condition; but this must mean that she spoke about his condition as it was, and not about her belief that this information would make him insane, which, so far as appears, was never disclosed until the trial. In connection with the making of the contracts, there was no conversation about her husband's condition except a reference to it when the plaintiff said, in answer to the defendant's statement that he should have to tell him: “Don't do that; you know what his condition is.”

It is a familiar rule of law that fraud or wrong of any kind is never to be presumed. It cannot be inferred from evidence which is as consistent with right as with wrong. I can see nothing in the evidence that tends to show that the defendant was guilty of any wrong towards the plaintiff. What he proposed could do no direct harm to the person or property of the plaintiff or of her husband. At most, there was merely a possibility or a probability of suffering and harm from reflection upon facts for whose existence the defendant was not responsible, and which the husband would be likely to learn at some time from others if the defendant did not tell him. But this probability, viewed from the defendant's knowledge and information, was no greater than would be expected in the case of any man who was irritable, melancholy, and unable to sleep from trouble in his head, yet whose ailments were not so severe as to prevent him from managing a somewhat extensive and important business. Reading the testimony without favor or prejudice, I do not see how an implication against the defendant of an improper purpose in saying to the plaintiff that he should have to tell her husband can be founded on anything more than conjecture. The presumptions are in favor of honesty and fair dealing, and the testimony is to be interpreted accordingly. Moreover, there is nothing to show a belief on the part of the [171 Mass. 386]defendant that the statement that he should tell her husband would overcome the plaintiff's will. Upon his understanding of the facts, such a suggestion would not be expected to overcome the will of a person of ordinary firmness; and there is no evidence that she was supposed by him to be, or that she was in fact, less firm than other women. Whether the rule so often stated in the books-that, to avoid a contract on the ground of duress by threats, a threat must be such as would overcome the will of a person of ordinary firmness-be of universal application or not, it undoubtedly furnishes a correct guide in cases in which there is nothing to show that the party who seeks to avoid the contract was not of ordinary courage and firmness. Upon an extended examination of the authorities, I have found no case in which a contract has been set aside on the ground of duress on such evidence as appears in this case. I think that the ruling of the superior court was correct.

FIELD, C.J., and LATHROP, J., concur in this dissent.

324 N.Y.S.2d 22
29 N.Y.2d 124, 272 N.E.2d 533

AUSTIN INSTRUMENT, INC., Respondent,
v.
LORAL CORPORATION, Appellant.

Court of Appeals of New York.
July 6, 1971.

[324 N.Y.S.2d 23] [272 N.E.2d 534] [29 N.Y.2d 126] Alvin A. Simon, New York City, and Joseph Sachter, Scarsdale, for appellant.

[29 N.Y.2d 127] Herbert, L. Ortner, and Joel Salon, New York City, for respondent.

[324 N.Y.S.2d 24] [29 N.Y.2d 128] FULD, Chief Judge.

The defendant, Loral Corporation, seeks to recover payment for goods delivered under a contract which it had with the plaintiff Austin Instrument, Inc., on the ground that the evidence establishes, as a matter of law, that it was forced to agree to an increase in price on the items in question under circumstances amounting to economic duress.

In July of 1965, Loral was awarded a $6,000,000 contract by the Navy for the production of radar sets. The contract contained a schedule of deliveries, a liquidated damages clause applying to late deliveries and a cancellation clause in case of default by Loral. The latter thereupon solicited bids for some [29 N.Y.2d 129] 40 precision gear components needed to produce the radar sets, and awarded Austin a subcontract to supply 23 such parts. That party commenced delivery in early 1966.

In May, 1966, Loral was awarded a second Navy contract for the production of more radar sets and again went about soliciting bids. Austin bid on all 40 gear components but, on July 15, a representative from Loral informed Austin's president, Mr. Krauss, that his company would be awarded the subcontract only for those items on which it was low bidder. The Austin officer refused to accept an order for less than all 40 of the gear parts and on the next day he told Loral that Austin would cease deliveries of the parts due under the existing subcontract unless Loral consented to substantial increases in the prices provided for by that agreement—both retroactively for parts already delivered and prospectively on those not yet shipped—and placed with Austin the order for all 40 parts needed under Loral's second Navy contract. Shortly thereafter, Austin did, indeed, stop delivery. After contacting 10 manufacturers of precision gears and finding none who could produce the parts in time to meet its commitments to the Navy,^[1] Loral acceded to Austin's demands; in a letter dated July 22, Loral wrote to Austin that

"We have feverishly surveyed other sources of supply and find that because of the prevailing military exigencies, were they to start from scratch as would have to be the case, they could not even remotely begin to deliver on time to [272 N.E.2d 535] meet the delivery requirements established by the Government. * * * Accordingly, we are left with no choice or alternative but to meet your conditions."

Loral thereupon consented to the price increases insisted upon by Austin under the first subcontract and the latter was awarded a second subcontract making it the supplier of all 40 gear parts for Loral's second contract with the Navy.^[2] Although Austin was granted [324 N.Y.S.2d 25] until September to resume deliveries, Loral did, in fact, receive parts in August and was able to produce the radar sets in time to meet its commitments to the Navy on both contracts. After Austin's last delivery under the second subcontract [29 N.Y.2d 130] in July, 1967, Loral notified it of its intention to seek recovery of the price increases.

On September 15, 1967, Austin instituted this action against Loral to recover an amount in excess of $17,750 which was still due on the second subcontract. On the same day, Loral commenced an action against Austin claiming damages of some $22,250—the aggregate of the price increases under the first subcontract—on the ground of economic duress. The two actions were consolidated and, following a trial, Austin was awarded the sum it requested and Loral's complaint against Austin was dismissed on the ground that it was not shown that "it could not have obtained the items in question from other sources in time to meet its commitment to the Navy under the first contract." A closely divided Appellate Division affirmed (35 A.D.2d 387, 316 N.Y.S.2d 528, 532). There was no material disagreement concerning the facts; as Justice Steuer stated in the course of his dissent below, "(t)he facts are virtually undisputed, nor is there any serious question of law. The difficulty lies in the application of the law to these facts." (35 A.D.2d 392, 316 N.Y.S.2d 534.)

The applicable law is clear and, indeed, is not disputed by the parties. A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will. (See Allstate Med. Labs., Inc. v. Blaivas, 20 N.Y.2d 654, 282 N.Y.S.2d 268, 229 N.E.2d 50; Kazaras v. Manufacturers Trust Co., 4 N.Y.2d 930, 175 N.Y.S.2d 172, 151 N.E.2d 356; Adams v. Irving Nat. Bank, 116 N.Y. 606, 611, 23 N.E. 7, 9; see, also, 13 Williston, Contracts (3d ed., 1970), § 1603, p. 658.) The existence of economic duress or business compulsion is demonstrated by proof that "immediate possession of needful goods is threatened" (Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d 418, 425, 165 N.Y.S.2d 517, 520, 144 N.E.2d 400) or, more particularly, in cases such as the one before us, by proof that one party to a contract has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand. (See, e.g., Du Pont de Nemours & Co. v. J. I. Hass Co., 303 N.Y. 785, 103 N.E.2d 896; Gallagher Switchboard Corp. v. Heckler Elec. Co., 36 Misc.2d 225, 232 N.Y.S.2d 590; see, also, 13 Williston, Contracts (3d ed., 1970), § 1617, p. 705.) However, a mere threat by one party to breach the contract by not delivering the required items, though wrongful, does not in itself constitute economic duress. It must also appear that [29 N.Y.2d 131] the threatened party could not obtain the goods [324 N.Y.S.2d 26] from another source of supply^[3] and that the ordinary remedy of an action for breach of contract would not be adequate.^[4]

[272 N.E.2d 536] We find without any support in the record the conclusion reached by the courts below that Loral failed to establish that it was the victim of economic duress. On the contrary, the evidence makes out a classic case, as a matter of law, of such duress.^[5]

It is manifest that Austin's threat—to stop deliveries unless the prices were increased—deprived Loral of its free will. As bearing on this, Loral's relationship with the Government is most significant. As mentioned above, its contract called for staggered monthly deliveries of the radar sets, with clauses calling for liquidated damages and possible cancellation on default. Because of its production schedule, Loral was, in July, 1966, concerned with meeting its delivery requirements in September, October and November, and it was for the sets to be delivered in those months that the withheld gears were needed. Loral had to plan ahead, and the substantial liquidated damages for which it would be liable, plus the threat of default, were genuine possibilities. Moreover, Loral did a substantial portion of its business with the Government, and it feared that a failure to deliver as agreed upon would jeopardize its chances for future contracts. These genuine concerns do not merit the label "self-imposed, undisclosed and subjective" which the Appellate Division majority placed upon them. It was perfectly reasonable for Loral, or any other party similarly placed, to consider itself in an emergency, duress situation.

[29 N.Y.2d 132] Austin, however, claims that the fact that Loral extended its time to resume deliveries until September negates its alleged dire need for the parts. A Loral official testified on this point that Austin's president told him he could deliver some parts in August and that the extension of deliveries was a formality. In any event, the parts necessary for production of the radar sets to be delivered in September were delivered to Loral on September 1, and the parts needed for the October schedule were delivered in late August and early September. [324 N.Y.S.2d 27] Even so, Loral had to "work * * * around the clock" to meet its commitments. Considering that the best offer Loral received from the other vendors it contacted was commencement of delivery sometime in October, which, as the record shows, would have made it late in its deliveries to the Navy in both September and October, Loral's claim that it had no choice but to accede to Austin's demands is conclusively demonstrated.

We find unconvincing Austin's contention that Loral, in order to meet its burden, should have contacted the Government and asked for an extension of its delivery dates so as to enable it to purchase the parts from another vendor. Aside from the consideration that Loral was anxious to perform well in the Government's eyes, it could not be sure when it would obtain enough parts from a substitute vendor to meet its commitments. The only promise which it received from the companies it contacted was for Commencement of deliveries, not full supply, and, with vendor delay common in this field, it would have been nearly impossible to know the length of the extension it should request. It must be remembered that Loral was producing a needed item of military hardware. Moreover, there is authority for Loral's position that nonperformance by a subcontractor is not an excuse for default in the main contract. (See, e.g., McBride & Wachtel, [272 N.E.2d 537] Government Contracts, § 35.10, (11).) In light of all this, Loral's claim should not be held insufficiently supported because it did not request an extension from the Government.

Loral, as indicated above, also had the burden of demonstrating that it could not obtain the parts elsewhere within a reasonable time, and there can be no doubt that it met this burden. The 10 manufacturers whom Loral contacted comprised its entire list of "approved vendors" for precision gears, and none was [29 N.Y.2d 133] able to commence delivery soon enough.^[6] As Loral was producing a highly sophisticated item of military machinery requiring parts made to the strictest engineering standards, it would be unreasonable to hold that Loral should have gone to other vendors, with whom it was either unfamiliar or dissatisfied, to procure the needed parts. As Justice Steuer noted in his dissent, Loral "contacted all the manufacturers whom it believed capable of making these parts" (35 A.D.2d at p. 393, 316 N.Y.S.2d at p. 534), and this was all the law requires.

It is hardly necessary to add that Loral's normal legal remedy of accepting Austin's breach of the contract and then suing for damages would have been inadequate under the circumstances, as Loral would still have had to obtain the gears elsewhere with all the concomitant [324 N.Y.S.2d 28] consequences mentioned above. In other words, Loral actually had no choice, when the prices were raised by Austin, except to take the gears at the "coerced" prices and then sue to get the excess back.

Austin's final argument is that Loral, Even if it did enter into the contract under duress, lost any rights it had to a refund of money by waiting until July, 1967, long after the termination date of the contract, to disaffirm it. It is true that one who would recover moneys allegedly paid under duress must act promptly to make his claim known. (See Oregon Pacific R.R. Co. v. Forrest, 128 N.Y. 83, 93, 28 N.E. 137, 139; Port Chester Elec. Constr. Corp. v. Hastings Terraces, 284 App.Div. 966, 967, 134 N.Y.S.2d 656, 658.) In this case, Loral delayed making its demand for a refund until three days after Austin's last delivery on the second subcontract. Loral's reason—for waiting until that time—is that it feared another stoppage of deliveries which would again put it in an untenable situation. Considering Austin's conduct in the past, this was perfectly reasonable, as the possibility of an application by Austin of further business compulsion still existed until all of the parts were delivered.

In sum, the record before us demonstrates that Loral agreed to the price increases in consequence of the economic duress [29 N.Y.2d 134] employed by Austin. Accordingly, the matter should be remanded to the trial court for a computation of its damages.

The order appealed from should be modified, with costs, by reversing so much thereof as affirms the dismissal of defendant Loral Corporation's claim and, except as so modified, affirmed.

BERGAN, Judge (dissenting).

Whether acts charged as constituting economic duress produce or do not produce the damaging effect attributed to them is normally a routine type of factual issue.

Here the fact question was resolved against Loral both by the Special Term and by the affirmance at the Appellate Division. It should not be open for different resolution here.

In summarizing the Special Term's decision and its own, the Appellate Division decided that "the conclusion that Loral acted deliberately and voluntarily, without being under immediate pressure of incurring severe business reverses, precludes a [272 N.E.2d 538] recovery on the theory of economic duress" (35 A.D.2d 387, 391, 316 N.Y.S.2d 528, 532).

When the testimony of the witnesses who actually took part in the negotiations for the two disputing parties is examined, sharp conflicts of fact emerge. Under Austin's version the request for a renegotiation of the existing contract was based on Austin's contention that Loral had failed to carry out an understanding as to the items to be [324 N.Y.S.2d 29] furnished under that contract and this was the source of dissatisfaction which led both to a revision of the existing agreement and to entering into a new one.

This is not necessarily and as a matter of law to be held economic duress. On this appeal it is needful to look at the facts resolved in favor of Austin most favorably to that party. Austin's version of events was that a threat was not made but rather a request to accommodate the closing of its plant for a customary vacation period in accordance with the general understanding of the parties.

Moreover, critical to the issue of economic duress was the availability of alternative suppliers to the purchaser Loral. The demonstration is replete in the direct testimony of Austin's witnesses and on cross-examination of Loral's principal and purchasing agent that the availability of practical alternatives was a highly controverted issue of fact. On that issue of fact the [29 N.Y.2d 135] explicit findings made by the Special Referee were affirmed by the Appellate Division. Nor is the issue of fact made the less so by assertion that the facts are undisputed and that only the application of equally undisputed rules of law is involved.

Austin asserted and Loral admitted on cross-examination that there were many suppliers listed in a trade registry but that Loral chose to rely only on those who had in the past come to them for orders and with whom they were familiar. It was, therefore, at least a fair issue of fact whether under the circumstances such conduct was reasonable and made what might otherwise have been a commercially understandable renegotiation an exercise of duress.

The order should be affirmed.

BURKE, SCILEPPI and GIBSON, JJ., concur with FULD, C.J.

BERGAN, J., dissents and votes to affirm in a separate opinion in which BREITEL and JASEN, JJ., concur.

Ordered accordingly.

[1] The best reply Loral received was from a vendor who stated he could commence deliveries sometime in October.

[2] Loral makes no claim in this action on the second subcontract.

[3] See, e.g., Du Pont de Nemours & Co. v. J. I. Hass Co., 303 N.Y. 785, 103 N.E.2d 896, Supra; Gallagher Switchboard Corp. v. Heckler Elec. Co., 36 Misc.2d 225, 226, 232 N.Y.S.2d 590, 591, Supra; 30 East End v. World Steel Prods. Corp., Sup., 110 N.Y.S.2d 754, 757.

[4] See, e.g., Kohn v. Kenton Assoc., 27 A.D.2d 709, 280 N.Y.S.2d 520; Colonie Constr. Corp. v. De Lollo, 25 A.D.2d 464, 465, 266 N.Y.S.2d 283, 285; Halperin v. Wolosoff, 282 App.Div. 876, 124 N.Y.S.2d 572; J. R. Constr. Corp. v. Berkeley Apts., 259 App.Div. 830, 19 N.Y.S.2d 500; Boss v. Hutchinson, 182 App.Div. 88, 92, 169 N.Y.S. 513, 516.

[5] The suggestion advanced that we are precluded from reaching this determination because the trial court's findings of fact have been affirmed by the Appellate Division ignores the question to be decided. That question, undoubtedly one of law (see Cohen and Karger, Powers of the New York Court of Appeals (1952), § 115, p. 492), is, accepting the facts found, did the courts below properly apply the law to them.

[6] Loral, as do many manufacturers, maintains a list of "approved vendors," that is, vendors whose products, facilities, techniques and performance have been inspected and found satisfactory.

45 Mich. 569

CHAS. H. HACKLEY AND JAS. MCGORDON
v.
JOHN HEADLEY.

[569] Logging contract—Scale—Expense of sealing—Usage—Duress.

Where a lumberman, in contracting with his jobber for getting out logs, agrees to divide the expense of scaling them and the scaler stipulates that the jobber shall board him, the cost of boarding him is an item of the expense to be divided, and the lumberman is liable for half of it and cannot show that it is the custom of jobbers to board their scalers at their own expense. But if the scaler does not stipulate for his board the lumberman is not liable, and the transaction is between the jobber and scaler alone.

A contract for getting out logs to be scaled "in accordance with the standard rules or scales in general use" on the stream, is governed by the scale in use at the time of scaling.

Duress exists where one is induced, by another's unlawful act, to make a contract or perform some act under circumstances which prevent his [570] exercising free will. It is either of the person or the goods of the party constrained.

Duress of the person is by imprisonment, threats or an exhibition of apparently irresistible force.

Duress of goods may exist when one is compelled to submit to an illegal exaction in order to obtain them from one who has them but refuses to surrender them unless the exaction is endured.

There is no duress where the act threatened is nothing which the party has not a legal right to perform.

Refusal, on demand, to pay a debt that is due, thereby forcing the creditor to receipt in full for only a partial payment, does not constitute duress if the debtor has done nothing unlawful to cause the financial embarassment which compelled him to submit to the extortion.

A receipt obtained by improper means and assuming to discharge any indebtedness not honestly in dispute between the parties and known by the debtor to be owing, is to that extent without consideration and ineffectual.

Error to Kent. Submitted Jan. 26. Decided April 13.

ASSUMPSIT. Defendant brings error. Reversed.

Smith, Nims, Hoyt & Erwin for plaintiffs in error.

Duress is that degree of constraint that is sufficient to overcome the mind and will of a person of ordinary firmness: Brown v. Pierce 7 Wal. 214; as a defense it must be made in good faith and seasonably: Lyon v. Waldo 36 Mich. 356, DeArmand v. Phillips Wal. Ch. 199; a payment is not compulsory unless made to emancipate the person or property from an actual and existing duress imposed upon it by the party to whom it is made: Radich v. Hutchins 95 U. S. 213; it is not ordinarily duress to refuse to pay without litigation: Mayhew v. Phoenix Ins. Co. 23 Mich. 105.

John C. FitzGerald for defendant in error. Procuring a settlement of a debt by taking advantage of the creditor's financial embarassments is duress of goods; Moses v. Macferlan 2 Burr. 1005; Irving v. Wilson 4 D. & E. 485; there is no consideration for a receipt obtained by taking such advantage, to the extent to which it releases the debt: Ryan [571] v. Ward 48 N. Y. 206; Harrison v. Close 2 Johns. 448; Seymour v. Minturn 17 Johns. 170; Mech. Bank v. Hazard 9 Johns. 393; Hendrickson v. Beers 6 Bosw. 639; contracts must be carried into effect according to the intention of the parties at the time of making them: Heald v. Cooper 8 Me. 32; a logging contract providing for scaling by the rule in general use means in use at the time: Williams v. Gilman 3 Me. 276; Homer v. Dorr 10 Mass. 26; Robinson v. Fiske 25 Me. 405; Dawson v. Kittle 4 Hill 108; Thomas v. Wiggers 41 Ill. 470; Karmuller v. Krotz 18 Ia. 352; Rindskoff v. Barrett 14 Ia. 101; 1 Chitty Cont. 135, n 3.

COOLEY, J. Headley sued Hackley & McGordon to recover compensation for cutting, hauling and delivering in the Muskegon river a quantity of logs. The performance of the labor was not disputed, but the parties were not agreed as to the construction of the contract in some important particulars, and the amount to which Headley was entitled depended largely upon the determination of these differences. The defendants also claimed to have had a full and complete settlement with Headley, and produced his receipt in evidence thereof. Headley admitted the receipt, but insisted that it was given by him under duress, and the verdict which he obtained in the circuit court was in accordance with this claim.

I.

The questions in dispute respecting the construction of the contract concerned the scaling of the logs. The contract was in writing, and bore date August 20, 1874. Headley agreed thereby to cut on specified lands and deliver in the main Muskegon river the next spring 8,000,000 feet of logs. The logs were to be measured or scaled by a competent person to be selected by Headley & McGordon, "and in accordance with the standard rules or scales in general use on Muskegon lake and river," and the expense of scaling was to be mutually borne by the parties.

The dispute respecting the expense of scaling related only to the board of the scaler. Headley boarded him and claimed to recover one-half what it was worth. Defendants offered [572] evidence that it was customary on the Muskegon river for jobbers to board the scalers, at their own expense, but we are of opinion that this was inadmissible. If under the contract with the scaler he was to be furnished his board, then the cost of the board was a part of the expense of scaling, and by the express terms of the contract was to be shared by the parties. If that was not the agreement with him, Headley could only look to the scaler himself for his pay.

This is a small matter; but the question what scale was to be the standard is one of considerable importance. The evidence tended to show that at the time the contract was entered into, scaling upon the river and lake was in accordance with the "Scribner rule," so-called; but that the "Doyle rule" was in general use when the logs were cut and delivered, and Hackley & McGordon had the logs scaled by that. By the new rule the quantity would be so much less than by the one in prior use that the amount Headley would be entitled to receive would be less by some $2000; and it was earnestly contended on behalf of Headley that the scale intended, as the one in general use, was the one in general use when the contract was entered into.

We are of opinion, however, that this is not the proper construction. The contract was for the performance of labor in the future, and as the scaling was to be done by third persons, and presumptively by those who were trained to the business, it would be expected they would perform their duties under such rules and according to such standards as were generally accepted at the time their services were called for. Indeed such contracts might contemplate performance at times when it would scarcely be expected that scalers would be familiar with scales in use when they were made. It is true the time that was to elapse between the making of this contract and its performance would be but short, but if it had been many years the question of construction would have been the same; and if we could not suppose under such circumstances that the parties contemplated the scalers should govern their measurements by obsolete and perhaps now unknown rules, neither can we here. It is fair to infer that [573] the existing scale was well known to the parties, and that if they intended to be governed by it at a time when it might have ceased to be used, they would have said so in explicit terms. In the absence of an agreement to that effect, we must suppose they intended their logs to be scaled as the logs of others would be at the place and time of scaling.

II.

The question of duress on the part of Hackley & McGordon, in obtaining the discharge, remains. The paper reads as follows:

                                                                                                                 "MUSKEGON, MICH., August 3, 1875.

Received from Hackley & McGordon their note for four thousand dollars, payable in thirty days, at First National Bank, Grand Rapids, which is in full for all claims of every kind and nature which I have against said Hackley & McGordon.

Witness: THOMAS HUME.                                                                                 JOHN HEADLEY."

Headley's account of the circumstances under which this receipt was given is in substance as follows: On August 3, 1875, he went to Muskegon, the place of business of Hackley & McGordon, from his home in Kent county, for the purpose of collecting the balance which he claimed was due him under the contract. The amount he claimed was upwards of $6200, estimating the logs by the Scribner scale. He had an interview with Hackley in the morning, who insisted that the estimate should be according to the Doyle scale, and who also claimed that he had made payments to others amounting to some $1400 which Headley should allow. Headley did not admit these payments, and denied his liability for them if they had been made. Hackley told Headley to come in again in the afternoon, and when he did so Hackley said to him: "My figures show there is 4260 and odd dollars in round numbers your due, and I will just give you $4000. I will give you our note for $4000." To this Headley replied: "I cannot take that; it is not right, and you know it. There is over $2000 besides that belongs to me, and you know it." Hackley replied: "That is the best I will do with you." Headley said: "I cannot take that, Mr. Hackley," and Hackley replied, "You do the next best thing you are a mind to. [574] You can sue me if you please." Headley then said: "I cannot afford to sue you, because I have got to have the money, and I cannot wait for it. If I fail to get the money to-day, I shall probably be ruined financially, because I have made no other arrangement to get the money only on this particular matter." Finally he took the note and gave the receipt, because at the time he could do nothing better, and in the belief that he would be financially ruined unless he had immediately the money that was offered him, or paper by means of which the money might be obtained.

If this statement is correct, the defendants not only took a most unjust advantage of Headley, but they obtained a receipt which, to the extent that it assumed to discharge anything not honestly in dispute between the parties, and known by them to be owing to Headley beyond the sum received, was without consideration and ineffectual. But was it a receipt obtained by duress? That is the question which the record presents. The circuit judge was of opinion that if the jury believed the statement of Headley they would be justified in finding that duress existed; basing his opinion largely upon the opinion of this Court in Vyne v. Glenn 41 Mich. 112.

Duress exists when one by the unlawful act of another is induced to make a contract or perform some act under circumstances which deprive him of the exercise of free will. It is commonly said to be of either the person or the goods of the party. Duress of the person is either by imprisonment, or by threats, or by an exhibition of force which apparently cannot be resisted. It is not pretended that duress of the person existed in this case; it is if anything duress of goods, or at least of that nature, and properly enough classed with duress of goods. Duress of goods may exist when one is compelled to submit to an illegal exaction in order to obtain them from one who has them in possession but refuses to surrender them unless the exaction is submitted to.

The leading case involving duress of goods is Astley v. Reynolds 2 Strange, 915. The plaintiff had pledged goods for £20, and when he offered to redeem them, the pawnbroker [575] refused to surrender them unless he was paid £10 for interest. The plaintiff submitted to the exaction, but was held entitled to recover back all that had been unlawfully demanded and taken. This, say the court,

"is a payment by compulsion: the plaintiff might have such an immediate want of his goods that an action of trover would not do his business: where the rule volenti non fit injuria is applied, it must be when the party had his freedom of exercising his will, which this man had not: we must take it he paid the money relying on his legal remedy to get it back again."

The principle of this case was approved in Smith v. Bromley Doug. 696, and also in Ashmole v. Wainwright 2 Q. B. 837. The latter was a suit to recover back excessive charges paid to common carriers who refused until payment was made to deliver the goods for the carriage of which the charges were made. There has never been any doubt but recovery could be had under such circumstances. Harmony v. Bingham 12 N. Y. 99. The case is like it of one having securities in his hands which he refuses to surrender until illegal commissions are paid. Scholey v. Mumford 60 N. Y. 498. So if illegal tolls are demanded, for passing a raft of lumber, and the owner pays them to liberate his raft, he may recover back what he pays. Chase v. Dwinal 7 Me. 134. Other cases in support of the same principle are Sham v. Woodcock 7 B. & C. 73; Nelson v. Suddarth 1 H. & Munf. 350; White v. Heylman 34 Penn. St. 142; Sasportas v. Jennings 1 Bay, 470; Collins v. Westbury 2 Bay 211; Crawford v. Cato 22 Ga. 594. So one may recover back money which he pays to release his goods from an attachment which is sued out with knowledge on the part of the plaintiff that he has no cause of action. Chandler v. Sanger 114 Mass. 364. See Spaids v. Barrett 57 Ill. 289. Nor is the principle confined to payments made to recover goods: it applies equally well when money is extorted as a condition to the exercise by the party of any other legal right; for example when a corporation refuses to suffer a lawful transfer of stock till the exaction is submitted to: Bates v. Insurance Co. 3 Johns. Cas. 238; or [576] a creditor witholds his certificate from a bankrupt. Smith v. Bromley Doug. 696. And the mere threat to employ colorable legal authority to compel payment of an unfounded claim is such duress as will support an action to recover back what is paid under it. Beckwith v. Frisbie 32 Vt. 559; Adams v. Reeves 68 N. C. 134; Briggs v. Lewiston 29 Me. 472; Grim v. School District 57 Penn. St. 433; First Nat. Bank v. Watkins 21 Mich. 483.

But where the party threatens nothing which he has not a legal right to perform, there is no duress. Skeate v. Beale 11 Ad. & El. 983; Preston v. Boston 12 Pick. 14. When therefore a judgment creditor threatens to levy his execution on the debtor's goods, and under fear of the levy the debtor executes and delivers a note for the amount, with sureties, the note cannot be avoided for duress. Wilcox v. Howland 23 Pick. 167. Many other cases might be cited, but it is wholly unnecessary. We have examined all to which our attention has been directed, and none are more favorable to the plaintiff's case than those above referred to. Some of them are much less so; notably Atlee v. Backhouse 3 M. & W. 633; Hall v. Schultz 4 Johns. 240; Silliman v. United States 101 U.S. 465.

In what did the alleged duress consist in the present case? Merely in this: that the debtors refused to pay on demand a debt already due, though the plaintiff was in great need of the money and might be financially ruined in case he failed to obtain it. It is not pretended that Hackley & McGordon had done anything to bring Headley to the condition which made this money so important to him at this very time, or that they were in any manner responsible for his pecuniary embarrassment except as they failed to pay this demand. The duress, then, is to be found exclusively in their failure to meet promptly their pecuniary obligation. But this, according to the plaintiffs claim, would have constituted no duress whatever if he had not happened to be in pecuniary straits; and the validity of negotiations, according to this claim, must be determined, not by the defendants' conduct, [577] but by the plaintiff's necessities. The same contract which would be valid if made with a man easy in his circumstances, becomes invalid when the contracting party is pressed with the necessity of immediately meeting his bank paper. But this would be a most dangerous, as well as a most unequal doctrine; and if accepted, no one could well know when he would be safe in dealing on the ordinary terms of negotiation with a party who professed to be in great need.

The case of Vyne v. Glenn 41 Mich. 112, differs essentially from this. There was not a simple withholding of moneys in that case. The decision was made upon facts found by referees who reported that the settlement upon which the defendant relied was made at Chicago, which was a long distance from plaintiff's home and place of business; that the defendant forced the plaintiff into the settlement against his will, by taking advantage of his pecuniary necessities, by informing plaintiff that he had taken steps to stop the payment of money due to the plaintiff from other parties, and that he had stopped the payment of a part of such moneys; that defendant knew the necessities and financial embarrassments in which the plaintiff was involved, and knew that if he failed to get the money so due to him he would be ruined financially; that plaintiff consented to such settlement only in order to get the money due to him, as aforesaid, and the payment of which was stopped by defendant, and which he must have to save him from financial ruin. The report, therefore, showed the same financial embarrassment and the same great need of money which is claimed existed in this case, and the same withholding of moneys lawfully due, but it showed over and above all that an unlawful interference by defendant between the plaintiff and other debtors, by means of which he had stopped the payment to plaintiff of sums due to him from such other debtors. It was this keeping of other moneys from the plaintiff's hands, and not the refusal by defendant to pay his own debt, which was the ruling fact in that case, and which was equivalent, in our opinion, to duress of goods.

[578] These views render a reversal of the judgment necessary, and the case will be remanded for a new trial with costs to the plaintiffs in error.

The other Justices concurred.

[2575] Paul D. Clement, for Petitioners.

Edwin S. Kneedler, for Respondents.

H. Bartow Farr, III, appointed by this Court, as amicus curiae.

Michael A. Carvin, for respondents National Federation of Independent Business.

Donald B. Verrilli, Jr., Solicitor General, Washington, D.C, for Respondents.

Karen R. Harned, Washington, Randy E. Barnett, Washington, DC, Michael A. Carvin, Gregory G. Katsas, C. Kevin Marshall, Hashim M. Mooppan, Yaakov M. Roth, Jones Day, Washington, DC, for Private Petitioners.

[2576] Pamela Jo Bondi, Attorney General of Florida, Scott D. Makar, Solicitor General, Louis F. Hubener, Timothy D. Osterhaus, Blaine H. Winship, Tallahassee, FL, Paul D. Clement, Erin E. Murphy, Bancroft PLLC, Washington, DC, Greg Abbott, Attorney General of Texas, Austin, TX, Alan Wilson, Attorney General of South Carolina, Columbia, SC, Luther Strange, Attorney General of Alabama, Montgomery, AL, Bill Schuette, Attorney General of Michigan, Lansing, MI, Robert M. McKenna, Attorney General of Washington, Olympia, WA, Jon Bruning, Attorney General of Nebraska, Katherine J. Spohn, Special Counsel to the Attorney General Office of the Attorney General of Nebraska, Lincoln, NE, Mark L. Shurtleff, Attorney General of Utah, Salt Lake City, UT, James D. "Buddy" Caldwell, Attorney General of Louisiana, Baton Rouge, LA, John W. Suthers, Attorney General of Colorado, Denver, CO, Lawrence G. Wasden, Attorney General of Idaho, Boise, ID, Thomas W. Corbett, Jr., Governor, Linda L. Kelly, Attorney General Commonwealth of Pennsylvania, Harrisburg, PA, Marty J. Jackley, Attorney General of South Dakota, Pierre, SD, Gregory F. Zoeller, Attorney General of Indiana, Indianapolis, IN, Samuel S. Olens, Attorney General of Georgia, Atlanta, GA, Joseph Sciarrotta, Jr., General Counsel, Office of Arizona Governor, Janice K. Brewer, Tom Home, Attorney General of Arizona, Phoenix, AZ, Wayne Stenejhem, Attorney General of North Dakota, Bismarck, ND, Brian Sandoval, Governor of Nevada, Carson City, NV, Michael C. Geraghty, Attorney General of Alaska, Juneau, AK, Michael DeWine, Attorney General of Ohio, David B. Rivkin, Lee A. Casey, Baker & Hostetler LLP, Columbus, OH, Matthew Mead, Governor of Wyoming, Cheyenne, WY, William J. Schneider, Attorney General of Maine, Augusta, ME, J.B. Van Hollen, Attorney General of Wisconsin, Madison, WI, Michael B. Wallace, Counsel for the State of Mississippi by and through Governor Phil Bryant, Wise Carter Child & Caraway, P.A., Jackson, MS, Derek Schmidt, Attorney General of Kansas, Topeka, KS, Terry Branstad, Governor of Iowa, Des Moines, IA, for State Petitioners on Severability, State Petitioners on Medicade.

George W. Madison, General Counsel, Washington, D.C., M. Patricia Smith, Solicitor of Labor, Washington, D.C., William B. Schultz, Acting General Counsel, Kenneth Y. Choe, Deputy General Counsel, Washington, D.C., Donald B. Verrilli, Jr., Solicitor General, Tony West, Assistant Attorney General, Edwin S. Kneedler, Deputy Solicitor General, Beth S. Brinkmann, Deputy Assistant Attorney General, Leondra R. Kruger, Assistant to the Solicitor General, Mark B. Stern, Alisa B. Klein, Attorneys Department of Justice, Washington, D.C., for Respondents.

George W. Madison, General Counsel, Washington, D.C., M. Patricia Smith, Solicitor of Labor, Washington, D.C., William B. Schultz, Acting General Counsel, Kenneth Y. Choe, Deputy General Counsel, Washington, D.C., Donald B. Verrilli, Jr., Solicitor General, Tony West, Assistant Attorney General, Edwin S. Kneedler, Deputy Solicitor General, Beth S. Brinkmann, Deputy Assistant Attorney General, Joseph R. Palmore, Assistant to the Solicitor General, Mark B. Stern, Alisa B. Klein, Anisha Dasgupta, Dana Kaersvang, Attorneys Department of Justice, Washington, D.C., for Respondents (Severability).

[2577] Chief Justice ROBERTS announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III-C, an opinion with respect to Part IV, in which Justice BREYER and Justice KAGAN join, and an opinion with respect to Parts III-A, III-B, and III-D.

Today we resolve constitutional challenges to two provisions of the Patient Protection and Affordable Care Act of 2010: the individual mandate, which requires individuals to purchase a health insurance policy providing a minimum level of coverage; and the Medicaid expansion, which gives funds to the States on the condition that they provide specified health care to all citizens whose income falls below a certain threshold. We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.

In our federal system, the National Government possesses only limited powers; the States and the people retain the remainder. Nearly two centuries ago, Chief Justice Marshall observed that "the question respecting the extent of the powers actually granted" to the Federal Government "is perpetually arising, and will probably continue to arise, as long as our system shall exist." McCulloch v. Maryland, 4 Wheat. 316, 405, 4 L.Ed. 579 (1819). In this case we must again determine whether the Constitution grants Congress powers it now asserts, but which many States and individuals believe it does not possess. Resolving this controversy requires us to examine both the limits of the Government's power, and our own limited role in policing those boundaries.

The Federal Government "is acknowledged by all to be one of enumerated powers." Ibid. That is, rather than granting general authority to perform all the conceivable functions of government, the Constitution lists, or enumerates, the Federal Government's powers. Congress may, for example, "coin Money," "establish Post Offices," and "raise and support Armies." Art. I, § 8, cls. 5, 7, 12. The enumeration of powers is also a limitation of powers, because "[t]he enumeration presupposes something not enumerated." Gibbons v. Ogden, 9 Wheat. 1, 195, 6 L.Ed. 23 (1824). The Constitution's express conferral of some powers makes clear that it does not grant others. And the Federal Government "can exercise only the powers granted to it." McCulloch, supra, at 405.

Today, the restrictions on government power foremost in many Americans' minds are likely to be affirmative prohibitions, such as contained in the Bill of Rights. These affirmative prohibitions come into play, however, only where the Government possesses authority to act in the first place. If no enumerated power authorizes Congress to pass a certain law, that law may not be enacted, even if it would not violate any of the express prohibitions in the Bill of Rights or elsewhere in the Constitution.

Indeed, the Constitution did not initially include a Bill of Rights at least partly [2578] because the Framers felt the enumeration of powers sufficed to restrain the Government. As Alexander Hamilton put it, "the Constitution is itself, in every rational sense, and to every useful purpose, A BILL OF RIGHTS." The Federalist No. 84, p. 515 (C. Rossiter ed. 1961). And when the Bill of Rights was ratified, it made express what the enumeration of powers necessarily implied: "The powers not delegated to the United States by the Constitution ... are reserved to the States respectively, or to the people." U.S. Const., Amdt. 10. The Federal Government has expanded dramatically over the past two centuries, but it still must show that a constitutional grant of power authorizes each of its actions. See, e.g., United States v. Comstock, 560 U.S. ___, 130 S.Ct. 1949, 176 L.Ed.2d 878 (2010).

The same does not apply to the States, because the Constitution is not the source of their power. The Constitution may restrict state governments — as it does, for example, by forbidding them to deny any person the equal protection of the laws. But where such prohibitions do not apply, state governments do not need constitutional authorization to act. The States thus can and do perform many of the vital functions of modern government — punishing street crime, running public schools, and zoning property for development, to name but a few — even though the Constitution's text does not authorize any government to do so. Our cases refer to this general power of governing, possessed by the States but not by the Federal Government, as the "police power." See, e.g., United States v. Morrison, 529 U.S. 598, 618-619, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000).

"State sovereignty is not just an end in itself: Rather, federalism secures to citizens the liberties that derive from the diffusion of sovereign power." New York v. United States, 505 U.S. 144, 181, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992) (internal quotation marks omitted). Because the police power is controlled by 50 different States instead of one national sovereign, the facets of governing that touch on citizens' daily lives are normally administered by smaller governments closer to the governed. The Framers thus ensured that powers which "in the ordinary course of affairs, concern the lives, liberties, and properties of the people" were held by governments more local and more accountable than a distant federal bureaucracy. The Federalist No. 45, at 293 (J. Madison). The independent power of the States also serves as a check on the power of the Federal Government: "By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power." Bond v. United States, 564 U.S. ___, ___, 131 S.Ct. 2355, 2364, 180 L.Ed.2d 269 (2011).

This case concerns two powers that the Constitution does grant the Federal Government, but which must be read carefully to avoid creating a general federal authority akin to the police power. The Constitution authorizes Congress to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Art. I, § 8, cl. 3. Our precedents read that to mean that Congress may regulate "the channels of interstate commerce," "persons or things in interstate commerce," and "those activities that substantially affect interstate commerce." Morrison, supra, at 609, 120 S.Ct. 1740 (internal quotation marks omitted). The power over activities that substantially affect interstate commerce can be expansive. That power has been held to authorize federal regulation of such seemingly local matters as a farmer's decision to grow wheat for himself and his [2579] livestock, and a loan shark's extortionate collections from a neighborhood butcher shop. See Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942); Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971).

Congress may also "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." U.S. Const., Art. I, § 8, cl. 1. Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control. See, e.g., License Tax Cases, 5 Wall. 462, 471, 18 L.Ed. 497 (1867). And in exercising its spending power, Congress may offer funds to the States, and may condition those offers on compliance with specified conditions. See, e.g., College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666, 686, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999). These offers may well induce the States to adopt policies that the Federal Government itself could not impose. See, e.g., South Dakota v. Dole, 483 U.S. 203, 205-206, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987) (conditioning federal highway funds on States raising their drinking age to 21).

The reach of the Federal Government's enumerated powers is broader still because the Constitution authorizes Congress to "make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers." Art. I, § 8, cl. 18. We have long read this provision to give Congress great latitude in exercising its powers: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional." McCulloch, 4 Wheat., at 421.

Our permissive reading of these powers is explained in part by a general reticence to invalidate the acts of the Nation's elected leaders. "Proper respect for a coordinate branch of the government" requires that we strike down an Act of Congress only if "the lack of constitutional authority to pass [the] act in question is clearly demonstrated." United States v. Harris, 106 U.S. 629, 635, 1 S.Ct. 601, 27 L.Ed. 290 (1883). Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation's elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.

Our deference in matters of policy cannot, however, become abdication in matters of law. "The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the constitution is written." Marbury v. Madison, 1 Cranch 137, 176, 2 L.Ed. 60 (1803). Our respect for Congress's policy judgments thus can never extend so far as to disavow restraints on federal power that the Constitution carefully constructed. "The peculiar circumstances of the moment may render a measure more or less wise, but cannot render it more or less constitutional." Chief Justice John Marshall, A Friend of the Constitution No. V, Alexandria Gazette, July 5, 1819, in John Marshall's Defense of McCulloch v. Maryland 190-191 (G. Gunther ed. 1969). And there can be no question that it is the responsibility of this Court to enforce the limits on federal power [2580] by striking down acts of Congress that transgress those limits. Marbury v. Madison, supra, at 175-176.

The questions before us must be considered against the background of these basic principles.

I

In 2010, Congress enacted the Patient Protection and Affordable Care Act, 124 Stat. 119. The Act aims to increase the number of Americans covered by health insurance and decrease the cost of health care. The Act's 10 titles stretch over 900 pages and contain hundreds of provisions. This case concerns constitutional challenges to two key provisions, commonly referred to as the individual mandate and the Medicaid expansion.

The individual mandate requires most Americans to maintain "minimum essential" health insurance coverage. 26 U.S.C. § 5000A. The mandate does not apply to some individuals, such as prisoners and undocumented aliens. § 5000A(d). Many individuals will receive the required coverage through their employer, or from a government program such as Medicaid or Medicare. See § 5000A(f). But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.

Beginning in 2014, those who do not comply with the mandate must make a "[s]hared responsibility payment" to the Federal Government. § 5000A(b)(1). That payment, which the Act describes as a "penalty," is calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance. § 5000A(c). In 2016, for example, the penalty will be 2.5 percent of an individual's household income, but no less than $695 and no more than the average yearly premium for insurance that covers 60 percent of the cost of 10 specified services (e.g., prescription drugs and hospitalization). Ibid.; 42 U.S.C. § 18022. The Act provides that the penalty will be paid to the Internal Revenue Service with an individual's taxes, and "shall be assessed and collected in the same manner" as tax penalties, such as the penalty for claiming too large an income tax refund. 26 U.S.C. § 5000A(g)(1). The Act, however, bars the IRS from using several of its normal enforcement tools, such as criminal prosecutions and levies. § 5000A(g)(2). And some individuals who are subject to the mandate are nonetheless exempt from the penalty — for example, those with income below a certain threshold and members of Indian tribes. § 5000A(e).

On the day the President signed the Act into law, Florida and 12 other States filed a complaint in the Federal District Court for the Northern District of Florida. Those plaintiffs — who are both respondents and petitioners here, depending on the issue — were subsequently joined by 13 more States, several individuals, and the National Federation of Independent Business. The plaintiffs alleged, among other things, that the individual mandate provisions of the Act exceeded Congress's powers under Article I of the Constitution. The District Court agreed, holding that Congress lacked constitutional power to enact the individual mandate. 780 F.Supp.2d 1256 (N.D.Fla.2011). The District Court determined that the individual mandate could not be severed from the remainder of the Act, and therefore struck down the Act in its entirety. Id., at 1305-1306.

The Court of Appeals for the Eleventh Circuit affirmed in part and reversed in [2581] part. The court affirmed the District Court's holding that the individual mandate exceeds Congress's power. 648 F.3d 1235 (2011). The panel unanimously agreed that the individual mandate did not impose a tax, and thus could not be authorized by Congress's power to "lay and collect Taxes." U.S. Const., Art. I, § 8, cl. 1. A majority also held that the individual mandate was not supported by Congress's power to "regulate Commerce ... among the several States." Id., cl. 3. According to the majority, the Commerce Clause does not empower the Federal Government to order individuals to engage in commerce, and the Government's efforts to cast the individual mandate in a different light were unpersuasive. Judge Marcus dissented, reasoning that the individual mandate regulates economic activity that has a clear effect on interstate commerce.

Having held the individual mandate to be unconstitutional, the majority examined whether that provision could be severed from the remainder of the Act. The majority determined that, contrary to the District Court's view, it could. The court thus struck down only the individual mandate, leaving the Act's other provisions intact. 648 F.3d, at 1328.

Other Courts of Appeals have also heard challenges to the individual mandate. The Sixth Circuit and the D.C. Circuit upheld the mandate as a valid exercise of Congress's commerce power. See Thomas More Law Center v. Obama, 651 F.3d 529 (C.A.6 2011); Seven-Sky v. Holder, 661 F.3d 1 (C.A.D.C.2011). The Fourth Circuit determined that the Anti-Injunction Act prevents courts from considering the merits of that question. See Liberty Univ., Inc. v. Geithner, 671 F.3d 391 (2011). That statute bars suits "for the purpose of restraining the assessment or collection of any tax." 26 U.S.C. § 7421(a). A majority of the Fourth Circuit panel reasoned that the individual mandate's penalty is a tax within the meaning of the Anti-Injunction Act, because it is a financial assessment collected by the IRS through the normal means of taxation. The majority therefore determined that the plaintiffs could not challenge the individual mandate until after they paid the penalty.^[1]

The second provision of the Affordable Care Act directly challenged here is the Medicaid expansion. Enacted in 1965, Medicaid offers federal funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. See 42 U.S.C. § 1396a(a)(10). In order to receive that funding, States must comply with federal criteria governing matters such as who receives care and what services are provided at what cost. By 1982 every State had chosen to participate in Medicaid. Federal funds received through the Medicaid program have become a substantial part of state budgets, now constituting over 10 percent of most States' total revenue.

The Affordable Care Act expands the scope of the Medicaid program and increases the number of individuals the States must cover. For example, the Act [2582] requires state programs to provide Medicaid coverage to adults with incomes up to 133 percent of the federal poverty level, whereas many States now cover adults with children only if their income is considerably lower, and do not cover childless adults at all. See § 1396a(a)(10)(A)(i)(VIII). The Act increases federal funding to cover the States' costs in expanding Medicaid coverage, although States will bear a portion of the costs on their own. § 1396d(y)(1). If a State does not comply with the Act's new coverage requirements, it may lose not only the federal funding for those requirements, but all of its federal Medicaid funds. See § 1396c.

Along with their challenge to the individual mandate, the state plaintiffs in the Eleventh Circuit argued that the Medicaid expansion exceeds Congress's constitutional powers. The Court of Appeals unanimously held that the Medicaid expansion is a valid exercise of Congress's power under the Spending Clause. U.S. Const., Art. I, § 8, cl. 1. And the court rejected the States' claim that the threatened loss of all federal Medicaid funding violates the Tenth Amendment by coercing them into complying with the Medicaid expansion. 648 F.3d, at 1264, 1268.

We granted certiorari to review the judgment of the Court of Appeals for the Eleventh Circuit with respect to both the individual mandate and the Medicaid expansion. 565 U.S. ___, 132 S.Ct. 603, 181 L.Ed.2d 420 (2011). Because no party supports the Eleventh Circuit's holding that the individual mandate can be completely severed from the remainder of the Affordable Care Act, we appointed an amicus curiae to defend that aspect of the judgment below. And because there is a reasonable argument that the Anti-Injunction Act deprives us of jurisdiction to hear challenges to the individual mandate, but no party supports that proposition, we appointed an amicus curiae to advance it.^[2]

II

Before turning to the merits, we need to be sure we have the authority to do so. The Anti-Injunction Act provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." 26 U.S.C. § 7421(a). This statute protects the Government's ability to collect a consistent stream of revenue, by barring litigation to enjoin or otherwise obstruct the collection of taxes. Because of the Anti-Injunction Act, taxes can ordinarily be challenged only after they are paid, by suing for a refund. See Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 7-8, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962).

The penalty for not complying with the Affordable Care Act's individual mandate first becomes enforceable in 2014. The present challenge to the mandate thus seeks to restrain the penalty's future collection. Amicus contends that the Internal Revenue Code treats the penalty as a tax, and that the Anti-Injunction Act therefore bars this suit.

The text of the pertinent statutes suggests otherwise. The Anti-Injunction Act applies to suits "for the purpose of restraining the assessment or collection of any tax." § 7421(a) (emphasis added). [2583] Congress, however, chose to describe the "[s]hared responsibility payment" imposed on those who forgo health insurance not as a "tax," but as a "penalty." §§ 5000A(b), (g)(2). There is no immediate reason to think that a statute applying to "any tax" would apply to a "penalty."

Congress's decision to label this exaction a "penalty" rather than a "tax" is significant because the Affordable Care Act describes many other exactions it creates as "taxes." See Thomas More, 651 F.3d, at 551. Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. See Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983).

Amicus argues that even though Congress did not label the shared responsibility payment a tax, we should treat it as such under the Anti-Injunction Act because it functions like a tax. It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional purposes simply by describing it as one or the other. Congress may not, for example, expand its power under the Taxing Clause, or escape the Double Jeopardy Clause's constraint on criminal sanctions, by labeling a severe financial punishment a "tax." See Bailey v. Drexel Furniture Co., 259 U.S. 20, 36-37, 42 S.Ct. 449, 66 L.Ed. 817 (1922); Department of Revenue of Mont. v. Kurth Ranch, 511 U.S. 767, 779, 114 S.Ct. 1937, 128 L.Ed.2d 767 (1994).

The Anti-Injunction Act and the Affordable Care Act, however, are creatures of Congress's own creation. How they relate to each other is up to Congress, and the best evidence of Congress's intent is the statutory text. We have thus applied the Anti-Injunction Act to statutorily described "taxes" even where that label was inaccurate. See Bailey v. George, 259 U.S. 16, 42 S.Ct. 419, 66 L.Ed. 816 (1922) (Anti-Injunction Act applies to "Child Labor Tax" struck down as exceeding Congress's taxing power in Drexel Furniture).

Congress can, of course, describe something as a penalty but direct that it nonetheless be treated as a tax for purposes of the Anti-Injunction Act. For example, 26 U.S.C. § 6671(a) provides that "any reference in this title to `tax' imposed by this title shall be deemed also to refer to the penalties and liabilities provided by" subchapter 68B of the Internal Revenue Code. Penalties in subchapter 68B are thus treated as taxes under Title 26, which includes the Anti-Injunction Act. The individual mandate, however, is not in subchapter 68B of the Code. Nor does any other provision state that references to taxes in Title 26 shall also be "deemed" to apply to the individual mandate.

Amicus attempts to show that Congress did render the Anti-Injunction Act applicable to the individual mandate, albeit by a more circuitous route. Section 5000A(g)(1) specifies that the penalty for not complying with the mandate "shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68." Assessable penalties in subchapter 68B, in turn, "shall be assessed and collected in the same manner as taxes." § 6671(a). According to amicus, by directing that the penalty be "assessed and collected in the same manner as taxes," § 5000A(g)(1) made the Anti-Injunction Act applicable to this penalty.

The Government disagrees. It argues that § 5000A(g)(1) does not direct courts to apply the Anti-Injunction Act, because § 5000A(g) is a directive only to the Secretary of the Treasury to use the same "`methodology and procedures'" to collect the penalty that he uses to collect taxes. [2584] Brief for United States 32-33 (quoting Seven-Sky, 661 F.3d, at 11).

We think the Government has the better reading. As it observes, "Assessment" and "Collection" are chapters of the Internal Revenue Code providing the Secretary authority to assess and collect taxes, and generally specifying the means by which he shall do so. See § 6201 (assessment authority); § 6301 (collection authority). Section 5000A(g)(1)'s command that the penalty be "assessed and collected in the same manner" as taxes is best read as referring to those chapters and giving the Secretary the same authority and guidance with respect to the penalty. That interpretation is consistent with the remainder of § 5000A(g), which instructs the Secretary on the tools he may use to collect the penalty. See § 5000A(g)(2)(A) (barring criminal prosecutions); § 5000A(g)(2)(B) (prohibiting the Secretary from using notices of lien and levies). The Anti-Injunction Act, by contrast, says nothing about the procedures to be used in assessing and collecting taxes.

Amicus argues in the alternative that a different section of the Internal Revenue Code requires courts to treat the penalty as a tax under the Anti-Injunction Act. Section 6201(a) authorizes the Secretary to make "assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties)." (Emphasis added.) Amicus contends that the penalty must be a tax, because it is an assessable penalty and § 6201(a) says that taxes include assessable penalties.

That argument has force only if § 6201(a) is read in isolation. The Code contains many provisions treating taxes and assessable penalties as distinct terms. See, e.g., §§ 860(h)(1), 6324A(a), 6601(e)(1)(2), 6602, 7122(b). There would, for example, be no need for § 6671(a) to deem "tax" to refer to certain assessable penalties if the Code already included all such penalties in the term "tax." Indeed, amicus's earlier observation that the Code requires assessable penalties to be assessed and collected "in the same manner as taxes" makes little sense if assessable penalties are themselves taxes. In light of the Code's consistent distinction between the terms "tax" and "assessable penalty," we must accept the Government's interpretation: § 6201(a) instructs the Secretary that his authority to assess taxes includes the authority to assess penalties, but it does not equate assessable penalties to taxes for other purposes.

The Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.

III

The Government advances two theories for the proposition that Congress had constitutional authority to enact the individual mandate. First, the Government argues that Congress had the power to enact the mandate under the Commerce Clause. Under that theory, Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, and could undercut the Affordable Care Act's other reforms. Second, the Government argues that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress's power to tax. According to the Government, even if Congress lacks the power to direct individuals to buy insurance, the only effect of the individual mandate is to raise taxes on those who do not do so, and thus the law may be upheld as a tax.

[2585] A

The Government's first argument is that the individual mandate is a valid exercise of Congress's power under the Commerce Clause and the Necessary and Proper Clause. According to the Government, the health care market is characterized by a significant cost-shifting problem. Everyone will eventually need health care at a time and to an extent they cannot predict, but if they do not have insurance, they often will not be able to pay for it. Because state and federal laws nonetheless require hospitals to provide a certain degree of care to individuals without regard to their ability to pay, see, e.g., 42 U.S.C. § 1395dd; Fla. Stat. Ann. § 395.1041, hospitals end up receiving compensation for only a portion of the services they provide. To recoup the losses, hospitals pass on the cost to insurers through higher rates, and insurers, in turn, pass on the cost to policy holders in the form of higher premiums. Congress estimated that the cost of uncompensated care raises family health insurance premiums, on average, by over $1,000 per year. 42 U.S.C. § 18091(2)(F).

In the Affordable Care Act, Congress addressed the problem of those who cannot obtain insurance coverage because of preexisting conditions or other health issues. It did so through the Act's "guaranteed-issue" and "community-rating" provisions. These provisions together prohibit insurance companies from denying coverage to those with such conditions or charging unhealthy individuals higher premiums than healthy individuals. See §§ 300gg, 300gg-1, 300gg-3, 300gg-4.

The guaranteed-issue and community-rating reforms do not, however, address the issue of healthy individuals who choose not to purchase insurance to cover potential health care needs. In fact, the reforms sharply exacerbate that problem, by providing an incentive for individuals to delay purchasing health insurance until they become sick, relying on the promise of guaranteed and affordable coverage. The reforms also threaten to impose massive new costs on insurers, who are required to accept unhealthy individuals but prohibited from charging them rates necessary to pay for their coverage. This will lead insurers to significantly increase premiums on everyone. See Brief for America's Health Insurance Plans et al. as Amici Curiae in No. 11-393 etc. 8-9.

The individual mandate was Congress's solution to these problems. By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept. The Government claims that Congress has power under the Commerce and Necessary and Proper Clauses to enact this solution.

1

The Government contends that the individual mandate is within Congress's power because the failure to purchase insurance "has a substantial and deleterious effect on interstate commerce" by creating the cost-shifting problem. Brief for United States 34. The path of our Commerce Clause decisions has not always run smooth, see United States v. Lopez, 514 U.S. 549, 552-559, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995), but it is now well established that Congress has broad authority under the Clause. We have recognized, for example, that "[t]he power of Congress over interstate commerce is not confined to the regulation of commerce among the states," but extends to activities that "have a substantial effect on interstate commerce." [2586] United States v. Darby, 312 U.S. 100, 118-119, 61 S.Ct. 451, 85 L.Ed. 609 (1941). Congress's power, moreover, is not limited to regulation of an activity that by itself substantially affects interstate commerce, but also extends to activities that do so only when aggregated with similar activities of others. See Wickard, 317 U.S., at 127-128, 63 S.Ct. 82.

Given its expansive scope, it is no surprise that Congress has employed the commerce power in a wide variety of ways to address the pressing needs of the time. But Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product.^[3] Legislative novelty is not necessarily fatal; there is a first time for everything. But sometimes "the most telling indication of [a] severe constitutional problem ... is the lack of historical precedent" for Congress's action. Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U.S. ___, ___, 130 S.Ct. 3138, 3159, 177 L.Ed.2d 706 (2010) (internal quotation marks omitted). At the very least, we should "pause to consider the implications of the Government's arguments" when confronted with such new conceptions of federal power. Lopez, supra, at 564, 115 S.Ct. 1624.

The Constitution grants Congress the power to "regulate Commerce." Art. I, § 8, cl. 3 (emphasis added). The power to regulate commerce presupposes the existence of commercial activity to be regulated. If the power to "regulate" something included the power to create it, many of the provisions in the Constitution would be superfluous. For example, the Constitution gives Congress the power to "coin Money," in addition to the power to "regulate the Value thereof." Id., cl. 5. And it gives Congress the power to "raise and support Armies" and to "provide and maintain a Navy," in addition to the power to "make Rules for the Government and Regulation of the land and naval Forces." Id., cls. 12-14. If the power to regulate the armed forces or the value of money included the power to bring the subject of the regulation into existence, the specific grant of such powers would have been unnecessary. The language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated. See Gibbons, 9 Wheat., at 188 ("[T]he enlightened patriots who framed our constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said").^[4]

[2587] Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching "activity." It is nearly impossible to avoid the word when quoting them. See, e.g., Lopez, supra, at 560, 115 S.Ct. 1624 ("Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained"); Perez, 402 U.S., at 154, 91 S.Ct. 1357 ("Where the class of activities is regulated and that class is within the reach of federal power, the courts have no power to excise, as trivial, individual instances of the class" (emphasis in original; internal quotation marks omitted)); Wickard, supra, at 125, 63 S.Ct. 82 ("[E]ven if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce"); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 37, 57 S.Ct. 615, 81 L.Ed. 893 (1937) ("Although activities may be intrastate in character when separately considered, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control"); see also post, at 2616, 2621-2623, 2623, 2625 (GINSBURG, J., concurring in part, concurring in judgment in part, and dissenting in part).^[5]

The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and — under the Government's theory — empower Congress to make those decisions for him.

Applying the Government's logic to the familiar case of Wickard v. Filburn shows how far that logic would carry us from the notion of a government of limited powers. In Wickard, the Court famously upheld a federal penalty imposed on a farmer for growing wheat for consumption on his own farm. 317 U.S., at 114-115, 128-129, 63 S.Ct. 82. That amount of wheat caused the farmer to exceed his quota under a [2588] program designed to support the price of wheat by limiting supply. The Court rejected the farmer's argument that growing wheat for home consumption was beyond the reach of the commerce power. It did so on the ground that the farmer's decision to grow wheat for his own use allowed him to avoid purchasing wheat in the market. That decision, when considered in the aggregate along with similar decisions of others, would have had a substantial effect on the interstate market for wheat. Id., at 127-129, 63 S.Ct. 82.

Wickard has long been regarded as "perhaps the most far reaching example of Commerce Clause authority over intrastate activity," Lopez, 514 U.S., at 560, 115 S.Ct. 1624, but the Government's theory in this case would go much further. Under Wickard it is within Congress's power to regulate the market for wheat by supporting its price. But price can be supported by increasing demand as well as by decreasing supply. The aggregated decisions of some consumers not to purchase wheat have a substantial effect on the price of wheat, just as decisions not to purchase health insurance have on the price of insurance. Congress can therefore command that those not buying wheat do so, just as it argues here that it may command that those not buying health insurance do so. The farmer in Wickard was at least actively engaged in the production of wheat, and the Government could regulate that activity because of its effect on commerce. The Government's theory here would effectively override that limitation, by establishing that individuals may be regulated under the Commerce Clause whenever enough of them are not doing something the Government would have them do.

Indeed, the Government's logic would justify a mandatory purchase to solve almost any problem. See Seven-Sky, 661 F.3d, at 14-15 (noting the Government's inability to "identify any mandate to purchase a product or service in interstate commerce that would be unconstitutional" under its theory of the commerce power). To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. See, e.g., Dept. of Agriculture and Dept. of Health and Human Services, Dietary Guidelines for Americans 1 (2010). The failure of that group to have a healthy diet increases health care costs, to a greater extent than the failure of the uninsured to purchase insurance. See, e.g., Finkelstein, Trogdon, Cohen, & Dietz, Annual Medical Spending Attributable to Obesity: Payer- and Service-Specific Estimates, 28 Health Affairs w822 (2009) (detailing the "undeniable link between rising rates of obesity and rising medical spending," and estimating that "the annual medical burden of obesity has risen to almost 10 percent of all medical spending and could amount to $147 billion per year in 2008"). Those increased costs are borne in part by other Americans who must pay more, just as the uninsured shift costs to the insured. See Center for Applied Ethics, Voluntary Health Risks: Who Should Pay?, 6 Issues in Ethics 6 (1993) (noting "overwhelming evidence that individuals with unhealthy habits pay only a fraction of the costs associated with their behaviors; most of the expense is borne by the rest of society in the form of higher insurance premiums, government expenditures for health care, and disability benefits"). Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government's theory, Congress could address the diet problem by ordering everyone to buy vegetables. See Dietary Guidelines, supra, at 19 ("Improved nutrition, appropriate eating behaviors, and increased [2589] physical activity have tremendous potential to ... reduce health care costs").

People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures — joined with the similar failures of others — can readily have a substantial effect on interstate commerce. Under the Government's logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act.

That is not the country the Framers of our Constitution envisioned. James Madison explained that the Commerce Clause was "an addition which few oppose and from which no apprehensions are entertained." The Federalist No. 45, at 293. While Congress's authority under the Commerce Clause has of course expanded with the growth of the national economy, our cases have "always recognized that the power to regulate commerce, though broad indeed, has limits." Maryland v. Wirtz, 392 U.S. 183, 196, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968). The Government's theory would erode those limits, permitting Congress to reach beyond the natural extent of its authority, "everywhere extending the sphere of its activity and drawing all power into its impetuous vortex." The Federalist No. 48, at 309 (J. Madison). Congress already enjoys vast power to regulate much of what we do. Accepting the Government's theory would give Congress the same license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal Government.^[6]

To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce. But the distinction between doing something and doing nothing would not have been lost on the Framers, who were "practical statesmen," not metaphysical philosophers. Industrial Union Dept., AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 673, 100 S.Ct. 2844, 65 L.Ed.2d 1010 (1980) (Rehnquist, J., concurring in judgment). As we have explained, "the framers of the Constitution were not mere visionaries, toying with speculations or theories, but practical men, dealing with the facts of political life as they understood them, putting into form the government they were creating, and prescribing in language clear and intelligible the powers that government was to take." South Carolina v. United States, 199 U.S. 437, 449, 26 S.Ct. 110, 50 L.Ed. 261 (1905). The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress's actions have reflected this understanding. There is no reason to depart from that understanding now.

The Government sees things differently. It argues that because sickness and injury are unpredictable but unavoidable, "the uninsured as a class are active in the market for health care, which they regularly seek and obtain." Brief for United States 50. The individual mandate "merely regulates how individuals finance and pay for that active participation — requiring that they do so through insurance, rather than through attempted self-insurance with the [2590] back-stop of shifting costs to others." Ibid.

The Government repeats the phrase "active in the market for health care" throughout its brief, see id., at 7, 18, 34, 50, but that concept has no constitutional significance. An individual who bought a car two years ago and may buy another in the future is not "active in the car market" in any pertinent sense. The phrase "active in the market" cannot obscure the fact that most of those regulated by the individual mandate are not currently engaged in any commercial activity involving health care, and that fact is fatal to the Government's effort to "regulate the uninsured as a class." Id., at 42. Our precedents recognize Congress's power to regulate "class[es] of activities," Gonzales v. Raich, 545 U.S. 1, 17, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005) (emphasis added), not classes of individuals, apart from any activity in which they are engaged, see, e.g., Perez, 402 U.S., at 153, 91 S.Ct. 1357 ("Petitioner is clearly a member of the class which engages in `extortionate credit transactions'..." (emphasis deleted)).

The individual mandate's regulation of the uninsured as a class is, in fact, particularly divorced from any link to existing commercial activity. The mandate primarily affects healthy, often young adults who are less likely to need significant health care and have other priorities for spending their money. It is precisely because these individuals, as an actuarial class, incur relatively low health care costs that the mandate helps counter the effect of forcing insurance companies to cover others who impose greater costs than their premiums are allowed to reflect. See 42 U.S.C. § 18091(2)(I) (recognizing that the mandate would "broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums"). If the individual mandate is targeted at a class, it is a class whose commercial inactivity rather than activity is its defining feature.

The Government, however, claims that this does not matter. The Government regards it as sufficient to trigger Congress's authority that almost all those who are uninsured will, at some unknown point in the future, engage in a health care transaction. Asserting that "[t]here is no temporal limitation in the Commerce Clause," the Government argues that because "[e]veryone subject to this regulation is in or will be in the health care market," they can be "regulated in advance." Tr. of Oral Arg. 109 (Mar. 27, 2012).

The proposition that Congress may dictate the conduct of an individual today because of prophesied future activity finds no support in our precedent. We have said that Congress can anticipate the effects on commerce of an economic activity. See, e.g., Consolidated Edison Co. v. NLRB, 305 U.S. 197, 59 S.Ct. 206, 83 L.Ed. 126 (1938) (regulating the labor practices of utility companies); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964) (prohibiting discrimination by hotel operators); Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964) (prohibiting discrimination by restaurant owners). But we have never permitted Congress to anticipate that activity itself in order to regulate individuals not currently engaged in commerce. Each one of our cases, including those cited by Justice GINSBURG, post, at 2619-2620, involved preexisting economic activity. See, e.g., Wickard, 317 U.S., at 127-129, 63 S.Ct. 82 (producing wheat); Raich, supra, at 25, 125 S.Ct. 2195 (growing marijuana).

Everyone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize [2591] Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States.

The Government argues that the individual mandate can be sustained as a sort of exception to this rule, because health insurance is a unique product. According to the Government, upholding the individual mandate would not justify mandatory purchases of items such as cars or broccoli because, as the Government puts it, "[h]ealth insurance is not purchased for its own sake like a car or broccoli; it is a means of financing health-care consumption and covering universal risks." Reply Brief for United States 19. But cars and broccoli are no more purchased for their "own sake" than health insurance. They are purchased to cover the need for transportation and food.

The Government says that health insurance and health care financing are "inherently integrated." Brief for United States 41. But that does not mean the compelled purchase of the first is properly regarded as a regulation of the second. No matter how "inherently integrated" health insurance and health care consumption may be, they are not the same thing: They involve different transactions, entered into at different times, with different providers. And for most of those targeted by the mandate, significant health care needs will be years, or even decades, away. The proximity and degree of connection between the mandate and the subsequent commercial activity is too lacking to justify an exception of the sort urged by the Government. The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to "regulate Commerce."

2

The Government next contends that Congress has the power under the Necessary and Proper Clause to enact the individual mandate because the mandate is an "integral part of a comprehensive scheme of economic regulation" — the guaranteed-issue and community-rating insurance reforms. Brief for United States 24. Under this argument, it is not necessary to consider the effect that an individual's inactivity may have on interstate commerce; it is enough that Congress regulate commercial activity in a way that requires regulation of inactivity to be effective.

The power to "make all Laws which shall be necessary and proper for carrying into Execution" the powers enumerated in the Constitution, Art. I, § 8, cl. 18, vests Congress with authority to enact provisions "incidental to the [enumerated] power, and conducive to its beneficial exercise," McCulloch, 4 Wheat., at 418. Although the Clause gives Congress authority to "legislate on that vast mass of incidental powers which must be involved in the constitution," it does not license the exercise of any "great substantive and independent power[s]" beyond those specifically enumerated. Id., at 411, 421. Instead, the Clause is "`merely a declaration, for the removal of all uncertainty, that the means of carrying into execution those [powers] otherwise granted are included in the grant.'" Kinsella v. United States ex rel. Singleton, 361 U.S. 234, 247, 80 S.Ct. 297, 4 L.Ed.2d 268 (1960) (quoting VI Writings of James Madison 383 (G. Hunt ed. 1906)).

As our jurisprudence under the Necessary and Proper Clause has developed, we [2592] have been very deferential to Congress's determination that a regulation is "necessary." We have thus upheld laws that are "`convenient, or useful' or `conducive' to the authority's `beneficial exercise.'" Cornstock, 560 U.S., at ___, 130 S.Ct., at 1965 (quoting McCulloch, supra, at 413, 418). But we have also carried out our responsibility to declare unconstitutional those laws that undermine the structure of government established by the Constitution. Such laws, which are not "consist[ent] with the letter and spirit of the constitution," McCulloch, supra, at 421, are not "proper [means] for carrying into Execution" Congress's enumerated powers. Rather, they are, "in the words of The Federalist, `merely acts of usurpation' which `deserve to be treated as such.'" Printz v. United States, 521 U.S. 898, 924, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997) (alterations omitted) (quoting The Federalist No. 33, at 204 (A. Hamilton)); see also New York, 505 U.S., at 177, 112 S.Ct. 2408; Comstock, supra, at ___, 130 S.Ct., at 1967-1968 (KENNEDY, J., concurring in judgment) ("It is of fundamental importance to consider whether essential attributes of state sovereignty are compromised by the assertion of federal power under the Necessary and Proper Clause ...").

Applying these principles, the individual mandate cannot be sustained under the Necessary and Proper Clause as an essential component of the insurance reforms. Each of our prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power. For example, we have upheld provisions permitting continued confinement of those already in federal custody when they could not be safely released, Comstock, supra, at ___, 130 S.Ct., at 1954-1955; criminalizing bribes involving organizations receiving federal funds, Sabri v. United States, 541 U.S. 600, 602, 605, 124 S.Ct. 1941, 158 L.Ed.2d 891 (2004); and tolling state statutes of limitations while cases are pending in federal court, Jinks v. Richland County, 538 U.S. 456, 459, 462, 123 S.Ct. 1667, 155 L.Ed.2d 631 (2003). The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.

This is in no way an authority that is "narrow in scope," Comstock, supra, at ___, 130 S.Ct., at 1964, or "incidental" to the exercise of the commerce power, McCulloch, supra, at 418. Rather, such a conception of the Necessary and Proper Clause would work a substantial expansion of federal authority. No longer would Congress be limited to regulating under the Commerce Clause those who by some preexisting activity bring themselves within the sphere of federal regulation. Instead, Congress could reach beyond the natural limit of its authority and draw within its regulatory scope those who otherwise would be outside of it. Even if the individual mandate is "necessary" to the Act's insurance reforms, such an expansion of federal power is not a "proper" means for making those reforms effective.

The Government relies primarily on our decision in Gonzales v. Raich. In Raich, we considered "comprehensive legislation to regulate the interstate market" in marijuana. 545 U.S., at 22, 125 S.Ct. 2195. Certain individuals sought an exemption from that regulation on the ground that they engaged in only intrastate possession and consumption. We denied any exemption, on the ground that marijuana is a fungible commodity, so that any marijuana could be readily diverted into the interstate market. Congress's attempt to regulate the interstate market for marijuana would therefore have been substantially undercut if it could not also regulate intrastate possession and consumption. Id., at [2593] 19, 125 S.Ct. 2195. Accordingly, we recognized that "Congress was acting well within its authority" under the Necessary and Proper Clause even though its "regulation ensnare[d] some purely intrastate activity." Id., at 22, 125 S.Ct. 2195; see also Perez, 402 U.S., at 154, 91 S.Ct. 1357. Raich thus did not involve the exercise of any "great substantive and independent power," McCulloch, supra, at 411, of the sort at issue here. Instead, it concerned only the constitutionality of "individual applications of a concededly valid statutory scheme." Raich, supra, at 23, 125 S.Ct. 2195 (emphasis added).

Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a "necessary and proper" component of the insurance reforms. The commerce power thus does not authorize the mandate. Accord, post, at 2644-2650 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting).

B

That is not the end of the matter. Because the Commerce Clause does not support the individual mandate, it is necessary to turn to the Government's second argument: that the mandate may be upheld as within Congress's enumerated power to "lay and collect Taxes." Art. I, § 8, cl. 1.

The Government's tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health insurance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product.

The text of a statute can sometimes have more than one possible meaning. To take a familiar example, a law that reads "no vehicles in the park" might, or might not, ban bicycles in the park. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so. Justice Story said that 180 years ago: "No court ought, unless the terms of an act rendered it unavoidable, to give a construction to it which should involve a violation, however unintentional, of the constitution." Parsons v. Bedford, 3 Pet. 433, 448-449, 7 L.Ed. 732 (1830). Justice Holmes made the same point a century later: "[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act." Blodgett v. Holden, 275 U.S. 142, 148, 48 S.Ct. 105, 72 L.Ed. 206 (1927) (concurring opinion).

The most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals "shall" maintain health insurance. 26 U.S.C. § 5000A(a). Congress thought it could enact such a command under the Commerce Clause, and the Government primarily defended the law on that basis. But, for the reasons explained above, the Commerce Clause does not give Congress that power. Under our precedent, it is therefore necessary to ask whether the Government's alternative reading of the statute — that it only imposes a tax on those without insurance — is a reasonable one.

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he [2594] pays his taxes. See § 5000A(b). That, according to the Government, means the mandate can be regarded as establishing a condition — not owning health insurance — that triggers a tax — the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress's constitutional power to tax.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a "fairly possible" one. Crowell v. Benson, 285 U.S. 22, 62, 52 S.Ct. 285, 76 L.Ed. 598 (1932). As we have explained, "every reasonable construction must be resorted to, in order to save a statute from unconstitutionality." Hooper v. California, 155 U.S. 648, 657, 15 S.Ct. 207, 39 L.Ed. 297 (1895). The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read, for the reasons set forth below.

C

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The "[s]hared responsibility payment," as the statute entitles it, is paid into the Treasury by "taxpayer[s]" when they file their tax returns. 26 U.S.C. § 5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. § 5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status. §§ 5000A(b)(3), (c)(2), (c)(4). The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which — as we previously explained — must assess and collect it "in the same manner as taxes." Supra, at 2583-2584. This process yields the essential feature of any tax: it produces at least some revenue for the Government. United States v. Kahriger, 345 U.S. 22, 28, n. 4, 73 S.Ct. 510, 97 L.Ed. 754 (1953). Indeed, the payment is expected to raise about $4 billion per year by 2017. Congressional Budget Office, Payments of Penalties for Being Uninsured Under the Patient Protection and Affordable Care Act (Apr. 30, 2010), in Selected CBO Publications Related to Health Care Legislation, 2009-2010, p. 71 (rev. 2010).

It is of course true that the Act describes the payment as a "penalty," not a "tax." But while that label is fatal to the application of the Anti-Injunction Act, supra, at 2582-2583, it does not determine whether the payment may be viewed as an exercise of Congress's taxing power. It is up to Congress whether to apply the Anti-Injunction Act to any particular statute, so it makes sense to be guided by Congress's choice of label on that question. That choice does not, however, control whether an exaction is within Congress's constitutional power to tax.

Our precedent reflects this: In 1922, we decided two challenges to the "Child Labor Tax" on the same day. In the first, we held that a suit to enjoin collection of the so-called tax was barred by the Anti-Injunction Act. George, 259 U.S., at 20, 42 S.Ct. 419. Congress knew that suits to obstruct taxes had to await payment under the Anti-Injunction Act; Congress called the child labor tax a tax; Congress therefore [2595] intended the Anti-Injunction Act to apply. In the second case, however, we held that the same exaction, although labeled a tax, was not in fact authorized by Congress's taxing power. Drexel Furniture, 259 U.S., at 38, 42 S.Ct. 449. That constitutional question was not controlled by Congress's choice of label.

We have similarly held that exactions not labeled taxes nonetheless were authorized by Congress's power to tax. In the License Tax Cases, for example, we held that federal licenses to sell liquor and lottery tickets — for which the licensee had to pay a fee — could be sustained as exercises of the taxing power. 5 Wall., at 471. And in New York v. United States we upheld as a tax a "surcharge" on out-of-state nuclear waste shipments, a portion of which was paid to the Federal Treasury. 505 U.S., at 171, 112 S.Ct. 2408. We thus ask whether the shared responsibility payment falls within Congress's taxing power, "[d]isregarding the designation of the exaction, and viewing its substance and application." United States v. Constantine, 296 U.S. 287, 294, 56 S.Ct. 223, 80 L.Ed. 233 (1935); cf. Quill Corp. v. North Dakota, 504 U.S. 298, 310, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992) ("[M]agic words or labels" should not "disable an otherwise constitutional levy" (internal quotation marks omitted)); Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363, 61 S.Ct. 586, 85 L.Ed. 888 (1941) ("In passing on the constitutionality of a tax law, we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it" (internal quotation marks omitted)); United States v. Sotelo, 436 U.S. 268, 275, 98 S.Ct. 1795, 56 L.Ed.2d 275 (1978) ("That the funds due are referred to as a `penalty'... does not alter their essential character as taxes").^[7]

Our cases confirm this functional approach. For example, in Drexel Furniture, we focused on three practical characteristics of the so-called tax on employing child laborers that convinced us the "tax" was actually a penalty. First, the tax imposed an exceedingly heavy burden — 10 percent of a company's net income — on those who employed children, no matter how small their infraction. Second, it imposed that exaction only on those who knowingly employed underage laborers. Such scienter requirements are typical of punitive statutes, because Congress often wishes to punish only those who intentionally break the law. Third, this "tax" was enforced in part by the Department of Labor, an agency responsible for punishing violations of labor laws, not collecting revenue. 259 U.S., at 36-37, 42 S.Ct. 449; see also, e.g., Kurth Ranch, 511 U.S., at 780-782, 114 S.Ct. 1937 (considering, inter alia, the amount of the exaction, and the fact that it was imposed for violation of a separate criminal law); Constantine, supra, at 295, 56 S.Ct. 223 (same).

The same analysis here suggests that the shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it [2596] can never be more.^[8] It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the "prohibitory" financial punishment in Drexel Furniture. 259 U.S., at 37, 42 S.Ct. 449. Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation — except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. See § 5000A(g)(2). The reasons the Court in Drexel Furniture held that what was called a "tax" there was a penalty support the conclusion that what is called a "penalty" here may be viewed as a tax.^[9]

None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new. Some of our earliest federal taxes sought to deter the purchase of imported manufactured goods in order to foster the growth of domestic industry. See W. Brownlee, Federal Taxation in America 22 (2d ed. 2004); cf. 2 J. Story, Commentaries on the Constitution of the United States § 962, p. 434 (1833) ("the taxing power is often, very often, applied for other purposes, than revenue"). Today, federal and state taxes can compose more than half the retail price of cigarettes, not just to raise more money, but to encourage people to quit smoking. And we have upheld such obviously regulatory measures as taxes on selling marijuana and sawed-off shotguns. See United States v. Sanchez, 340 U.S. 42, 44-45, 71 S.Ct. 108, 95 L.Ed. 47 (1950); Sonzinsky v. United States, 300 U.S. 506, 513, 57 S.Ct. 554, 81 L.Ed. 772 (1937). Indeed, "[e]very tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed." Sonzinsky, supra, at 513, 57 S.Ct. 554. That § 5000A seeks to shape decisions about whether to buy health insurance does not mean that it cannot be a valid exercise of the taxing power.

In distinguishing penalties from taxes, this Court has explained that "if the concept of penalty means anything, it means punishment for an unlawful act or omission." United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 224, 116 S.Ct. 2106, 135 L.Ed.2d 506 (1996); see also United States v. La Franca, 282 U.S. 568, 572, 51 S.Ct. 278, 75 L.Ed. 551 (1931) ("[A] penalty, as the word is here used, is an exaction imposed by statute as punishment for an unlawful act"). While the individual mandate clearly aims to induce the purchase of health [2597] insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law. Brief for United States 60-61; Tr. of Oral Arg. 49-50 (Mar. 26, 2012).

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. See Congressional Budget Office, supra, at 71. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.

The plaintiffs contend that Congress's choice of language — stating that individuals "shall" obtain insurance or pay a "penalty" — requires reading § 5000A as punishing unlawful conduct, even if that interpretation would render the law unconstitutional. We have rejected a similar argument before. In New York v. United States we examined a statute providing that "`[e]ach State shall be responsible for providing ... for the disposal of... low-level radioactive waste.'" 505 U.S., at 169, 112 S.Ct. 2408 (quoting 42 U.S.C. § 2021c(a)(1)(A)). A State that shipped its waste to another State was exposed to surcharges by the receiving State, a portion of which would be paid over to the Federal Government. And a State that did not adhere to the statutory scheme faced "[p]enalties for failure to comply," including increases in the surcharge. § 2021e(e)(2); New York, 505 U.S., at 152-153, 112 S.Ct. 2408. New York urged us to read the statute as a federal command that the state legislature enact legislation to dispose of its waste, which would have violated the Constitution. To avoid that outcome, we interpreted the statute to impose only "a series of incentives" for the State to take responsibility for its waste. We then sustained the charge paid to the Federal Government as an exercise of the taxing power. Id., at 169-174, 112 S.Ct. 2408. We see no insurmountable obstacle to a similar approach here.^[10]

The joint dissenters argue that we cannot uphold § 5000A as a tax because Congress did not "frame" it as such. Post, at 2650-2651. In effect, they contend that even if the Constitution permits Congress to do exactly what we interpret this statute to do, the law must be struck down because Congress used the wrong labels. An example may help illustrate why labels should not control here. Suppose Congress enacted a statute providing that every taxpayer who owns a house without [2598] energy efficient windows must pay $50 to the IRS. The amount due is adjusted based on factors such as taxable income and joint filing status, and is paid along with the taxpayer's income tax return. Those whose income is below the filing threshold need not pay. The required payment is not called a "tax," a "penalty," or anything else. No one would doubt that this law imposed a tax, and was within Congress's power to tax. That conclusion should not change simply because Congress used the word "penalty" to describe the payment. Interpreting such a law to be a tax would hardly "[i]mpos[e] a tax through judicial legislation." Post, at 2655. Rather, it would give practical effect to the Legislature's enactment.

Our precedent demonstrates that Congress had the power to impose the exaction in § 5000A under the taxing power, and that § 5000A need not be read to do more than impose a tax. That is sufficient to sustain it. The "question of the constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise." Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144, 68 S.Ct. 421, 92 L.Ed. 596 (1948).

Even if the taxing power enables Congress to impose a tax on not obtaining health insurance, any tax must still comply with other requirements in the Constitution. Plaintiffs argue that the shared responsibility payment does not do so, citing Article I, § 9, clause 4. That clause provides: "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken." This requirement means that any "direct Tax" must be apportioned so that each State pays in proportion to its population. According to the plaintiffs, if the individual mandate imposes a tax, it is a direct tax, and it is unconstitutional because Congress made no effort to apportion it among the States.

Even when the Direct Tax Clause was written it was unclear what else, other than a capitation (also known as a "head tax" or a "poll tax"), might be a direct tax. See Springer v. United States, 102 U.S. 586, 596-598, 26 L.Ed. 253 (1881). Soon after the framing, Congress passed a tax on ownership of carriages, over James Madison's objection that it was an unapportioned direct tax. Id., at 597. This Court upheld the tax, in part reasoning that apportioning such a tax would make little sense, because it would have required taxing carriage owners at dramatically different rates depending on how many carriages were in their home State. See Hylton v. United States, 3 Dall. 171, 174, 1 L.Ed. 556 (1796) (opinion of Chase, J.). The Court was unanimous, and those Justices who wrote opinions either directly asserted or strongly suggested that only two forms of taxation were direct: capitations and land taxes. See id., at 175; id., at 177 (opinion of Paterson, J.); id., at 183 (opinion of Iredell, J.).

That narrow view of what a direct tax might be persisted for a century. In 1880, for example, we explained that "direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate." Springer, supra, at 602. In 1895, we expanded our interpretation to include taxes on personal property and income from personal property, in the course of striking down aspects of the federal income tax. Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, 618, 15 S.Ct. 912, 39 L.Ed. 1108 (1895). That result was overturned by the Sixteenth Amendment, although we continued to consider taxes on personal property to be direct taxes. See Eisner v. Macomber, 252 U.S. 189, 218-219, 40 S.Ct. 189, 64 L.Ed. 521 (1920).

[2599] A tax on going without health insurance does not fall within any recognized category of direct tax. It is not a capitation. Capitations are taxes paid by every person, "without regard to property, profession, or any other circumstance." Hylton, supra, at 175 (opinion of Chase, J.) (emphasis altered). The whole point of the shared responsibility payment is that it is triggered by specific circumstances — earning a certain amount of income but not obtaining health insurance. The payment is also plainly not a tax on the ownership of land or personal property. The shared responsibility payment is thus not a direct tax that must be apportioned among the several States.

There may, however, be a more fundamental objection to a tax on those who lack health insurance. Even if only a tax, the payment under § 5000A(b) remains a burden that the Federal Government imposes for an omission, not an act. If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something.

Three considerations allay this concern. First, and most importantly, it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity. A capitation, after all, is a tax that everyone must pay simply for existing, and capitations are expressly contemplated by the Constitution. The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes. See Letter from Benjamin Franklin to M. Le Roy (Nov. 13, 1789) ("Our new Constitution is now established ... but in this world nothing can be said to be certain, except death and taxes").

Whether the mandate can be upheld under the Commerce Clause is a question about the scope of federal authority. Its answer depends on whether Congress can exercise what all acknowledge to be the novel course of directing individuals to purchase insurance. Congress's use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations. See 26 U.S.C. §§ 163(h), 25A. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.

Second, Congress's ability to use its taxing power to influence conduct is not without limits. A few of our cases policed these limits aggressively, invalidating punitive exactions obviously designed to regulate behavior otherwise regarded at the time as beyond federal authority. See, e.g., United States v. Butler, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477 (1936); Drexel Furniture, 259 U.S. 20, 42 S.Ct. 449, 66 L.Ed. 817. More often and more recently we have declined to closely examine the regulatory motive or effect of revenue-raising measures. See Kahriger, 345 U.S., at 27-31, 73 S.Ct. 510 (collecting cases). We have nonetheless maintained that "`there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.'" Kurth Ranch, 511 U.S., at 779, 114 S.Ct. [2600] 1937 (quoting Drexel Furniture, supra, at 38, 42 S.Ct. 449).

We have already explained that the shared responsibility payment's practical characteristics pass muster as a tax under our narrowest interpretations of the taxing power. Supra, at 2595-2596. Because the tax at hand is within even those strict limits, we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it. It remains true, however, that the "`power to tax is not the power to destroy while this Court sits.'" Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 364, 69 S.Ct. 561, 93 L.Ed. 721 (1949) (quoting Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218, 223, 48 S.Ct. 451, 72 L.Ed. 857 (1928) (Holmes, J., dissenting)).

Third, although the breadth of Congress's power to tax is greater than its power to regulate commerce, the taxing power does not give Congress the same degree of control over individual behavior. Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal: deprivation of otherwise protected civil rights, such as the right to bear arms or vote in elections; loss of employment opportunities; social stigma; and severe disabilities in other controversies, such as custody or immigration disputes.

By contrast, Congress's authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We do not make light of the severe burden that taxation — especially taxation motivated by a regulatory purpose — can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.^[11]

The Affordable Care Act's requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax. it is not our role to forbid it, or to pass upon its wisdom or fairness.

D

Justice GINSBURG questions the necessity of rejecting the Government's commerce power argument, given that § 5000A can be upheld under the taxing power. Post, at 2627. But the statute reads more naturally as a command to buy insurance than as a tax, and I would uphold it as a command if the Constitution allowed it. It is only because the Commerce Clause does not authorize such a command that it is necessary to reach the taxing power question. And it is only because we have a duty to construe a statute to save it, if fairly possible, that [2601] § 5000A can be interpreted as a tax. Without deciding the Commerce Clause question, I would find no basis to adopt such a saving construction.

The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The Federal Government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax.

IV

A

The States also contend that the Medicaid expansion exceeds Congress's authority under the Spending Clause. They claim that Congress is coercing the States to adopt the changes it wants by threatening to withhold all of a State's Medicaid grants, unless the State accepts the new expanded funding and complies with the conditions that come with it. This, they argue, violates the basic principle that the "Federal Government may not compel the States to enact or administer a federal regulatory program." New York, 505 U.S., at 188, 112 S.Ct. 2408.

There is no doubt that the Act dramatically increases state obligations under Medicaid. The current Medicaid program requires States to cover only certain discrete categories of needy individuals — pregnant women, children, needy families, the blind, the elderly, and the disabled. 42 U.S.C. § 1396a(a)(10). There is no mandatory coverage for most childless adults, and the States typically do not offer any such coverage. The States also enjoy considerable flexibility with respect to the coverage levels for parents of needy families. § 1396a(a)(10)(A)(ii). On average States cover only those unemployed parents who make less than 37 percent of the federal poverty level, and only those employed parents who make less than 63 percent of the poverty line. Kaiser Comm'n on Medicaid and the Uninsured, Performing Under Pressure 11, and fig. 11 (2012).

The Medicaid provisions of the Affordable Care Act, in contrast, require States to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133 percent of the federal poverty line. § 1396a(a)(10)(A)(i)(VIII). The Act also establishes a new "[e]ssential health benefits" package, which States must provide to all new Medicaid recipients — a level sufficient to satisfy a recipient's obligations under the individual mandate. §§ 1396a(k)(1), 1396u-7(b)(5), 18022(b). The Affordable Care Act provides that the Federal Government will pay 100 percent of the costs of covering these newly eligible individuals through 2016. § 1396d(y)(1). In the following years, the federal payment level gradually decreases, to a minimum of 90 percent. Ibid. In light of the expansion in coverage mandated by the Act, the Federal Government estimates that its Medicaid spending will increase by approximately $100 billion per year, nearly 40 percent above current levels. Statement of Douglas W. Elmendorf, CBO's Analysis of the Major Health Care Legislation Enacted in March 2010, p. 14, Table 2 (Mar. 30, 2011).

The Spending Clause grants Congress the power "to pay the Debts and provide for the ... general Welfare of the United States." U.S. Const., Art. I, § 8, cl. 1. We have long recognized that Congress may use this power to grant federal funds to the States, and may condition such a grant upon the States'"taking certain actions that Congress could not require them to take." College Savings Bank, 527 U.S., at 686, 119 S.Ct. 2219. Such measures "encourage [2602] a State to regulate in a particular way, [and] influenc[e] a State's policy choices." New York, supra, at 166, 112 S.Ct. 2408. The conditions imposed by Congress ensure that the funds are used by the States to "provide for the ... general Welfare" in the manner Congress intended.

At the same time, our cases have recognized limits on Congress's power under the Spending Clause to secure state compliance with federal objectives. "We have repeatedly characterized ... Spending Clause legislation as `much in the nature of a contract.'" Barnes v. Gorman, 536 U.S. 181, 186, 122 S.Ct. 2097, 153 L.Ed.2d 230 (2002) (quoting Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981)). The legitimacy of Congress's exercise of the spending power "thus rests on whether the State voluntarily and knowingly accepts the terms of the `contract.'" Pennhurst, supra, at 17, 101 S.Ct. 1531. Respecting this limitation is critical to ensuring that Spending Clause legislation does not undermine the status of the States as independent sovereigns in our federal system. That system "rests on what might at first seem a counter-intuitive insight, that `freedom is enhanced by the creation of two governments, not one.'" Bond, 564 U.S., at ___, 131 S.Ct., at 2364 (quoting Alden v. Maine, 527 U.S. 706, 758, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999)). For this reason, "the Constitution has never been understood to confer upon Congress the ability to require the States to govern according to Congress' instructions." New York, supra, at 162, 112 S.Ct. 2408. Otherwise the two-government system established by the Framers would give way to a system that vests power in one central government, and individual liberty would suffer.

That insight has led this Court to strike down federal legislation that commandeers a State's legislative or administrative apparatus for federal purposes. See, e.g., Printz, 521 U.S., at 933, 117 S.Ct. 2365 (striking down federal legislation compelling state law enforcement officers to perform federally mandated background checks on handgun purchasers); New York, supra, at 174-175, 112 S.Ct. 2408 (invalidating provisions of an Act that would compel a State to either take title to nuclear waste or enact particular state waste regulations). It has also led us to scrutinize Spending Clause legislation to ensure that Congress is not using financial inducements to exert a "power akin to undue influence." Steward Machine Co. v. Davis, 301 U.S. 548, 590, 57 S.Ct. 883, 81 L.Ed. 1279 (1937). Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when "pressure turns into compulsion," ibid., the legislation runs contrary to our system of federalism. "[T]he Constitution simply does not give Congress the authority to require the States to regulate." New York, 505 U.S., at 178, 112 S.Ct. 2408. That is true whether Congress directly commands a State to regulate or indirectly coerces a State to adopt a federal regulatory system as its own.

Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system. "[W]here the Federal Government directs the States to regulate, it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision." Id., at 169, 112 S.Ct. 2408. Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal [2603] funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability, just as in New York and Printz. Indeed, this danger is heightened when Congress acts under the Spending Clause, because Congress can use that power to implement federal policy it could not impose directly under its enumerated powers.

We addressed such concerns in Steward Machine. That case involved a federal tax on employers that was abated if the businesses paid into a state unemployment plan that met certain federally specified conditions. An employer sued, alleging that the tax was impermissibly "driv[ing] the state legislatures under the whip of economic pressure into the enactment of unemployment compensation laws at the bidding of the central government." 301 U.S., at 587, 57 S.Ct. 883. We acknowledged the danger that the Federal Government might employ its taxing power to exert a "power akin to undue influence" upon the States. Id., at 590, 57 S.Ct. 883. But we observed that Congress adopted the challenged tax and abatement program to channel money to the States that would otherwise have gone into the Federal Treasury for use in providing national unemployment services. Congress was willing to direct businesses to instead pay the money into state programs only on the condition that the money be used for the same purposes. Predicating tax abatement on a State's adoption of a particular type of unemployment legislation was therefore a means to "safeguard [the Federal Government's] own treasury." Id., at 591, 57 S.Ct. 883. We held that "[i]n such circumstances, if in no others, inducement or persuasion does not go beyond the bounds of power." Ibid.

In rejecting the argument that the federal law was a "weapon[] of coercion, destroying or impairing the autonomy of the states," the Court noted that there was no reason to suppose that the State in that case acted other than through "her unfettered will." Id., at 586, 590, 57 S.Ct. 883. Indeed, the State itself did "not offer a suggestion that in passing the unemployment law she was affected by duress." Id., at 589, 57 S.Ct. 883.

As our decision in Steward Machine confirms, Congress may attach appropriate conditions to federal taxing and spending programs to preserve its control over the use of federal funds. In the typical case we look to the States to defend their prerogatives by adopting "the simple expedient of not yielding" to federal blandishments when they do not want to embrace the federal policies as their own. Massachusetts v. Mellon, 262 U.S. 447, 482, 43 S.Ct. 597, 67 L.Ed. 1078 (1923). The States are separate and independent sovereigns. Sometimes they have to act like it.

The States, however, argue that the Medicaid expansion is far from the typical case. They object that Congress has "crossed the line distinguishing encouragement from coercion," New York, supra, at 175, 112 S.Ct. 2408, in the way it has structured the funding: Instead of simply refusing to grant the new funds to States that will not accept the new conditions, Congress has also threatened to withhold those States' existing Medicaid funds. The States claim that this threat serves no purpose other than to force unwilling States to sign up for the dramatic expansion in health care coverage effected by the Act.

Given the nature of the threat and the programs at issue here, we must agree. We have upheld Congress's authority to condition the receipt of funds on the [2604] States' complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the "general Welfare." Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.

In South Dakota v. Dole, we considered a challenge to a federal law that threatened to withhold five percent of a State's federal highway funds if the State did not raise its drinking age to 21. The Court found that the condition was "directly related to one of the main purposes for which highway funds are expended — safe interstate travel." 483 U.S., at 208, 107 S.Ct. 2793. At the same time, the condition was not a restriction on how the highway funds — set aside for specific highway improvement and maintenance efforts — were to be used.

We accordingly asked whether "the financial inducement offered by Congress" was "so coercive as to pass the point at which `pressure turns into compulsion.'" Id., at 211, 107 S.Ct. 2793 (quoting Steward Machine, supra, at 590, 57 S.Ct. 883). By "financial inducement" the Court meant the threat of losing five percent of highway funds; no new money was offered to the States to raise their drinking ages. We found that the inducement was not impermissibly coercive, because Congress was offering only "relatively mild encouragement to the States." Dole, 483 U.S., at 211, 107 S.Ct. 2793. We observed that "all South Dakota would lose if she adheres to her chosen course as to a suitable minimum drinking age is 5%" of her highway funds. Ibid. In fact, the federal funds at stake constituted less than half of one percent of South Dakota's budget at the time. See Nat. Assn. of State Budget Officers, The State Expenditure Report 59 (1987); South Dakota v. Dole, 791 F.2d 628, 630 (C.A.8 1986). In consequence, "we conclude[d] that [the] encouragement to state action [was] a valid use of the spending power." Dole, 483 U.S., at 212, 107 S.Ct. 2793. Whether to accept the drinking age change "remain[ed] the prerogative of the States not merely in theory but in fact." Id., at 211-212, 107 S.Ct. 2793.

In this case, the financial "inducement" Congress has chosen is much more than "relatively mild encouragement" — it is a gun to the head. Section 1396c of the Medicaid Act provides that if a State's Medicaid plan does not comply with the Act's requirements, the Secretary of Health and Human Services may declare that "further payments will not be made to the State." 42 U.S.C. § 1396c. A State that opts out of the Affordable Care Act's expansion in health care coverage thus stands to lose not merely "a relatively small percentage" of its existing Medicaid funding, but all of it. Dole, supra, at 211, 107 S.Ct. 2793. Medicaid spending accounts for over 20 percent of the average State's total budget, with federal funds covering 50 to 83 percent of those costs. See Nat. Assn. of State Budget Officers, Fiscal Year 2010 State Expenditure Report, p. 11, Table 5 (2011); 42 U.S.C. § 1396d(b). The Federal Government estimates that it will pay out approximately $3.3 trillion between 2010 and 2019 in order to cover the costs of pre-expansion Medicaid. Brief for United States 10, n. 6. In addition, the States have developed intricate statutory and administrative regimes over the course of many decades to implement their objectives under existing Medicaid. It is easy to see how the Dole Court could conclude that the threatened loss of less than half of one percent of South Dakota's budget left that State with [2605] a "prerogative" to reject Congress's desired policy, "not merely in theory but in fact." 483 U.S., at 211-212, 107 S.Ct. 2793. The threatened loss of over 10 percent of a State's overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.^[12]

Justice GINSBURG claims that Dole is distinguishable because here "Congress has not threatened to withhold funds earmarked for any other program." Post, at 2634. But that begs the question: The States contend that the expansion is in reality a new program and that Congress is forcing them to accept it by threatening the funds for the existing Medicaid program. We cannot agree that existing Medicaid and the expansion dictated by the Affordable Care Act are all one program simply because "Congress styled" them as such. Post, at 2635. If the expansion is not properly viewed as a modification of the existing Medicaid program, Congress's decision to so title it is irrelevant.^[13]

Here, the Government claims that the Medicaid expansion is properly viewed merely as a modification of the existing program because the States agreed that Congress could change the terms of Medicaid when they signed on in the first place. The Government observes that the Social Security Act, which includes the original Medicaid provisions, contains a clause expressly reserving "[t]he right to alter, amend, or repeal any provision" of that statute. 42 U.S.C. § 1304. So it does. But "if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously." Pennhurst, 451 U.S., at 17, 101 S.Ct. 1531. A State confronted with statutory language reserving the right to "alter" or "amend" the pertinent provisions of the Social Security Act might reasonably assume that Congress was entitled to make adjustments to the Medicaid program as it developed. Congress has in fact done so, sometimes conditioning only the new funding, other times both old and new. See, e.g., Social Security Amendments of 1972, 86 Stat. 1381-1382, 1465 (extending Medicaid eligibility, but partly conditioning only the new funding); Omnibus Budget Reconciliation Act of 1990, § 4601, 104 Stat. 1388-166 (extending eligibility, and conditioning old and new funds).

The Medicaid expansion, however, accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for four particular categories of the needy: the disabled, [2606] the blind, the elderly, and needy families with dependent children. See 42 U.S.C. § 1396a(a)(10). Previous amendments to Medicaid eligibility merely altered and expanded the boundaries of these categories. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. It is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.^[14]

Indeed, the manner in which the expansion is structured indicates that while Congress may have styled the expansion a mere alteration of existing Medicaid, it recognized it was enlisting the States in a new health care program. Congress created a separate funding provision to cover the costs of providing services to any person made newly eligible by the expansion. While Congress pays 50 to 83 percent of the costs of covering individuals currently enrolled in Medicaid, § 1396d(b), once the expansion is fully implemented Congress will pay 90 percent of the costs for newly eligible persons, § 1396d(y)(1). The conditions on use of the different funds are also distinct. Congress mandated that newly eligible persons receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package. § 1396a(k)(1); see Brief for United States 9.

As we have explained, "[t]hough Congress' power to legislate under the spending power is broad, it does not include surprising participating States with post-acceptance or `retroactive' conditions." Pennhurst, supra, at 25, 101 S.Ct. 1531. A State could hardly anticipate that Congress's reservation of the right to "alter" or "amend" the Medicaid program included the power to transform it so dramatically.

Justice GINSBURG claims that in fact this expansion is no different from the previous changes to Medicaid, such that "a State would be hard put to complain that it lacked fair notice." Post, at 2639. But the prior change she discusses — presumably the most dramatic alteration she could find — does not come close to working the transformation the expansion accomplishes. She highlights an amendment requiring States to cover pregnant women and increasing the number of eligible children. Ibid. But this modification can hardly be described as a major change in a program that — from its inception — provided health care for "families with dependent children." Previous Medicaid amendments simply do not fall into the same category as the one at stake here.

The Court in Steward Machine did not attempt to "fix the outermost line" where persuasion gives way to coercion. 301 U.S., at 591, 57 S.Ct. 883. The Court found it "[e]nough for present purposes that wherever the line may be, this statute is within it." Ibid. We have no need to fix a line either. It is enough for today that wherever that line may be, this statute is surely beyond it. Congress may not simply [2607] "conscript state [agencies] into the national bureaucratic army," FERC v. Mississippi, 456 U.S. 742, 775, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982) (O'Connor, J., concurring in judgment in part and dissenting in part), and that is what it is attempting to do with the Medicaid expansion.

B

Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding. Section 1396c gives the Secretary of Health and Human Services the authority to do just that. It allows her to withhold all "further [Medicaid] payments ... to the State" if she determines that the State is out of compliance with any Medicaid requirement, including those contained in the expansion. 42 U.S.C. § 1396c. In light of the Court's holding, the Secretary cannot apply § 1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion.

That fully remedies the constitutional violation we have identified. The chapter of the United States Code that contains § 1396c includes a severability clause confirming that we need go no further. That clause specifies that "[i]f any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provision to other persons or circumstances shall not be affected thereby." § 1303. Today's holding does not affect the continued application of § 1396c to the existing Medicaid program. Nor does it affect the Secretary's ability to withdraw funds provided under the Affordable Care Act if a State that has chosen to participate in the expansion fails to comply with the requirements of that Act.

This is not to say, as the joint dissent suggests, that we are "rewriting the Medicaid Expansion." Post, at 2667. Instead, we determine, first, that § 1396c is unconstitutional when applied to withdraw existing Medicaid funds from States that decline to comply with the expansion. We then follow Congress's explicit textual instruction to leave unaffected "the remainder of the chapter, and the application of [the challenged] provision to other persons or circumstances." § 1303. When we invalidate an application of a statute because that application is unconstitutional, we are not "rewriting" the statute; we are merely enforcing the Constitution.

The question remains whether today's holding affects other provisions of the Affordable Care Act. In considering that question, "[w]e seek to determine what Congress would have intended in light of the Court's constitutional holding." United States v. Booker, 543 U.S. 220, 246, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005) (internal quotation marks omitted). Our "touchstone for any decision about remedy is legislative intent, for a court cannot use its remedial powers to circumvent the intent of the legislature." Ayotte v. Planned Parenthood of Northern New Eng., 546 U.S. 320, 330, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006) (internal quotation marks omitted). The question here is whether Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the new Medicaid expansion. Unless it is "evident" that the answer is no, we must leave the rest of the Act intact. Champlin Refining Co. v. Corporation Comm'n of Okla., 286 U.S. 210, 234, 52 S.Ct. 559, 76 L.Ed. 1062 (1932).

[2608] We are confident that Congress would have wanted to preserve the rest of the Act. It is fair to say that Congress assumed that every State would participate in the Medicaid expansion, given that States had no real choice but to do so. The States contend that Congress enacted the rest of the Act with such full participation in mind; they point out that Congress made Medicaid a means for satisfying the mandate, 26 U.S.C. § 5000A(f)(1)(A)(ii), and enacted no other plan for providing coverage to many low-income individuals. According to the States, this means that the entire Act must fall.

We disagree. The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical matter, that means States may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administrative resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.

We have no way of knowing how many States will accept the terms of the expansion, but we do not believe Congress would have wanted the whole Act to fall, simply because some may choose not to participate. The other reforms Congress enacted, after all, will remain "fully operative as a law," Champlin, supra, at 234, 52 S.Ct. 559, and will still function in a way "consistent with Congress' basic objectives in enacting the statute," Booker, supra, at 259, 125 S.Ct. 738. Confident that Congress would not have intended anything different, we conclude that the rest of the Act need not fall in light of our constitutional holding.

* * *

The Affordable Care Act is constitutional in part and unconstitutional in part. The individual mandate cannot be upheld as an exercise of Congress's power under the Commerce Clause. That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it. In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress's power to tax.

As for the Medicaid expansion, that portion of the Affordable Care Act violates the Constitution by threatening existing Medicaid funding. Congress has no authority to order the States to regulate according to its instructions. Congress may offer the States grants and require the States to comply with accompanying conditions, but the States must have a genuine choice whether to accept the offer. The States are given no such choice in this case: They must either accept a basic change in the nature of Medicaid, or risk losing all Medicaid funding. The remedy for that constitutional violation is to preclude the Federal Government from imposing such a sanction. That remedy does not require striking down other portions of the Affordable Care Act.

The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.

[2609] The judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part and reversed in part.

It is so ordered.

Justice GINSBURG, with whom Justice SOTOMAYOR joins, and with whom Justice BREYER and Justice KAGAN join as to Parts I, II, III, and IV, concurring in part, concurring in the judgment in part, and dissenting in part.

I agree with THE CHIEF JUSTICE that the Anti-Injunction Act does not bar the Court's consideration of this case, and that the minimum coverage provision is a proper exercise of Congress' taxing power. I therefore join Parts I, II, and III-C of THE CHIEF JUSTICE's opinion. Unlike THE CHIEF JUSTICE, however, I would hold, alternatively, that the Commerce Clause authorizes Congress to enact the minimum coverage provision. I would also hold that the Spending Clause permits the Medicaid expansion exactly as Congress enacted it.

I

The provision of health care is today a concern of national dimension, just as the provision of old-age and survivors' benefits was in the 1930's. In the Social Security Act, Congress installed a federal system to provide monthly benefits to retired wage earners and, eventually, to their survivors. Beyond question, Congress could have adopted a similar scheme for health care. Congress chose, instead, to preserve a central role for private insurers and state governments. According to THE CHIEF JUSTICE, the Commerce Clause does not permit that preservation. This rigid reading of the Clause makes scant sense and is stunningly retrogressive.

Since 1937, our precedent has recognized Congress' large authority to set the Nation's course in the economic and social welfare realm. See United States v. Darby, 312 U.S. 100, 115, 61 S.Ct. 451, 85 L.Ed. 609 (1941) (overruling Hammer v. Dagenhart, 247 U.S. 251, 38 S.Ct. 529, 62 L.Ed. 1101 (1918), and recognizing that "regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause"); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 37, 57 S.Ct. 615, 81 L.Ed. 893 (1937) ("[The commerce] power is plenary and may be exerted to protect interstate commerce no matter what the source of the dangers which threaten it." (internal quotation marks omitted)). THE CHIEF JUSTICE's crabbed reading of the Commerce Clause harks back to the era in which the Court routinely thwarted Congress' efforts to regulate the national economy in the interest of those who labor to sustain it. See, e.g., Railroad Retirement Bd. v. Alton R. Co., 295 U.S. 330, 362, 368, 55 S.Ct. 758, 79 L.Ed. 1468 (1935) (invalidating compulsory retirement and pension plan for employees of carriers subject to the Interstate Commerce Act; Court found law related essentially "to the social welfare of the worker, and therefore remote from any regulation of commerce as such"). It is a reading that should not have staying power.

A

In enacting the Patient Protection and Affordable Care Act (ACA), Congress comprehensively reformed the national market for health-care products and services. By any measure, that market is immense. Collectively, Americans spent $2.5 trillion on health care in 2009, accounting for 17.6% of our Nation's economy. 42 U.S.C. § 18091(2)(B) (2006 ed., Supp. IV). Within the next decade, it is anticipated, spending on health care will nearly double. Ibid.

[2610] The health-care market's size is not its only distinctive feature. Unlike the market for almost any other product or service, the market for medical care is one in which all individuals inevitably participate. Virtually every person residing in the United States, sooner or later, will visit a doctor or other health-care professional. See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for U.S. Adults: National Health Interview Survey 2009, Ser. 10, No. 249, p. 124, Table 37 (Dec. 2010) (Over 99.5% of adults above 65 have visited a health-care professional.). Most people will do so repeatedly. See id., at 115, Table 34 (In 2009 alone, 64% of adults made two or more visits to a doctor's office.).

When individuals make those visits, they face another reality of the current market for medical care: its high cost. In 2010, on average, an individual in the United States incurred over $7,000 in health-care expenses. Dept. of Health and Human Services, Centers for Medicare and Medicaid Services, Historic National Health Expenditure Data, National Health Expenditures: Selected Calendar Years 1960-2010 (Table 1). Over a lifetime, costs mount to hundreds of thousands of dollars. See Alemayahu & Warner, The Lifetime Distribution of Health Care Costs, in 39 Health Service Research 627, 635 (June 2004). When a person requires nonroutine care, the cost will generally exceed what he or she can afford to pay. A single hospital stay, for instance, typically costs upwards of $10,000. See Dept. of Health and Human Services, Office of Health Policy, ASPE Research Brief: The Value of Health Insurance 5 (May 2011). Treatments for many serious, though not uncommon, conditions similarly cost a substantial sum. Brief for Economic Scholars as Amici Curiae in No. 11-398, p. 10 (citing a study indicating that, in 1998, the cost of treating a heart attack for the first 90 days exceeded $20,000, while the annual cost of treating certain cancers was more than $50,000).

Although every U.S. domiciliary will incur significant medical expenses during his or her lifetime, the time when care will be needed is often unpredictable. An accident, a heart attack, or a cancer diagnosis commonly occurs without warning. Inescapably, we are all at peril of needing medical care without a moment's notice. See, e.g., Campbell, Down the Insurance Rabbit Hole, N.Y. Times, Apr. 5, 2012, p. A23 (telling of an uninsured 32-year-old woman who, healthy one day, became a quadriplegic the next due to an auto accident).

To manage the risks associated with medical care — its high cost, its unpredictability, and its inevitability — most people in the United States obtain health insurance. Many (approximately 170 million in 2009) are insured by private insurance companies. Others, including those over 65 and certain poor and disabled persons, rely on government-funded insurance programs, notably Medicare and Medicaid. Combined, private health insurers and State and Federal Governments finance almost 85% of the medical care administered to U.S. residents. See Congressional Budget Office, CBO's 2011 Long-Term Budget Outlook 37 (June 2011).

Not all U.S. residents, however, have health insurance. In 2009, approximately 50 million people were uninsured, either by choice or, more likely, because they could not afford private insurance and did not qualify for government aid. See Dept. of Commerce, Census Bureau, C. DeNavas-Walt, B. Proctor, & J. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2009, p. 23, Table 8 (Sept. 2010). As a group, uninsured individuals [2611] annually consume more than $100 billion in healthcare services, nearly 5% of the Nation's total. Hidden Health Tax: Americans Pay a Premium 2 (2009), available at http://www.familiesusa.org (all Internet material as visited June 25, 2012, and included in Clerk of Court's case file). Over 60% of those without insurance visit a doctor's office or emergency room in a given year. See Dept. of Health and Human Services, National Center for Health Statistics, Health — United States — 2010, p. 282, Table 79 (Feb. 2011).

B

The large number of individuals without health insurance, Congress found, heavily burdens the national health-care market. See 42 U.S.C. § 18091(2). As just noted, the cost of emergency care or treatment for a serious illness generally exceeds what an individual can afford to pay on her own. Unlike markets for most products, however, the inability to pay for care does not mean that an uninsured individual will receive no care. Federal and state law, as well as professional obligations and embedded social norms, require hospitals and physicians to provide care when it is most needed, regardless of the patient's ability to pay. See, e.g., 42 U.S.C. § 1395dd; Fla. Stat. § 395.1041(3)(f) (2010); Tex. Health & Safety Code Ann. §§ 311.022(a) and (b) (West 2010); American Medical Association, Council on Ethical and Judicial Affairs, Code of Medical Ethics, Current Opinions: Opinion 8.11 — Neglect of Patient, p. 70 (1998-1999 ed.).

As a consequence, medical-care providers deliver significant amounts of care to the uninsured for which the providers receive no payment. In 2008, for example, hospitals, physicians, and other health-care professionals received no compensation for $43 billion worth of the $116 billion in care they administered to those without insurance. 42 U.S.C. § 18091(2)(F) (2006 ed., Supp. IV).

Health-care providers do not absorb these bad debts. Instead, they raise their prices, passing along the cost of uncompensated care to those who do pay reliably: the government and private insurance companies. In response, private insurers increase their premiums, shifting the cost of the elevated bills from providers onto those who carry insurance. The net result: Those with health insurance subsidize the medical care of those without it. As economists would describe what happens, the uninsured "free ride" on those who pay for health insurance.

The size of this subsidy is considerable. Congress found that the cost-shifting just described "increases family [insurance] premiums by on average over $1,000 a year." Ibid. Higher premiums, in turn, render health insurance less affordable, forcing more people to go without insurance and leading to further cost-shifting.

And it is hardly just the currently sick or injured among the uninsured who prompt elevation of the price of health care and health insurance. Insurance companies and health-care providers know that some percentage of healthy, uninsured people will suffer sickness or injury each year and will receive medical care despite their inability to pay. In anticipation of this uncompensated care, health-care companies raise their prices, and insurers their premiums. In other words, because any uninsured person may need medical care at any moment and because health-care companies must account for that risk, every uninsured person impacts the market price of medical care and medical insurance.

The failure of individuals to acquire insurance has other deleterious effects on the health-care market. Because those without insurance generally lack access to [2612] preventative care, they do not receive treatment for conditions — like hypertension and diabetes — that can be successfully and affordably treated if diagnosed early on. See Institute of Medicine, National Academies, Insuring America's Health: Principles and Recommendations 43 (2004). When sickness finally drives the uninsured to seek care, once treatable conditions have escalated into grave health problems, requiring more costly and extensive intervention. Id., at 43-44. The extra time and resources providers spend serving the uninsured lessens the providers' ability to care for those who do have insurance. See Kliff, High Uninsured Rates Can Kill You — Even if You Have Coverage, Washington Post (May 7, 2012) (describing a study of California's health-care market which found that, when hospitals divert time and resources to provide uncompensated care, the quality of care the hospitals deliver to those with insurance drops significantly), available at http://www.washingtonpost.com/blogs/ezra-klein/post/high-uninsured-rates-can-kill-you-even-if-you-have-coverage/2012/05/07/g IQALNHN8T_print.html.

C

States cannot resolve the problem of the uninsured on their own. Like Social Security benefits, a universal health-care system, if adopted by an individual State, would be "bait to the needy and dependent elsewhere, encouraging them to migrate and seek a haven of repose." Helvering v. Davis, 301 U.S. 619, 644, 57 S.Ct. 904, 81 L.Ed. 1307 (1937). See also Brief for Commonwealth of Massachusetts as Amicus Curiae in No. 11-398, p. 15 (noting that, in 2009, Massachusetts' emergency rooms served thousands of uninsured, out-of-state residents). An influx of unhealthy individuals into a State with universal health care would result in increased spending on medical services. To cover the increased costs, a State would have to raise taxes, and private health-insurance companies would have to increase premiums. Higher taxes and increased insurance costs would, in turn, encourage businesses and healthy individuals to leave the State.

States that undertake health-care reforms on their own thus risk "placing themselves in a position of economic disadvantage as compared with neighbors or competitors." Davis, 301 U.S., at 644, 57 S.Ct. 904. See also Brief for Health Care for All, Inc., et al. as Amici Curiae in No. 11-398, p. 4 ("[O]ut-of-state residents continue to seek and receive millions of dollars in uncompensated care in Massachusetts hospitals, limiting the State's efforts to improve its health care system through the elimination of uncompensated care."). Facing that risk, individual States are unlikely to take the initiative in addressing the problem of the uninsured, even though solving that problem is in all States' best interests. Congress' intervention was needed to overcome this collective-action impasse.

D

Aware that a national solution was required, Congress could have taken over the health-insurance market by establishing a tax-and-spend federal program like Social Security. Such a program, commonly referred to as a single-payer system (where the sole payer is the Federal Government), would have left little, if any, room for private enterprise or the States. Instead of going this route, Congress enacted the ACA, a solution that retains a robust role for private insurers and state governments. To make its chosen approach work, however, Congress had to use some new tools, including a requirement that most individuals obtain private health insurance coverage. See 26 U.S.C. [2613] § 5000A (2006 ed., Supp. IV) (the minimum coverage provision). As explained below, by employing these tools, Congress was able to achieve a practical, altogether reasonable, solution.

A central aim of the ACA is to reduce the number of uninsured U.S. residents. See 42 U.S.C. § 18091(2)(C) and (I) (2006 ed., Supp. IV). The minimum coverage provision advances this objective by giving potential recipients of health care a financial incentive to acquire insurance. Per the minimum coverage provision, an individual must either obtain insurance or pay a toll constructed as a tax penalty. See 26 U.S.C. § 5000A.

The minimum coverage provision serves a further purpose vital to Congress' plan to reduce the number of uninsured. Congress knew that encouraging individuals to purchase insurance would not suffice to solve the problem, because most of the uninsured are not uninsured by choice.^[15] Of particular concern to Congress were people who, though desperately in need of insurance, often cannot acquire it: persons who suffer from preexisting medical conditions.

Before the ACA's enactment, private insurance companies took an applicant's medical history into account when setting insurance rates or deciding whether to insure an individual. Because individuals with preexisting medical conditions cost insurance companies significantly more than those without such conditions, insurers routinely refused to insure these individuals, charged them substantially higher premiums, or offered only limited coverage that did not include the preexisting illness. See Dept. of Health and Human Services, Coverage Denied: How the Current Health Insurance System Leaves Millions Behind 1 (2009) (Over the past three years, 12.6 million nonelderly adults were denied insurance coverage or charged higher premiums due to a preexisting condition.).

To ensure that individuals with medical histories have access to affordable insurance, Congress devised a three-part solution. First, Congress imposed a "guaranteed issue" requirement, which bars insurers from denying coverage to any person on account of that person's medical condition or history. See 42 U.S.C. §§ 300gg-1, 300gg-3, 300gg-4(a) (2006 ed., Supp. IV). Second, Congress required insurers to use "community rating" to price their insurance policies. See § 300gg. Community rating, in effect, bars insurance companies from charging higher premiums to those with preexisting conditions.

But these two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance. See Hearings before the House Ways and Means Committee, 111th Cong., 1st Sess., 10, 13 (2009) (statement of Uwe Reinhardt) ("[I]mposition of community-rated premiums and guaranteed issue on a market of competing private health insurers will inexorably drive that market into extinction, unless these two features are coupled with ... a [2614] mandate on individual[s] to be insured." (emphasis in original)).

In the 1990's, several States — including New York, New Jersey, Washington, Kentucky, Maine, New Hampshire, and Vermont — enacted guaranteed-issue and community-rating laws without requiring universal acquisition of insurance coverage. The results were disastrous. "All seven states suffered from skyrocketing insurance premium costs, reductions in individuals with coverage, and reductions in insurance products and providers." Brief for American Association of People with Disabilities et al. as Amici Curiae in No. 11-398, p. 9 (hereinafter AAPD Brief). See also Brief for Governor of Washington Christine Gregoire as Amicus Curiae in No. 11-398, pp. 11-14 (describing the "death spiral" in the insurance market Washington experienced when the State passed a law requiring coverage for preexisting conditions).

Congress comprehended that guaranteed-issue and community-rating laws alone will not work. When insurance companies are required to insure the sick at affordable prices, individuals can wait until they become ill to buy insurance. Pretty soon, those in need of immediate medical care — i.e., those who cost insurers the most — become the insurance companies' main customers. This "adverse selection" problem leaves insurers with two choices: They can either raise premiums dramatically to cover their ever-increasing costs or they can exit the market. In the seven States that tried guaranteed-issue and community-rating requirements without a minimum coverage provision, that is precisely what insurance companies did. See, e.g., AAPD Brief 10 ("[In Maine,] [m]any insurance providers doubled their premiums in just three years or less."); id., at 12 ("Like New York, Vermont saw substantial increases in premiums after its ... insurance reform measures took effect in 1993."); Hall, An Evaluation of New York's Reform Law, 25 J. Health Pol. Pol'y & L. 71, 91-92 (2000) (Guaranteed-issue and community-rating laws resulted in a "dramatic exodus of indemnity insurers from New York's individual [insurance] market."); Brief for Barry Friedman et al. as Amici Curiae in No. 11-398, p. 17 ("In Kentucky, all but two insurers (one State-run) abandoned the State.").

Massachusetts, Congress was told, cracked the adverse selection problem. By requiring most residents to obtain insurance, see Mass. Gen. Laws, ch. 111M, § 2 (West 2011), the Commonwealth ensured that insurers would not be left with only the sick as customers. As a result, federal lawmakers observed, Massachusetts succeeded where other States had failed. See Brief for Commonwealth of Massachusetts as Amicus Curiae in No. 11-398, p. 3 (noting that the Commonwealth's reforms reduced the number of uninsured residents to less than 2%, the lowest rate in the Nation, and cut the amount of uncompensated care by a third); 42 U.S.C. § 18091(2)(D) (2006 ed., Supp. IV) (noting the success of Massachusetts' reforms).^[16] In coupling the minimum coverage provision with guaranteed-issue and community-rating prescriptions, Congress followed Massachusetts' lead.

* * *

In sum, Congress passed the minimum coverage provision as a key component of the ACA to address an economic and social problem that has plagued the Nation for decades: the large number of U.S. residents [2615] who are unable or unwilling to obtain health insurance. Whatever one thinks of the policy decision Congress made, it was Congress' prerogative to make it. Reviewed with appropriate deference, the minimum coverage provision, allied to the guaranteed-issue and community-rating prescriptions, should survive measurement under the Commerce and Necessary and Proper Clauses.

II

A

The Commerce Clause, it is widely acknowledged, "was the Framers' response to the central problem that gave rise to the Constitution itself." EEOC v. Wyoming, 460 U.S. 226, 244, 245, n. 1, 103 S.Ct. 1054, 75 L.Ed.2d 18 (1983) (Stevens, J., concurring) (citing sources). Under the Articles of Confederation, the Constitution's precursor, the regulation of commerce was left to the States. This scheme proved unworkable, because the individual States, understandably focused on their own economic interests, often failed to take actions critical to the success of the Nation as a whole. See Vices of the Political System of the United States, in James Madison: Writings 69, 71, ¶ 5 (J. Rakove ed. 1999) (As a result of the "want of concert in matters where common interest requires it," the "national dignity, interest, and revenue [have] suffered.").^[17]

What was needed was a "national Government... armed with a positive & compleat authority in all cases where uniform measures are necessary." See Letter from James Madison to Edmund Randolph (Apr. 8, 1787), in 9 Papers of James Madison 368, 370 (R. Rutland ed. 1975). See also Letter from George Washington to James Madison (Nov. 30, 1785), in 8 id., at 428, 429 ("We are either a United people, or we are not. If the former, let us, in all matters of general concern act as a nation, which ha[s] national objects to promote, and a national character to support."). The Framers' solution was the Commerce Clause, which, as they perceived it, granted Congress the authority to enact economic legislation "in all Cases for the general Interests of the Union, and also in those Cases to which the States are separately incompetent." 2 Records of the Federal Convention of 1787, pp. 131-132, ¶ 8 (M. Farrand rev. 1966). See also North American Co. v. SEC, 327 U.S. 686, 705, 66 S.Ct. 785, 90 L.Ed. 945 (1946) ("[The commerce power] is an affirmative power commensurate with the national needs.").

The Framers understood that the "general Interests of the Union" would change over time, in ways they could not anticipate. Accordingly, they recognized that the Constitution was of necessity a "great outlin[e]," not a detailed blueprint, see McCulloch v. Maryland, 4 Wheat. 316, 407, 4 L.Ed. 579 (1819), and that its provisions included broad concepts, to be "explained by the context or by the facts of the case," Letter from James Madison to N.P. Trist (Dec. 1831), in 9 Writings of James Madison 471, 475 (G. Hunt ed. 1910). "Nothing ... can be more fallacious," Alexander Hamilton emphasized, "than to infer the extent of any power, proper to be lodged in the national government, from ... its immediate necessities. [2616] There ought to be a CAPACITY to provide for future contingencies[,] as they may happen; and as these are illimitable in their nature, it is impossible safely to limit that capacity." The Federalist No. 34, pp. 205, 206 (John Harvard Library ed. 2009). See also McCulloch, 4 Wheat., at 415 (The Necessary and Proper Clause is lodged "in a constitution[,] intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs.").

B

Consistent with the Framers' intent, we have repeatedly emphasized that Congress' authority under the Commerce Clause is dependent upon "practical" considerations, including "actual experience." Jones & Laughlin Steel Corp., 301 U.S., at 41-42, 57 S.Ct. 615; see Wickard v. Filburn, 317 U.S. 111, 122, 63 S.Ct. 82, 87 L.Ed. 122 (1942); United States v. Lopez, 514 U.S. 549, 573, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995) (KENNEDY, J., concurring) (emphasizing "the Court's definitive commitment to the practical conception of the commerce power"). See also North American Co., 327 U.S., at 705, 66 S.Ct. 785 ("Commerce itself is an intensely practical matter. To deal with it effectively, Congress must be able to act in terms of economic and financial realities." (citation omitted)). We afford Congress the leeway "to undertake to solve national problems directly and realistically." American Power & Light Co. v. SEC, 329 U.S. 90, 103, 67 S.Ct. 133, 91 L.Ed. 103 (1946).

Until today, this Court's pragmatic approach to judging whether Congress validly exercised its commerce power was guided by two familiar principles. First, Congress has the power to regulate economic activities "that substantially affect interstate commerce." Gonzales v. Raich, 545 U.S. 1, 17, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). This capacious power extends even to local activities that, viewed in the aggregate, have a substantial impact on interstate commerce. See ibid. See also Wickard, 317 U.S., at 125, 63 S.Ct. 82 ("[E]ven if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce." (emphasis added)); Jones & Laughlin Steel Corp., 301 U.S., at 37, 57 S.Ct. 615.

Second, we owe a large measure of respect to Congress when it frames and enacts economic and social legislation. See Raich, 545 U.S., at 17, 125 S.Ct. 2195. See also Pension Benefit Guaranty Corporation v. R.A. Gray & Co., 467 U.S. 717, 729, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) ("[S]trong deference [is] accorded legislation in the field of national economic policy."); Hodel v. Indiana, 452 U.S. 314, 326, 101 S.Ct. 2376, 69 L.Ed.2d 40 (1981) ("This [C]ourt will certainly not substitute its judgment for that of Congress unless the relation of the subject to interstate commerce and its effect upon it are clearly non-existent." (internal quotation marks omitted)). When appraising such legislation, we ask only (1) whether Congress had a "rational basis" for concluding that the regulated activity substantially affects interstate commerce, and (2) whether there is a "reasonable connection between the regulatory means selected and the asserted ends." Id., at 323-324, 101 S.Ct. 2376. See also Raich, 545 U.S., at 22, 125 S.Ct. 2195; Lopez, 514 U.S., at 557, 115 S.Ct. 1624; Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264, 277, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981); Katzenbach v. McClung, 379 U.S. 294, 303, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 258, 85 S.Ct. 348, 13 L.Ed.2d 258 [2617] (1964); United States v. Carolene Products Co., 304 U.S. 144, 152-153, 58 S.Ct. 778, 82 L.Ed. 1234 (1938). In answering these questions, we presume the statute under review is constitutional and may strike it down only on a "plain showing" that Congress acted irrationally. United States v. Morrison, 529 U.S. 598, 607, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000).

C

Straightforward application of these principles would require the Court to hold that the minimum coverage provision is proper Commerce Clause legislation. Beyond dispute, Congress had a rational basis for concluding that the uninsured, as a class, substantially affect interstate commerce. Those without insurance consume billions of dollars of health-care products and services each year. See supra, at 2610. Those goods are produced, sold, and delivered largely by national and regional companies who routinely transact business across state lines. The uninsured also cross state lines to receive care. Some have medical emergencies while away from home. Others, when sick, go to a neighboring State that provides better care for those who have not prepaid for care. See supra, at 2611-2612.

Not only do those without insurance consume a large amount of health care each year; critically, as earlier explained, their inability to pay for a significant portion of that consumption drives up market prices, foists costs on other consumers, and reduces market efficiency and stability. See supra, at 2610-2612. Given these far-reaching effects on interstate commerce, the decision to forgo insurance is hardly inconsequential or equivalent to "doing nothing," ante, at 2587; it is, instead, an economic decision Congress has the authority to address under the Commerce Clause. See supra, at 2615-2617. See also Wickard, 317 U.S., at 128, 63 S.Ct. 82 ("It is well established by decisions of this Court that the power to regulate commerce includes the power to regulate the prices at which commodities in that commerce are dealt in and practices affecting such prices." (emphasis added)).

The minimum coverage provision, furthermore, bears a "reasonable connection" to Congress' goal of protecting the health-care market from the disruption caused by individuals who fail to obtain insurance. By requiring those who do not carry insurance to pay a toll, the minimum coverage provision gives individuals a strong incentive to insure. This incentive, Congress had good reason to believe, would reduce the number of uninsured and, correspondingly, mitigate the adverse impact the uninsured have on the national health-care market.

Congress also acted reasonably in requiring uninsured individuals, whether sick or healthy, either to obtain insurance or to pay the specified penalty. As earlier observed, because every person is at risk of needing care at any moment, all those who lack insurance, regardless of their current health status, adversely affect the price of health care and health insurance. See supra, at 2611-2612. Moreover, an insurance-purchase requirement limited to those in need of immediate care simply could not work. Insurance companies would either charge these individuals prohibitively expensive premiums, or, if community-rating regulations were in place, close up shop. See supra, at 2612-2614. See also Brief for State of Maryland and 10 Other States et al. as Amici Curiae in No. 11-398, p. 28 (hereinafter Maryland Brief) ("No insurance regime can survive if people can opt out when the risk insured against is only a risk, but opt in when the risk materializes.").

[2618] "[W]here we find that the legislators ... have a rational basis for finding a chosen regulatory scheme necessary to the protection of commerce, our investigation is at an end." Katzenbach, 379 U.S., at 303-304, 85 S.Ct. 377. Congress' enactment of the minimum coverage provision, which addresses a specific interstate problem in a practical, experience-informed manner, easily meets this criterion.

D

Rather than evaluating the constitutionality of the minimum coverage provision in the manner established by our precedents, THE CHIEF JUSTICE relies on a newly minted constitutional doctrine. The commerce power does not, THE CHIEF JUSTICE announces, permit Congress to "compe[l] individuals to become active in commerce by purchasing a product." Ante, at 2587 (emphasis deleted).

1

a

THE CHIEF JUSTICE's novel constraint on Congress' commerce power gains no force from our precedent and for that reason alone warrants disapprobation. See infra, at 2620-2623. But even assuming, for the moment, that Congress lacks authority under the Commerce Clause to "compel individuals not engaged in commerce to purchase an unwanted product," ante, at 2586, such a limitation would be inapplicable here. Everyone will, at some point, consume health-care products and services. See supra, at 2609. Thus, if THE CHIEF JUSTICE is correct that an insurance-purchase requirement can be applied only to those who "actively" consume health care, the minimum coverage provision fits the bill.

THE CHIEF JUSTICE does not dispute that all U.S. residents participate in the market for health services over the course of their lives. See ante, at 2585 ("Everyone will eventually need health care at a time and to an extent they cannot predict."). But, THE CHIEF JUSTICE insists, the uninsured cannot be considered active in the market for health care, because "[t]he proximity and degree of connection between the [uninsured today] and [their] subsequent commercial activity is too lacking." Ante, at 2591.

This argument has multiple flaws. First, more than 60% of those without insurance visit a hospital or doctor's office each year. See supra, at 2610. Nearly 90% will within five years.^[18] An uninsured's consumption of health care is thus quite proximate: It is virtually certain to occur in the next five years and more likely than not to occur this year.

Equally evident, Congress has no way of separating those uninsured individuals who will need emergency medical care today (surely their consumption of medical care is sufficiently imminent) from those who will not need medical services for years to come. No one knows when an emergency will occur, yet emergencies involving the uninsured arise daily. To capture individuals who unexpectedly will obtain medical care in the very near future, then, Congress needed to include individuals who will not go to a doctor anytime soon. Congress, our decisions instruct, has authority to cast its net that wide. See Perez v. United States, 402 U.S. 146, 154, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971) ("[W]hen it is necessary in order to prevent an evil to make the law embrace more than the precise [2619] thing to be prevented it may do so." (internal quotation marks omitted)).^[19]

Second, it is Congress' role, not the Court's, to delineate the boundaries of the market the Legislature seeks to regulate. THE CHIEF JUSTICE defines the health-care market as including only those transactions that will occur either in the next instant or within some (unspecified) proximity to the next instant. But Congress could reasonably have viewed the market from a long-term perspective, encompassing all transactions virtually certain to occur over the next decade, see supra, at 2618, not just those occurring here and now.

Third, contrary to THE CHIEF JUSTICE's contention, our precedent does indeed support "[t]he proposition that Congress may dictate the conduct of an individual today because of prophesied future activity." Ante, at 2590. In Wickard, the Court upheld a penalty the Federal Government imposed on a farmer who grew more wheat than he was permitted to grow under the Agricultural Adjustment Act of 1938(AAA). 317 U.S., at 114-115, 63 S.Ct. 82. He could not be penalized, the farmer argued, as he was growing the wheat for home consumption, not for sale on the open market. Id., at 119, 63 S.Ct. 82. The Court rejected this argument. Id., at 127-129, 63 S.Ct. 82. Wheat intended for home consumption, the Court noted, "overhangs the market, and if induced by rising prices, tends to flow into the market and check price increases [intended by the AAA]." Id., at 128, 63 S.Ct. 82.

Similar reasoning supported the Court's judgment in Raich, which upheld Congress' authority to regulate marijuana grown for personal use. 545 U.S., at 19, 125 S.Ct. 2195. Homegrown marijuana substantially affects the interstate market for marijuana, we observed, for "the high demand in the interstate market will [likely] draw such marijuana into that market." Ibid.

Our decisions thus acknowledge Congress' authority, under the Commerce Clause, to direct the conduct of an individual today (the farmer in Wickard, stopped from growing excess wheat; the plaintiff in Raich, ordered to cease cultivating marijuana) because of a prophesied future transaction (the eventual sale of that wheat or marijuana in the interstate market). Congress' actions are even more rational in this case, where the future activity (the consumption of medical care) is certain to occur, the sole uncertainty being the time the activity will take place.

Maintaining that the uninsured are not active in the health-care market, THE CHIEF JUSTICE draws an analogy to the car market. An individual "is not `active in the car market,'" THE CHIEF JUSTICE observes, simply because he or she may someday buy a car. Ante, at 2589-2590. The analogy is inapt. The inevitable yet unpredictable need for medical care and the guarantee that emergency care will be provided when required are conditions nonexistent in other markets. That is so of the market for cars, and of the market for broccoli as well. Although an individual might buy a car or a crown of broccoli one day, there is no certainty she [2620] will ever do so. And if she eventually wants a car or has a craving for broccoli, she will be obliged to pay at the counter before receiving the vehicle or nourishment. She will get no free ride or food, at the expense of another consumer forced to pay an inflated price. See Thomas More Law Center v. Obama, 651 F.3d 529, 565 (C.A.6 2011) (Sutton, J., concurring in part) ("Regulating how citizens pay for what they already receive (health care), never quite know when they will need, and in the case of severe illnesses or emergencies generally will not be able to afford, has few (if any) parallels in modern life."). Upholding the minimum coverage provision on the ground that all are participants or will be participants in the health-care market would therefore carry no implication that Congress may justify under the Commerce Clause a mandate to buy other products and services.

Nor is it accurate to say that the minimum coverage provision "compel[s] individuals... to purchase an unwanted product," ante, at 2586, or "suite of products," post, at 2648, n. 2 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.). If unwanted today, medical service secured by insurance may be desperately needed tomorrow. Virtually everyone, I reiterate, consumes health care at some point in his or her life. See supra, at 2612. Health insurance is a means of paying for this care, nothing more. In requiring individuals to obtain insurance, Congress is therefore not mandating the purchase of a discrete, unwanted product. Rather, Congress is merely defining the terms on which individuals pay for an interstate good they consume: Persons subject to the mandate must now pay for medical care in advance (instead of at the point of service) and through insurance (instead of out of pocket). Establishing payment terms for goods in or affecting interstate commerce is quintessential economic regulation well within Congress' domain. See, e.g., United States v. Wrightwood Dairy Co., 315 U.S. 110, 118, 62 S.Ct. 523, 86 L.Ed. 726 (1942). Cf. post, at 2648 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.) (recognizing that "the Federal Government can prescribe [a commodity's] quality ... and even [its price]").

THE CHIEF JUSTICE also calls the minimum coverage provision an illegitimate effort to make young, healthy individuals subsidize insurance premiums paid by the less hale and hardy. See ante, at 2585, 2589-2591. This complaint, too, is spurious. Under the current health-care system, healthy persons who lack insurance receive a benefit for which they do not pay: They are assured that, if they need it, emergency medical care will be available, although they cannot afford it. See supra, at 2610-2611. Those who have insurance bear the cost of this guarantee. See ibid. By requiring the healthy uninsured to obtain insurance or pay a penalty structured as a tax, the minimum coverage provision ends the free ride these individuals currently enjoy.

In the fullness of time, moreover, today's young and healthy will become society's old and infirm. Viewed over a lifespan, the costs and benefits even out: The young who pay more than their fair share currently will pay less than their fair share when they become senior citizens. And even if, as undoubtedly will be the case, some individuals, over their lifespans, will pay more for health insurance than they receive in health services, they have little to complain about, for that is how insurance works. Every insured person receives protection against a catastrophic loss, even though only a subset of the covered class will ultimately need that protection.

[2621] b

In any event, THE CHIEF JUSTICE's limitation of the commerce power to the regulation of those actively engaged in commerce finds no home in the text of the Constitution or our decisions. Article I, § 8, of the Constitution grants Congress the power "[t]o regulate Commerce ... among the several States." Nothing in this language implies that Congress' commerce power is limited to regulating those actively engaged in commercial transactions. Indeed, as the D.C. Circuit observed, "[a]t the time the Constitution was [framed], to `regulate' meant," among other things, "to require action." See Seven-Sky v. Holder, 661 F.3d 1, 16 (2011).

Arguing to the contrary, THE CHIEF JUSTICE notes that "the Constitution gives Congress the power to `coin Money,' in addition to the power to `regulate the Value thereof,'" and similarly "gives Congress the power to `raise and support Armies' and to `provide and maintain a Navy,' in addition to the power to `make Rules for the Government and Regulation of the land and naval Forces.'" Ante, at 2586 (citing Art. I, § 8, cls. 5, 12-14). In separating the power to regulate from the power to bring the subject of the regulation into existence, THE CHIEF JUSTICE asserts, "[t]he language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated." Ante, at 2586.

This argument is difficult to fathom. Requiring individuals to obtain insurance unquestionably regulates the interstate health-insurance and health-care markets, both of them in existence well before the enactment of the ACA. See Wickard, 317 U.S., at 128, 63 S.Ct. 82 ("The stimulation of commerce is a use of the regulatory function quite as definitely as prohibitions or restrictions thereon."). Thus, the "something to be regulated" was surely there when Congress created the minimum coverage provision.^[20]

Nor does our case law toe the activity versus inactivity line. In Wickard, for example, we upheld the penalty imposed on a farmer who grew too much wheat, even though the regulation had the effect of compelling farmers to purchase wheat in the open market. Id., at 127-129, 63 S.Ct. 82. "[F]orcing some farmers into the market to buy what they could provide for themselves" was, the Court held, a valid means of regulating commerce. Id., at 128-129, 63 S.Ct. 82. In another context, this Court similarly upheld Congress' authority under the commerce power to compel an "inactive" landholder to submit to an unwanted sale. See Monongahela Nav. Co. v. United States, 148 U.S. 312, 335-337, 13 S.Ct. 622, 37 L.Ed. 463 (1893) ("[U]pon the [great] power to regulate commerce [,]" Congress has the authority to mandate the sale of real property to the Government, where the sale is essential to the improvement of a navigable waterway (emphasis added)); Cherokee Nation v. Southern Kansas R. Co., 135 U.S. 641, 657-659, 10 S.Ct. 965, 34 L.Ed. 295 (1890) (similar reliance on the commerce power regarding mandated sale of private property for railroad construction).

[2622] In concluding that the Commerce Clause does not permit Congress to regulate commercial "inactivity," and therefore does not allow Congress to adopt the practical solution it devised for the health-care problem, THE CHIEF JUSTICE views the Clause as a "technical legal conception," precisely what our case law tells us not to do. Wickard, 317 U.S., at 122, 63 S.Ct. 82 (internal quotation marks omitted). See also supra, at 2615-2617. This Court's former endeavors to impose categorical limits on the commerce power have not fared well. In several pre-New Deal cases, the Court attempted to cabin Congress' Commerce Clause authority by distinguishing "commerce" from activity once conceived to be noncommercial, notably, "production," "mining," and "manufacturing." See, e.g., United States v. E.C. Knight Co., 156 U.S. 1, 12, 15 S.Ct. 249, 39 L.Ed. 325 (1895) ("Commerce succeeds to manufacture, and is not a part of it."); Carter v. Carter Coal Co., 298 U.S. 238, 304, 56 S.Ct. 855, 80 L.Ed. 1160 (1936) ("Mining brings the subject matter of commerce into existence. Commerce disposes of it."). The Court also sought to distinguish activities having a "direct" effect on interstate commerce, and for that reason, subject to federal regulation, from those having only an "indirect" effect, and therefore not amenable to federal control. See, e.g., A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 548, 55 S.Ct. 837, 79 L.Ed. 1570 (1935) ("[T]he distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be recognized as a fundamental one.").

These line-drawing exercises were untenable, and the Court long ago abandoned them. "[Q]uestions of the power of Congress [under the Commerce Clause]," we held in Wickard, "are not to be decided by reference to any formula which would give controlling force to nomenclature such as `production' and `indirect' and foreclose consideration of the actual effects of the activity in question upon interstate commerce." 317 U.S., at 120, 63 S.Ct. 82. See also Morrison, 529 U.S., at 641-644, 120 S.Ct. 1740 (Souter, J., dissenting) (recounting the Court's "nearly disastrous experiment" with formalistic limits on Congress' commerce power). Failing to learn from this history, THE CHIEF JUSTICE plows ahead with his formalistic distinction between those who are "active in commerce," ante, at 2587, and those who are not.

It is not hard to show the difficulty courts (and Congress) would encounter in distinguishing statutes that regulate "activity" from those that regulate "inactivity." As Judge Easterbrook noted, "it is possible to restate most actions as corresponding inactions with the same effect." Archie v. Racine, 847 F.2d 1211, 1213 (C.A.7 1988) (en banc). Take this case as an example. An individual who opts not to purchase insurance from a private insurer can be seen as actively selecting another form of insurance: self-insurance. See Thomas More Law Center, 651 F.3d, at 561 (Sutton, J., concurring in part) ("No one is inactive when deciding how to pay for health care, as self-insurance and private insurance are two forms of action for addressing the same risk."). The minimum coverage provision could therefore be described as regulating activists in the self-insurance market.^[21]Wickard is another example. Did the statute there at issue [2623] target activity (the growing of too much wheat) or inactivity (the farmer's failure to purchase wheat in the marketplace)? If anything, the Court's analysis suggested the latter. See 317 U.S., at 127-129, 63 S.Ct. 82.

At bottom, THE CHIEF JUSTICE's and the joint dissenters' "view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that [is] more redolent of Due Process Clause arguments." Seven-Sky, 661 F.3d, at 19. See also Troxel v. Granville, 530 U.S. 57, 65, 120 S.Ct. 2054, 147 L.Ed.2d 49 (2000) (plurality opinion) ("The [Due Process] Clause also includes a substantive component that provides heightened protection against government interference with certain fundamental rights and liberty interests." (internal quotation marks omitted)). Plaintiffs have abandoned any argument pinned to substantive due process, however, see 648 F.3d 1235, 1291, n. 93 (C.A.11 2011), and now concede that the provisions here at issue do not offend the Due Process Clause.^[22]

2

Underlying THE CHIEF JUSTICE's view that the Commerce Clause must be confined to the regulation of active participants in a commercial market is a fear that the commerce power would otherwise know no limits. See, e.g., ante, at 2589 (Allowing Congress to compel an individual not engaged in commerce to purchase a product would "permi[t] Congress to reach beyond the natural extent of its authority, everywhere extending the sphere of its activity, and drawing all power into its impetuous vortex." (internal quotation marks omitted)). The joint dissenters express a similar apprehension. See post, at 2646 (If the minimum coverage provision is upheld under the commerce power then "the Commerce Clause becomes a font of unlimited power, ... the hideous monster whose devouring jaws ... spare neither sex nor age, nor high nor low, nor sacred nor profane." (internal quotation marks omitted)). This concern is unfounded.

First, THE CHIEF JUSTICE could certainly uphold the individual mandate without giving Congress carte blanche to enact any and all purchase mandates. As several times noted, the unique attributes of the health-care market render everyone active in that market and give rise to a significant free-riding problem that does not occur in other markets. See supra, at 2609-2612, 2616-2618, 2619.

Nor would the commerce power be unbridled, absent THE CHIEF JUSTICE's "activity" limitation. Congress would remain unable to regulate noneconomic conduct that has only an attenuated effect on interstate commerce and is traditionally left to state law. See Lopez, 514 U.S., at 567, 115 S.Ct. 1624; Morrison, 529 U.S., at 617-619, 120 S.Ct. 1740. In Lopez, for example, the Court held that the Federal Government lacked power, under the Commerce Clause, to criminalize the possession of a gun in a local school zone. Possessing [2624] a gun near a school, the Court reasoned, "is in no sense an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce." 514 U.S., at 567, 115 S.Ct. 1624; ibid. (noting that the Court would have "to pile inference upon inference" to conclude that gun possession has a substantial effect on commerce). Relying on similar logic, the Court concluded in Morrison that Congress could not regulate gender-motivated violence, which the Court deemed to have too "attenuated [an] effect upon interstate commerce." 529 U.S., at 615, 120 S.Ct. 1740.

An individual's decision to self-insure, I have explained, is an economic act with the requisite connection to interstate commerce. See supra, at 2616-2618. Other choices individuals make are unlikely to fit the same or similar description. As an example of the type of regulation he fears, THE CHIEF JUSTICE cites a Government mandate to purchase green vegetables. Ante, at 2588-2589. One could call this concern "the broccoli horrible." Congress, THE CHIEF JUSTICE posits, might adopt such a mandate, reasoning that an individual's failure to eat a healthy diet, like the failure to purchase health insurance, imposes costs on others. See ibid.

Consider the chain of inferences the Court would have to accept to conclude that a vegetable-purchase mandate was likely to have a substantial effect on the health-care costs borne by lithe Americans. The Court would have to believe that individuals forced to buy vegetables would then eat them (instead of throwing or giving them away), would prepare the vegetables in a healthy way (steamed or raw, not deep-fried), would cut back on unhealthy foods, and would not allow other factors (such as lack of exercise or little sleep) to trump the improved diet.^[23] Such "pil[ing of] inference upon inference" is just what the Court refused to do in Lopez and Morrison.

Other provisions of the Constitution also check congressional overreaching. A mandate to purchase a particular product would be unconstitutional if, for example, the edict impermissibly abridged the freedom of speech, interfered with the free exercise of religion, or infringed on a liberty interest protected by the Due Process Clause.

Supplementing these legal restraints is a formidable check on congressional power: the democratic process. See Raich, 545 U.S., at 33, 125 S.Ct. 2195; Wickard, 317 U.S., at 120, 63 S.Ct. 82 (repeating Chief Justice Marshall's "warning that effective restraints on [the commerce power's] exercise must proceed from political rather than judicial processes") (citing Gibbons v. Ogden, 9 Wheat. 1, 197, 6 L.Ed. 23 (1824)). As the controversy surrounding the passage of the Affordable Care Act attests, purchase mandates are likely to engender political resistance. This prospect is borne out by the behavior of state legislators. Despite their possession of unquestioned authority to impose mandates, state governments have rarely done so. See Hall, Commerce Clause Challenges to Health [2625] Care Reform, 159 U. Pa. L. Rev. 1825, 1838 (2011).

When contemplated in its extreme, almost any power looks dangerous. The commerce power, hypothetically, would enable Congress to prohibit the purchase and home production of all meat, fish, and dairy goods, effectively compelling Americans to eat only vegetables. Cf. Raich, 545 U.S., at 9, 125 S.Ct. 2195; Wickard, 317 U.S., at 127-129, 63 S.Ct. 82. Yet no one would offer the "hypothetical and unreal possibilit[y]," Pullman Co. v. Knott, 235 U.S. 23, 26, 35 S.Ct. 2, 59 L.Ed. 105 (1914), of a vegetarian state as a credible reason to deny Congress the authority ever to ban the possession and sale of goods. THE CHIEF JUSTICE accepts just such specious logic when he cites the broccoli horrible as a reason to deny Congress the power to pass the individual mandate. Cf. R. Bork, The Tempting of America 169 (1990) ("Judges and lawyers live on the slippery slope of analogies; they are not supposed to ski it to the bottom."). But see, e.g., post, at 2586 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.) (asserting, outlandishly, that if the minimum coverage provision is sustained, then Congress could make "breathing in and out the basis for federal prescription").

3

To bolster his argument that the minimum coverage provision is not valid Commerce Clause legislation, THE CHIEF JUSTICE emphasizes the provision's novelty. See ante, at 2586 (asserting that "sometimes the most telling indication of [a] severe constitutional problem ... is the lack of historical precedent for Congress's action" (internal quotation marks omitted)). While an insurance-purchase mandate may be novel, THE CHIEF JUSTICE's argument certainly is not. "[I]n almost every instance of the exercise of the [commerce] power differences are asserted from previous exercises of it and made a ground of attack." Hoke v. United States, 227 U.S. 308, 320, 33 S.Ct. 281, 57 L.Ed. 523 (1913). See, e.g., Brief for Petitioner in Perez v. United States, O.T. 1970, No. 600, p. 5 ("unprecedented exercise of power"); Supplemental Brief for Appellees in Katzenbach v. McClung, O.T. 1964, No. 543, p. 40 ("novel assertion of federal power"); Brief for Appellee in Wickard v. Filburn, O.T. 1941, No. 59, p. 6 ("complete departure"). For decades, the Court has declined to override legislation because of its novelty, and for good reason. As our national economy grows and changes, we have recognized, Congress must adapt to the changing "economic and financial realities." See supra, at 2616. Hindering Congress' ability to do so is shortsighted; if history is any guide, today's constriction of the Commerce Clause will not endure. See supra, at 2621-2623.

III

A

For the reasons explained above, the minimum coverage provision is valid Commerce Clause legislation. See supra, Part II. When viewed as a component of the entire ACA, the provision's constitutionality becomes even plainer.

The Necessary and Proper Clause "empowers Congress to enact laws in effectuation of its [commerce] powe[r] that are not within its authority to enact in isolation." Raich, 545 U.S., at 39, 125 S.Ct. 2195 (SCALIA, J., concurring in judgment). Hence, "[a] complex regulatory program... can survive a Commerce Clause challenge without a showing that every single facet of the program is independently and directly related to a valid congressional goal." Indiana, 452 U.S., at 329, n. 17, [2626] 101 S.Ct. 2376. "It is enough that the challenged provisions are an integral part of the regulatory program and that the regulatory scheme when considered as a whole satisfies this test." Ibid. (collecting cases). See also Raich, 545 U.S., at 24-25, 125 S.Ct. 2195 (A challenged statutory provision fits within Congress' commerce authority if it is an "essential par[t] of a larger regulation of economic activity," such that, in the absence of the provision, "the regulatory scheme could be undercut." (quoting Lopez, 514 U.S., at 561, 115 S.Ct. 1624)); Raich, 545 U.S., at 37, 125 S.Ct. 2195 (SCALIA, J., concurring in judgment) ("Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. The relevant question is simply whether the means chosen are `reasonably adapted' to the attainment of a legitimate end under the commerce power." (citation omitted)).

Recall that one of Congress' goals in enacting the Affordable Care Act was to eliminate the insurance industry's practice of charging higher prices or denying coverage to individuals with preexisting medical conditions. See supra, at 2612-2614. The commerce power allows Congress to ban this practice, a point no one disputes. See United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 545, 552-553, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944) (Congress may regulate "the methods by which interstate insurance companies do business.").

Congress knew, however, that simply barring insurance companies from relying on an applicant's medical history would not work in practice. Without the individual mandate, Congress learned, guaranteed-issue and community-rating requirements would trigger an adverse-selection death-spiral in the health-insurance market: Insurance premiums would skyrocket, the number of uninsured would increase, and insurance companies would exit the market. See supra, at 2613-2614. When complemented by an insurance mandate, on the other hand, guaranteed issue and community rating would work as intended, increasing access to insurance and reducing uncompensated care. See supra, at 2614-2615. The minimum coverage provision is thus an "essential par[t] of a larger regulation of economic activity"; without the provision, "the regulatory scheme [w]ould be undercut." Raich, 545 U.S., at 24-25, 125 S.Ct. 2195 (internal quotation marks omitted). Put differently, the minimum coverage provision, together with the guaranteed-issue and community-rating requirements, is "`reasonably adapted' to the attainment of a legitimate end under the commerce power": the elimination of pricing and sales practices that take an applicant's medical history into account. See id., at 37, 125 S.Ct. 2195 (SCALIA, J., concurring in judgment).

B

Asserting that the Necessary and Proper Clause does not authorize the minimum coverage provision, THE CHIEF JUSTICE focuses on the word "proper." A mandate to purchase health insurance is not "proper" legislation, THE CHIEF JUSTICE urges, because the command "undermine[s] the structure of government established by the Constitution." Ante, at 2592. If long on rhetoric, THE CHIEF JUSTICE's argument is short on substance.

THE CHIEF JUSTICE cites only two cases in which this Court concluded that a federal statute impermissibly transgressed the Constitution's boundary between state and federal authority: Printz v. United States, 521 U.S. 898, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997), and New York v. United States, 505 U.S. 144, 112 S.Ct. 2408, 120 [2627] L.Ed.2d 120 (1992). See ante, at 2592. The statutes at issue in both cases, however, compelled state officials to act on the Federal Government's behalf. 521 U.S., at 925-933, 117 S.Ct. 2365 (holding unconstitutional a statute obligating state law enforcement officers to implement a federal gun-control law); New York, 505 U.S., at 176-177, 112 S.Ct. 2408 (striking down a statute requiring state legislators to pass regulations pursuant to Congress' instructions). "[Federal] laws conscripting state officers," the Court reasoned, "violate state sovereignty and are thus not in accord with the Constitution." Printz, 521 U.S., at 925, 935, 117 S.Ct. 2365; New York, 505 U.S., at 176, 112 S.Ct. 2408.

The minimum coverage provision, in contrast, acts "directly upon individuals, without employing the States as intermediaries." New York, 505 U.S., at 164, 112 S.Ct. 2408. The provision is thus entirely consistent with the Constitution's design. See Printz, 521 U.S., at 920, 117 S.Ct. 2365 ("[T]he Framers explicitly chose a Constitution that confers upon Congress the power to regulate individuals, not States." (internal quotation marks omitted)).

Lacking case law support for his holding, THE CHIEF JUSTICE nevertheless declares the minimum coverage provision not "proper" because it is less "narrow in scope" than other laws this Court has upheld under the Necessary and Proper Clause. Ante, at 2592 (citing United States v. Comstock, 560 U.S. ___, 130 S.Ct. 1949, 176 L.Ed.2d 878 (2010); Sabri v. United States, 541 U.S. 600, 124 S.Ct. 1941, 158 L.Ed.2d 891 (2004); Jinks v. Richland County, 538 U.S. 456, 123 S.Ct. 1667, 155 L.Ed.2d 631 (2003)). THE CHIEF JUSTICE's reliance on cases in which this Court has affirmed Congress' "broad authority to enact federal legislation" under the Necessary and Proper Clause, Comstock, 560 U.S., at ___, 130 S.Ct., at 1956, is underwhelming.

Nor does THE CHIEF JUSTICE pause to explain why the power to direct either the purchase of health insurance or, alternatively, the payment of a penalty collectible as a tax is more far-reaching than other implied powers this Court has found meet under the Necessary and Proper Clause. These powers include the power to enact criminal laws, see, e.g., United States v. Fox, 95 U.S. 670, 672, 24 L.Ed. 538 (1878); the power to imprison, including civil imprisonment, see, e.g., Comstock, 560 U.S., at ___, 130 S.Ct., at 1954; and the power to create a national bank, see McCulloch, 4 Wheat., at 425. See also Jinks, 538 U.S., at 463, 123 S.Ct. 1667 (affirming Congress' power to alter the way a state law is applied in state court, where the alteration "promotes fair and efficient operation of the federal courts").^[24]

In failing to explain why the individual mandate threatens our constitutional order, THE CHIEF JUSTICE disserves future courts. How is a judge to decide, when ruling on the constitutionality of a federal statute, whether Congress employed an "independent power," ante, at 2591, or merely a "derivative" one, ante, at 2592. Whether the power used is "substantive," ante, at 2592, or just "incidental," [2628] ante, at 2592? The instruction THE CHIEF JUSTICE, in effect, provides lower courts: You will know it when you see it.

It is more than exaggeration to suggest that the minimum coverage provision improperly intrudes on "essential attributes of state sovereignty." Ibid. (internal quotation marks omitted). First, the Affordable Care Act does not operate "in [an] are[a] such as criminal law enforcement or education where States historically have been sovereign." Lopez, 514 U.S., at 564, 115 S.Ct. 1624. As evidenced by Medicare, Medicaid, the Employee Retirement Income Security Act of 1974 (ERISA), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Federal Government plays a lead role in the health-care sector, both as a direct payer and as a regulator.

Second, and perhaps most important, the minimum coverage provision, along with other provisions of the ACA, addresses the very sort of interstate problem that made the commerce power essential in our federal system. See supra, at 2614-2616. The crisis created by the large number of U.S. residents who lack health insurance is one of national dimension that States are "separately incompetent" to handle. See supra, at 2611-2612, 2615. See also Maryland Brief 15-26 (describing "the impediments to effective state policymaking that flow from the interconnectedness of each state's healthcare economy" and emphasizing that "state-level reforms cannot fully address the problems associated with uncompensated care"). Far from trampling on States' sovereignty, the ACA attempts a federal solution for the very reason that the States, acting separately, cannot meet the need. Notably, the ACA serves the general welfare of the people of the United States while retaining a prominent role for the States. See id., at 31-36 (explaining and illustrating how the ACA affords States wide latitude in implementing key elements of the Act's reforms).^[25]

IV

In the early 20th century, this Court regularly struck down economic regulation enacted by the peoples' representatives in both the States and the Federal Government. See, e.g., Carter Coal Co., 298 U.S., at 303-304, 309-310, 56 S.Ct. 855; Dagenhart, 247 U.S., at 276-277, 38 S.Ct. 529; [2629] Lochner v. New York, 198 U.S. 45, 64, 25 S.Ct. 539, 49 L.Ed. 937 (1905). THE CHIEF JUSTICE's Commerce Clause opinion, and even more so the joint dissenters' reasoning, see post, at 2644-2650, bear a disquieting resemblance to those long-overruled decisions.

Ultimately, the Court upholds the individual mandate as a proper exercise of Congress' power to tax and spend "for the... general Welfare of the United States." Art. I, § 8, cl. 1; ante, at 2600-2601. I concur in that determination, which makes THE CHIEF JUSTICE's Commerce Clause essay all the more puzzling. Why should THE CHIEF JUSTICE strive so mightily to hem in Congress' capacity to meet the new problems arising constantly in our ever-developing modern economy? I find no satisfying response to that question in his opinion.^[26]

V

Through Medicaid, Congress has offered the States an opportunity to furnish health care to the poor with the aid of federal financing. To receive federal Medicaid funds, States must provide health benefits to specified categories of needy persons, including pregnant women, children, parents, and adults with disabilities. Guaranteed eligibility varies by category: for some it is tied to the federal poverty level (incomes up to 100% or 133%); for others it depends on criteria such as eligibility for designated state or federal assistance programs. The ACA enlarges the population of needy people States must cover to include adults under age 65 with incomes up to 133% of the federal poverty level. The spending power conferred by the Constitution, the Court has never doubted, permits Congress to define the contours of programs financed with federal funds. See, e.g., Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981). And to expand coverage, Congress could have recalled the existing legislation, and replaced it with a new law making Medicaid as embracive of the poor as Congress chose.

The question posed by the 2010 Medicaid expansion, then, is essentially this: To cover a notably larger population, must Congress take the repeal/reenact route, or may it achieve the same result by amending existing law? The answer should be that Congress may expand by amendment the classes of needy persons entitled to Medicaid benefits. A ritualistic requirement that Congress repeal and reenact spending legislation in order to enlarge the population served by a federally funded program would advance no constitutional principle and would scarcely serve the interests of federalism. To the contrary, such a requirement would rigidify Congress' efforts to empower States by partnering with them in the implementation of federal programs.

Medicaid is a prototypical example of federal-state cooperation in serving the Nation's general welfare. Rather than authorizing a federal agency to administer a uniform national health-care system for the poor, Congress offered States the opportunity to tailor Medicaid grants to their particular needs, so long as they remain within bounds set by federal law. In shaping [2630] Medicaid, Congress did not endeavor to fix permanently the terms participating states must meet; instead, Congress reserved the "right to alter, amend, or repeal" any provision of the Medicaid Act. 42 U.S.C. § 1304. States, for their part, agreed to amend their own Medicaid plans consistent with changes from time to time made in the federal law. See 42 CFR § 430.12(c)(i) (2011). And from 1965 to the present, States have regularly conformed to Congress' alterations of the Medicaid Act.

THE CHIEF JUSTICE acknowledges that Congress may "condition the receipt of [federal] funds on the States' complying with restrictions on the use of those funds," ante, at 2603-2604, but nevertheless concludes that the 2010 expansion is unduly coercive. His conclusion rests on three premises, each of them essential to his theory. First, the Medicaid expansion is, in THE CHIEF JUSTICE's view, a new grant program, not an addition to the Medicaid program existing before the ACA's enactment. Congress, THE CHIEF JUSTICE maintains, has threatened States with the loss of funds from an old program in an effort to get them to adopt a new one. Second, the expansion was unforeseeable by the States when they first signed on to Medicaid. Third, the threatened loss of funding is so large that the States have no real choice but to participate in the Medicaid expansion. THE CHIEF JUSTICE therefore — for the first time ever — finds an exercise of Congress' spending power unconstitutionally coercive.

Medicaid, as amended by the ACA, however, is not two spending programs; it is a single program with a constant aim — to enable poor persons to receive basic health care when they need it. Given past expansions, plus express statutory warning that Congress may change the requirements participating States must meet, there can be no tenable claim that the ACA fails for lack of notice. Moreover, States have no entitlement to receive any Medicaid funds; they enjoy only the opportunity to accept funds on Congress' terms. Future Congresses are not bound by their predecessors' dispositions; they have authority to spend federal revenue as they see fit. The Federal Government, therefore, is not, as THE CHIEF JUSTICE charges, threatening States with the loss of "existing" funds from one spending program in order to induce them to opt into another program. Congress is simply requiring States to do what States have long been required to do to receive Medicaid funding: comply with the conditions Congress prescribes for participation.

A majority of the Court, however, buys the argument that prospective withholding of funds formerly available exceeds Congress' spending power. Given that holding, I entirely agree with THE CHIEF JUSTICE as to the appropriate remedy. It is to bar the withholding found impermissible — not, as the joint dissenters would have it, to scrap the expansion altogether, see post, at 2666-2668. The dissenters' view that the ACA must fall in its entirety is a radical departure from the Court's normal course. When a constitutional infirmity mars a statute, the Court ordinarily removes the infirmity. It undertakes a salvage operation; it does not demolish the legislation. See, e.g., Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 504, 105 S.Ct. 2794, 86 L.Ed.2d 394 (1985) (Court's normal course is to declare a statute invalid "to the extent that it reaches too far, but otherwise [to leave the statute] intact"). That course is plainly in order where, as in this case, Congress has expressly instructed courts to leave untouched every provision not found invalid. See 42 U.S.C. § 1303. Because THE CHIEF JUSTICE finds the withholding — [2631] not the granting — of federal funds incompatible with the Spending Clause, Congress' extension of Medicaid remains available to any State that affirms its willingness to participate.

A

Expansion has been characteristic of the Medicaid program. Akin to the ACA in 2010, the Medicaid Act as passed in 1965 augmented existing federal grant programs jointly administered with the States.^[27] States were not required to participate in Medicaid. But if they did, the Federal Government paid at least half the costs. To qualify for these grants, States had to offer a minimum level of health coverage to beneficiaries of four federally funded, state-administered welfare programs: Aid to Families with Dependent Children; Old Age Assistance; Aid to the Blind; and Aid to the Permanently and Totally Disabled. See Social Security Amendments of 1965, § 121(a), 79 Stat. 343; Schweiker v. Gray Panthers, 453 U.S. 34, 37, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981). At their option, States could enroll additional "medically needy" individuals; these costs, too, were partially borne by the Federal Government at the same, at least 50%, rate. Ibid.

Since 1965, Congress has amended the Medicaid program on more than 50 occasions, sometimes quite sizably. Most relevant here, between 1988 and 1990, Congress required participating States to include among their beneficiaries pregnant women with family incomes up to 133% of the federal poverty level, children up to age 6 at the same income levels, and children ages 6 to 18 with family incomes up to 100% of the poverty level. See 42 U.S.C. §§ 1396a(a)(10)(A)(i), 1396a(l); Medicare Catastrophic Coverage Act of 1988, § 302, 102 Stat. 750; Omnibus Budget Reconciliation Act of 1989, § 6401, 103 Stat. 2258; Omnibus Budget Reconciliation Act of 1990, § 4601, 104 Stat. 1388-166. These amendments added millions to the Medicaid-eligible population. Dubay & Kenney, Lessons from the Medicaid Expansions for Children and Pregnant Women 5 (Apr. 1997).

Between 1966 and 1990, annual federal Medicaid spending grew from $631.6 million to $42.6 billion; state spending rose to $31 billion over the same period. See Dept. of Health and Human Services, National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2010 (table).^[28] And between 1990 and 2010, federal spending increased to $269.5 billion. Ibid. Enlargement of the population and services covered by Medicaid, in short, has been the trend.

Compared to past alterations, the ACA is notable for the extent to which the Federal Government will pick up the tab. Medicaid's 2010 expansion is financed [2632] largely by federal outlays. In 2014, federal funds will cover 100% of the costs for newly eligible beneficiaries; that rate will gradually decrease before settling at 90% in 2020. 42 U.S.C. § 1396d(y) (2006 ed., Supp. IV). By comparison, federal contributions toward the care of beneficiaries eligible pre-ACA range from 50% to 83%, and averaged 57% between 2005 and 2008. § 1396d(b) (2006 ed., Supp. IV); Dept. of Health and Human Services, Centers for Medicare and Medicaid Services, C. Truffer et al., 2010 Actuarial Report on the Financial Outlook for Medicaid, p. 20.

Nor will the expansion exorbitantly increase state Medicaid spending. The Congressional Budget Office (CBO) projects that States will spend 0.8% more than they would have, absent the ACA. See CBO, Spending & Enrollment Detail for CBO's March 2009 Baseline. But see ante, at 2601 ("[T]he Act dramatically increases state obligations under Medicaid."); post, at 2666 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.) ("[A]cceptance of the [ACA expansion] will impose very substantial costs on participating States."). Whatever the increase in state obligations after the ACA, it will pale in comparison to the increase in federal funding.^[29]

Finally, any fair appraisal of Medicaid would require acknowledgment of the considerable autonomy States enjoy under the Act. Far from "conscript[ing] state agencies into the national bureaucratic army," ante, at 2607 (citing FERC v. Mississippi, 456 U.S. 742, 775, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982) (O'Connor, J., concurring in judgment in part and dissenting in part) (brackets in original and internal quotation marks omitted)), Medicaid "is designed to advance cooperative federalism." Wisconsin Dept. of Health and Family Servs. v. Blumer, 534 U.S. 473, 495, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002) (citing Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980)). Subject to its basic requirements, the Medicaid Act empowers States to "select dramatically different levels of funding and coverage, alter and experiment with different financing and delivery modes, and opt to cover (or not to cover) a range of particular procedures and therapies. States have leveraged this policy discretion to generate a myriad of dramatically different Medicaid programs over the past several decades." Ruger, Of Icebergs and Glaciers, 75 Law & Contemp. Probs. 215, 233 (2012) (footnote omitted). The ACA does not jettison this approach. States, as first-line administrators, will continue to guide the distribution of substantial resources among their needy populations.

The alternative to conditional federal spending, it bears emphasis, is not state autonomy but state marginalization.^[30] In 1965, Congress elected to nationalize health coverage for seniors through Medicare. [2633] It could similarly have established Medicaid as an exclusively federal program. Instead, Congress gave the States the opportunity to partner in the program's administration and development. Absent from the nationalized model, of course, is the state-level policy discretion and experimentation that is Medicaid's hallmark; undoubtedly the interests of federalism are better served when States retain a meaningful role in the implementation of a program of such importance. See Caminker, State Sovereignty and Subordinacy, 95 Colum. L. Rev. 1001, 1002-1003 (1995) (cooperative federalism can preserve "a significant role for state discretion in achieving specified federal goals, where the alternative is complete federal preemption of any state regulatory role"); Rose-Ackerman, Cooperative Federalism and Co-optation, 92 Yale L.J. 1344, 1346 (1983) ("If the federal government begins to take full responsibility for social welfare spending and preempts the states, the result is likely to be weaker ... state governments.").^[31]

Although Congress "has no obligation to use its Spending Clause power to disburse funds to the States," College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666, 686, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999), it has provided Medicaid grants notable for their generosity and flexibility. "[S]uch funds," we once observed, "are gifts," id., at 686-687, 119 S.Ct. 2219, and so they have remained through decades of expansion in their size and scope.

B

The Spending Clause authorizes Congress "to pay the Debts and provide for the ... general Welfare of the United States." Art. I, § 8, cl. 1. To ensure that federal funds granted to the States are spent "to `provide for the ... general Welfare' in the manner Congress intended," ante, at 2602, Congress must of course have authority to impose limitations on the States' use of the federal dollars. This Court, time and again, has respected Congress' prescription of spending conditions, and has required States to abide by them. See, e.g., Pennhurst, 451 U.S., at 17, 101 S.Ct. 1531 ("[O]ur cases have long recognized that Congress may fix the terms on which it shall disburse federal money to the States."). In particular, we have recognized Congress' prerogative to condition a State's receipt of Medicaid funding on compliance with the terms Congress set for participation in the program. See, e.g., Harris, 448 U.S., at 301, 100 S.Ct. 2671 ("[O]nce a State elects to participate [in Medicaid], it must comply with the requirements of [the Medicaid Act]."); Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 275, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006); Frew v. Hawkins, 540 U.S. 431, 433, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004); Atkins v. Rivera, 477 U.S. 154, 156-157, 106 S.Ct. 2456, 91 L.Ed.2d 131 (1986).

Congress' authority to condition the use of federal funds is not confined to spending programs as first launched. The legislature may, and often does, amend the law, imposing new conditions grant recipients henceforth must meet in order to continue receiving funds. See infra, at 2638 (describing Bennett v. Kentucky Dept. of Ed., [2634] 470 U.S. 656, 659-660, 105 S.Ct. 1544, 84 L.Ed.2d 590 (1985) (enforcing restriction added five years after adoption of educational program)).

Yes, there are federalism-based limits on the use of Congress' conditional spending power. In the leading decision in this area, South Dakota v. Dole, 483 U.S. 203, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987), the Court identified four criteria. The conditions placed on federal grants to States must (a) promote the "general welfare," (b) "unambiguously" inform States what is demanded of them, (c) be germane "to the federal interest in particular national projects or programs," and (d) not "induce the States to engage in activities that would themselves be unconstitutional." Id., at 207-208, 210, 107 S.Ct. 2793 (internal quotation marks omitted).^[32]

The Court in Dole mentioned, but did not adopt, a further limitation, one hypothetically raised a half-century earlier: In "some circumstances," Congress might be prohibited from offering a "financial inducement... so coercive as to pass the point at which `pressure turns into compulsion.'" Id., at 211, 107 S.Ct. 2793 (quoting Steward Machine Co. v. Davis, 301 U.S. 548, 590, 57 S.Ct. 883, 81 L.Ed. 1279 (1937)). Prior to today's decision, however, the Court has never ruled that the terms of any grant crossed the indistinct line between temptation and coercion.

Dole involved the National Minimum Drinking Age Act, 23 U.S.C. § 158, enacted in 1984. That Act directed the Secretary of Transportation to withhold 5% of the federal highway funds otherwise payable to a State if the State permitted purchase of alcoholic beverages by persons less than 21 years old. Drinking age was not within the authority of Congress to regulate, South Dakota argued, because the Twenty-First Amendment gave the States exclusive power to control the manufacture, transportation, and consumption of alcoholic beverages. The small percentage of highway-construction funds South Dakota stood to lose by adhering to 19 as the age of eligibility to purchase 3.2% beer, however, was not enough to qualify as coercion, the Court concluded.

This case does not present the concerns that led the Court in Dole even to consider the prospect of coercion. In Dole, the condition — set 21 as the minimum drinking age — did not tell the States how to use funds Congress provided for highway construction. Further, in view of the Twenty-First Amendment, it was an open question whether Congress could directly impose a national minimum drinking age.

The ACA, in contrast, relates solely to the federally funded Medicaid program; if States choose not to comply, Congress has not threatened to withhold funds earmarked for any other program. Nor does the ACA use Medicaid funding to induce States to take action Congress itself could not undertake. The Federal Government undoubtedly could operate its own health-care program for poor persons, just as it operates Medicare for seniors' health care. See supra, at 2632.

That is what makes this such a simple case, and the Court's decision so unsettling. Congress, aiming to assist the needy, has appropriated federal money to subsidize state health-insurance programs that meet federal standards. The principal standard the ACA sets is that the state program cover adults earning no more [2635] than 133% of the federal poverty line. Enforcing that prescription ensures that federal funds will be spent on health care for the poor in furtherance of Congress' present perception of the general welfare.

C

THE CHIEF JUSTICE asserts that the Medicaid expansion creates a "new health care program." Ante, at 2606. Moreover, States could "hardly anticipate" that Congress would "transform [the program] so dramatically." Ante, at 2606. Therefore, THE CHIEF JUSTICE maintains, Congress' threat to withhold "old" Medicaid funds based on a State's refusal to participate in the "new" program is a "threa[t] to terminate [an]other ... independent gran[t]." Ante, at 2604, 2605-2606. And because the threat to withhold a large amount of funds from one program "leaves the States with no real option but to acquiesce [in a newly created program]," THE CHIEF JUSTICE concludes, the Medicaid expansion is unconstitutionally coercive. Ante, at 2605.

1

The starting premise on which THE CHIEF JUSTICE's coercion analysis rests is that the ACA did not really "extend" Medicaid; instead, Congress created an entirely new program to co-exist with the old. THE CHIEF JUSTICE calls the ACA new, but in truth, it simply reaches more of America's poor than Congress originally covered.

Medicaid was created to enable States to provide medical assistance to "needy persons." See S.Rep. No. 404, 89th Cong., 1st Sess., pt. 1, p. 9 (1965). See also § 121(a), 79 Stat. 343 (The purpose of Medicaid is to enable States "to furnish ... medical assistance on behalf of [certain persons] whose income and resources are insufficient to meet the costs of necessary medical services."). By bringing health care within the reach of a larger population of Americans unable to afford it, the Medicaid expansion is an extension of that basic aim.

The Medicaid Act contains hundreds of provisions governing operation of the program, setting conditions ranging from "Limitation on payments to States for expenditures attributable to taxes," 42 U.S.C. § 1396a(t) (2006 ed.), to "Medical assistance to aliens not lawfully admitted for permanent residence," § 1396b(v) (2006 ed. and Supp. IV). The Medicaid expansion leaves unchanged the vast majority of these provisions; it adds beneficiaries to the existing program and specifies the rate at which States will be reimbursed for services provided to the added beneficiaries. See ACA §§ 2001(a)(1), (3), 124 Stat. 271-272. The ACA does not describe operational aspects of the program for these newly eligible persons; for that information, one must read the existing Medicaid Act. See 42 U.S.C. §§ 1396-1396v(b) (2006 ed. and Supp. IV).

Congress styled and clearly viewed the Medicaid expansion as an amendment to the Medicaid Act, not as a "new" health-care program. To the four categories of beneficiaries for whom coverage became mandatory in 1965, and the three mandatory classes added in the late 1980's, see supra, at 2631-2632, the ACA adds an eighth: individuals under 65 with incomes not exceeding 133% of the federal poverty level. The expansion is effectuated by § 2001 of the ACA, aptly titled: "Medicaid Coverage for the Lowest Income Populations." 124 Stat. 271. That section amends Title 42, Chapter 7, Subchapter XIX: Grants to States for Medical Assistance Programs. Commonly known as the Medicaid Act, Subchapter XIX filled some 278 pages in 2006. Section 2001 of the [2636] ACA would add approximately three pages.^[33]

Congress has broad authority to construct or adjust spending programs to meet its contemporary understanding of "the general Welfare." Helvering v. Davis, 301 U.S. 619, 640-641, 57 S.Ct. 904, 81 L.Ed. 1307 (1937). Courts owe a large measure of respect to Congress' characterization of the grant programs it establishes. See Steward Machine, 301 U.S., at 594, 57 S.Ct. 883. Even if courts were inclined to second-guess Congress' conception of the character of its legislation, how would reviewing judges divine whether an Act of Congress, purporting to amend a law, is in reality not an amendment, but a new creation? At what point does an extension become so large that it "transforms" the basic law?

Endeavoring to show that Congress created a new program, THE CHIEF JUSTICE cites three aspects of the expansion. First, he asserts that, in covering those earning no more than 133% of the federal poverty line, the Medicaid expansion, unlike pre-ACA Medicaid, does not "care for the neediest among us." Ante, at 2606. What makes that so? Single adults earning no more than $14,856 per year — 133% of the current federal poverty level — surely rank among the Nation's poor.

Second, according to THE CHIEF JUSTICE, "Congress mandated that newly eligible persons receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package." Ibid. That less comprehensive benefit package, however, is not an innovation introduced by the ACA; since 2006, States have been free to use it for many of their Medicaid beneficiaries.^[34] The level of benefits offered therefore does not set apart post-ACA Medicaid recipients from all those entitled to benefits pre-ACA.

Third, THE CHIEF JUSTICE correctly notes that the reimbursement rate for participating States is different regarding individuals who became Medicaid-eligible through the ACA. Ibid. But the rate differs only in its generosity to participating States. Under pre-ACA Medicaid, the Federal Government pays up to 83% of the costs of coverage for current enrollees, § 1396d(b) (2006 ed. and Supp. IV); under the ACA, the federal contribution starts at 100% and will eventually settle at 90%, § 1396d(y). Even if one agreed that a change of as little as 7 percentage points carries constitutional significance, is it not passing strange to suggest that the purported incursion on state sovereignty might have been averted, or at least mitigated, had Congress offered States less money to carry out the same obligations?

Consider also that Congress could have repealed Medicaid. See supra, at 2629-2630 (citing 42 U.S.C. § 1304); Brief for Petitioners in No. 11-400, p. 41. Thereafter, Congress could have enacted Medicaid II, a new program combining the pre-2010 coverage with the expanded coverage required by the ACA. By what right does a court stop Congress from building up without first tearing down?

2

THE CHIEF JUSTICE finds the Medicaid expansion vulnerable because it took [2637] participating States by surprise. Ante, at 2606. "A State could hardly anticipate that Congres[s]" would endeavor to "transform [the Medicaid program] so dramatically," he states. Ante, at 2606. For the notion that States must be able to foresee, when they sign up, alterations Congress might make later on, THE CHIEF JUSTICE cites only one case: Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 101 S.Ct. 1531, 67 L.Ed.2d 694.

In Pennhurst, residents of a state-run, federally funded institution for the mentally disabled complained of abusive treatment and inhumane conditions in alleged violation of the Developmentally Disabled Assistance and Bill of Rights Act. 451 U.S., at 5-6, 101 S.Ct. 1531. We held that the State was not answerable in damages for violating conditions it did not "voluntarily and knowingly accep[t]." Id., at 17, 27, 101 S.Ct. 1531. Inspecting the statutory language and legislative history, we found that the Act did not "unambiguously" impose the requirement on which the plaintiffs relied: that they receive appropriate treatment in the least restrictive environment. Id., at 17-18, 101 S.Ct. 1531. Satisfied that Congress had not clearly conditioned the States' receipt of federal funds on the States' provision of such treatment, we declined to read such a requirement into the Act. Congress' spending power, we concluded, "does not include surprising participating States with post-acceptance or `retroactive' conditions." Id., at 24-25, 101 S.Ct. 1531.

Pennhurst thus instructs that "if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously." Ante, at 2605 (quoting Pennhurst, 451 U.S., at 17, 101 S.Ct. 1531). That requirement is met in this case. Section 2001 does not take effect until 2014. The ACA makes perfectly clear what will be required of States that accept Medicaid funding after that date: They must extend eligibility to adults with incomes no more than 133% of the federal poverty line. See 42 U.S.C. § 1396a(a)(10)(A)(i)(VIII) (2006 ed. and Supp. IV).

THE CHIEF JUSTICE appears to find in Pennhurst a requirement that, when spending legislation is first passed, or when States first enlist in the federal program, Congress must provide clear notice of conditions it might later impose. If I understand his point correctly, it was incumbent on Congress, in 1965, to warn the States clearly of the size and shape potential changes to Medicaid might take. And absent such notice, sizable changes could not be made mandatory. Our decisions do not support such a requirement.^[35]

In Bennett v. New Jersey, 470 U.S. 632, 105 S.Ct. 1555, 84 L.Ed.2d 572 (1985), the Secretary of Education sought to recoup Title I funds^[36] based on the State's noncompliance, from 1970 to 1972, with a 1978 amendment to Title I. Relying on Pennhurst, [2638] we rejected the Secretary's attempt to recover funds based on the States' alleged violation of a rule that did not exist when the State accepted and spent the funds. See 470 U.S., at 640, 105 S.Ct. 1555 ("New Jersey[,] when it applied for and received Title I funds for the years 1970-1972[,] had no basis to believe that the propriety of the expenditures would be judged by any standards other than the ones in effect at the time." (citing Pennhurst, 451 U.S., at 17, 24-25, 101 S.Ct. 1531; emphasis added)).

When amendment of an existing grant program has no such retroactive effect, however, we have upheld Congress' instruction. In Bennett v. Kentucky Dept. of Ed., 470 U.S. 656, 105 S.Ct. 1544, 84 L.Ed.2d 590 (1985), the Secretary sued to recapture Title I funds based on the Commonwealth's 1974 violation of a spending condition Congress added to Title I in 1970. Rejecting Kentucky's argument pinned to Pennhurst, we held that the Commonwealth suffered no surprise after accepting the federal funds. Kentucky was therefore obliged to return the money. 470 U.S., at 665-666, 673-674, 105 S.Ct. 1544. The conditions imposed were to be assessed as of 1974, in light of "the legal requirements in place when the grants were made," id., at 670, 105 S.Ct. 1544, not as of 1965, when Title I was originally enacted.

As these decisions show, Pennhurst's rule demands that conditions on federal funds be unambiguously clear at the time a State receives and uses the money — not at the time, perhaps years earlier, when Congress passed the law establishing the program. See also Dole, 483 U.S., at 208, 107 S.Ct. 2793 (finding Pennhurst satisfied based on the clarity of the Federal Aid Highway Act as amended in 1984, without looking back to 1956, the year of the Act's adoption).

In any event, from the start, the Medicaid Act put States on notice that the program could be changed: "The right to alter, amend, or repeal any provision of [Medicaid]," the statute has read since 1965, "is hereby reserved to the Congress." 42 U.S.C. § 1304. The "effect of these few simple words" has long been settled. See National Railroad Passenger Corporation v. Atchison, T. & S.F.R. Co., 470 U.S. 451, 467-468, n. 22, 105 S.Ct. 1441, 84 L.Ed.2d 432 (1985) (citing Sinking Fund Cases, 99 U.S. 700, 720, 25 L.Ed. 496 (1879)). By reserving the right to "alter, amend, [or] repeal" a spending program, Congress "has given special notice of its intention to retain ... full and complete power to make such alterations and amendments ... as come within the just scope of legislative power." Id., at 720.

Our decision in Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 51-52, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986), is guiding here. As enacted in 1935, the Social Security Act did not cover state employees. Id., at 44, 106 S.Ct. 2390. In response to pressure from States that wanted coverage for their employees, Congress, in 1950, amended the Act to allow States to opt into the program. Id., at 45, 106 S.Ct. 2390. The statutory provision giving States this option expressly permitted them to withdraw from the program. Ibid.

Beginning in the late 1970's, States increasingly exercised the option to withdraw. Id., at 46, 106 S.Ct. 2390. Concerned that withdrawals were threatening the integrity of Social Security, Congress repealed the termination provision. Congress thereby changed Social Security from a program voluntary for the States to one from which they could not escape. Id., at 48, 106 S.Ct. 2390. California objected, arguing that the change impermissibly deprived it of a right to withdraw [2639] from Social Security. Id., at 49-50, 106 S.Ct. 2390. We unanimously rejected California's argument. Id., at 51-53, 106 S.Ct. 2390. By including in the Act "a clause expressly reserving to it `[t]he right to alter, amend, or repeal any provision' of the Act," we held, Congress put States on notice that the Act "created no contractual rights." Id., at 51-52, 106 S.Ct. 2390. The States therefore had no law-based ground on which to complain about the amendment, despite the significant character of the change.

THE CHIEF JUSTICE nevertheless would rewrite § 1304 to countenance only the "right to alter somewhat," or "amend, but not too much." Congress, however, did not so qualify § 1304. Indeed, Congress retained discretion to "repeal" Medicaid, wiping it out entirely. Cf. Delta Air Lines, Inc. v. August, 450 U.S. 346, 368, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981) (Rehnquist, J., dissenting) (invoking "the common-sense maxim that the greater includes the lesser"). As Bowen indicates, no State could reasonably have read § 1304 as reserving to Congress authority to make adjustments only if modestly sized.

In fact, no State proceeded on that understanding. In compliance with Medicaid regulations, each State expressly undertook to abide by future Medicaid changes. See 42 CFR § 430.12(c)(1) (2011) ("The [state Medicaid] plan must provide that it will be amended whenever necessary to reflect ... [c]hanges in Federal law, regulations, policy interpretations, or court decisions."). Whenever a State notifies the Federal Government of a change in its own Medicaid program, the State certifies both that it knows the federally set terms of participation may change, and that it will abide by those changes as a condition of continued participation. See, e.g., Florida Agency for Health Care Admin., State Plan Under Title XIX of the Social Security Act Medical Assistance Program § 7.1, p. 86 (Oct. 6, 1992).

THE CHIEF JUSTICE insists that the most recent expansion, in contrast to its predecessors, "accomplishes a shift in kind, not merely degree." Ante, at 2605. But why was Medicaid altered only in degree, not in kind, when Congress required States to cover millions of children and pregnant women? See supra, at 2631-2632. Congress did not "merely alte[r] and expan[d] the boundaries of" the Aid to Families with Dependent Children program. But see ante, at 2605-2607. Rather, Congress required participating States to provide coverage tied to the federal poverty level (as it later did in the ACA), rather than to the AFDC program. See Brief for National Health Law Program et al. as Amici Curiae 16-18. In short, given § 1304, this Court's construction of § 1304's language in Bowen, and the enlargement of Medicaid in the years since 1965,^[37] a State would be hard put to complain that it lacked fair notice when, in 2010, Congress altered Medicaid to embrace a larger portion of the Nation's poor.

3

THE CHIEF JUSTICE ultimately asks whether "the financial inducement offered by Congress ... pass[ed] the point at which pressure turns into compulsion." Ante, at 2604 (internal quotation marks omitted). The financial inducement Congress employed here, he concludes, crosses [2640] that threshold: The threatened withholding of "existing Medicaid funds" is "a gun to the head" that forces States to acquiesce. Ante, at 2604 (citing 42 U.S.C. § 1396c).^[38]

THE CHIEF JUSTICE sees no need to "fix the outermost line," Steward Machine, 301 U.S., at 591, 57 S.Ct. 883, "where persuasion gives way to coercion," ante, at 2606. Neither do the joint dissenters. See post, at 2661, 2662.^[39] Notably, the decision on which they rely, Steward Machine, found the statute at issue inside the line, "wherever the line may be." 301 U.S., at 591, 57 S.Ct. 883.

When future Spending Clause challenges arrive, as they likely will in the wake of today's decision, how will litigants and judges assess whether "a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds"? Ante, at 2602. Are courts to measure the number of dollars the Federal Government might withhold for noncompliance? The portion of the State's budget at stake? And which State's — or States' — budget is determinative: the lead plaintiff, all challenging States (26 in this case, many with quite different fiscal situations), or some national median? Does it matter that Florida, unlike most States, imposes no state income tax, and therefore might be able to replace foregone federal funds with new state revenue?^[40] Or that the [2641] coercion state officials in fact fear is punishment at the ballot box for turning down a politically popular federal grant?

The coercion inquiry, therefore, appears to involve political judgments that defy judicial calculation. See Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). Even commentators sympathetic to robust enforcement of Dole's limitations, see supra, at 2633, have concluded that conceptions of "impermissible coercion" premised on States' perceived inability to decline federal funds "are just too amorphous to be judicially administrable." Baker & Berman, Getting off the Dole, 78 Ind. L.J. 459, 521, 522, n. 307 (2003) (citing, e.g., Scalia, The Rule of Law as a Law of Rules, 56 U. Chi. L. Rev. 1175 (1989)).

At bottom, my colleagues' position is that the States' reliance on federal funds limits Congress' authority to alter its spending programs. This gets things backwards: Congress, not the States, is tasked with spending federal money in service of the general welfare. And each successive Congress is empowered to appropriate funds as it sees fit. When the 110th Congress reached a conclusion about Medicaid funds that differed from its predecessors' view, it abridged no State's right to "existing," or "pre-existing," funds. But see ante, at 2604-2605; post, at 2667-2668 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.). For, in fact, there are no such funds. There is only money States anticipate receiving from future Congresses.

D

Congress has delegated to the Secretary of Health and Human Services the authority to withhold, in whole or in part, federal Medicaid funds from States that fail to comply with the Medicaid Act as originally composed and as subsequently amended. 42 U.S.C. § 1396c.^[41] THE CHIEF JUSTICE, however, holds that the Constitution precludes the Secretary from withholding "existing" Medicaid funds based on [2642] States' refusal to comply with the expanded Medicaid program. Ante, at 2606. For the foregoing reasons, I disagree that any such withholding would violate the Spending Clause. Accordingly, I would affirm the decision of the Court of Appeals for the Eleventh Circuit in this regard.

But in view of THE CHIEF JUSTICE's disposition, I agree with him that the Medicaid Act's severability clause determines the appropriate remedy. That clause provides that "[i]f any provision of [the Medicaid Act], or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provision to other persons or circumstances shall not be affected thereby." 42 U.S.C. § 1303.

The Court does not strike down any provision of the ACA. It prohibits only the "application" of the Secretary's authority to withhold Medicaid funds from States that decline to conform their Medicaid plans to the ACA's requirements. Thus the ACA's authorization of funds to finance the expansion remains intact, and the Secretary's authority to withhold funds for reasons other than noncompliance with the expansion remains unaffected.

Even absent § 1303's command, we would have no warrant to invalidate the Medicaid expansion, contra post, at 2666-2668 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.), not to mention the entire ACA, post, at 2668-2676 (same). For when a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislature's dominant objective. See, e.g., Ayotte v. Planned Parenthood of Northern New Eng., 546 U.S. 320, 328-330, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006). In this case, that objective was to increase access to health care for the poor by increasing the States' access to federal funds. THE CHIEF JUSTICE is undoubtedly right to conclude that Congress may offer States funds "to expand the availability of health care, and requir[e] that States accepting such funds comply with the conditions on their use." Ante, at 2607. I therefore concur in the judgment with respect to Part IV-B of THE CHIEF JUSTICE's opinion.

* * *

For the reasons stated, I agree with THE CHIEF JUSTICE that, as to the validity of the minimum coverage provision, the judgment of the Court of Appeals for the Eleventh Circuit should be reversed. In my view, the provision encounters no constitutional obstruction. Further, I would uphold the Eleventh Circuit's decision that the Medicaid expansion is within Congress' spending power.

Justice SCALIA, Justice KENNEDY, Justice THOMAS, and Justice ALITO, dissenting.

Congress has set out to remedy the problem that the best health care is beyond the reach of many Americans who cannot afford it. It can assuredly do that, by exercising the powers accorded to it under the Constitution. The question in this case, however, is whether the complex structures and provisions of the Patient Protection and Affordable Care Act (Affordable Care Act or ACA) go beyond those powers. We conclude that they do.

This case is in one respect difficult: it presents two questions of first impression. The first of those is whether failure to engage in economic activity (the purchase of health insurance) is subject to regulation under the Commerce Clause. Failure to act does result in an effect on commerce, and hence might be said to come under this Court's "affecting commerce" criterion of Commerce Clause jurisprudence. But in none of its decisions has this Court extended the Clause that far. [2643] The second question is whether the congressional power to tax and spend, U.S. Const., Art. I, § 8, cl. 1, permits the conditioning of a State's continued receipt of all funds under a massive state-administered federal welfare program upon its acceptance of an expansion to that program. Several of our opinions have suggested that the power to tax and spend cannot be used to coerce state administration of a federal program, but we have never found a law enacted under the spending power to be coercive. Those questions are difficult.

The case is easy and straightforward, however, in another respect. What is absolutely clear, affirmed by the text of the 1789 Constitution, by the Tenth Amendment ratified in 1791, and by innumerable cases of ours in the 220 years since, is that there are structural limits upon federal power — upon what it can prescribe with respect to private conduct, and upon what it can impose upon the sovereign States. Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the Federal Government to regulate all private conduct and to compel the States to function as administrators of federal programs.

That clear principle carries the day here. The striking case of Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942), which held that the economic activity of growing wheat, even for one's own consumption, affected commerce sufficiently that it could be regulated, always has been regarded as the ne plus ultra of expansive Commerce Clause jurisprudence. To go beyond that, and to say the failure to grow wheat (which is not an economic activity, or any activity at all) nonetheless affects commerce and therefore can be federally regulated, is to make mere breathing in and out the basis for federal prescription and to extend federal power to virtually all human activity.

As for the constitutional power to tax and spend for the general welfare: The Court has long since expanded that beyond (what Madison thought it meant) taxing and spending for those aspects of the general welfare that were within the Federal Government's enumerated powers, see United States v. Butler, 297 U.S. 1, 65-66, 56 S.Ct. 312, 80 L.Ed. 477 (1936). Thus, we now have sizable federal Departments devoted to subjects not mentioned among Congress' enumerated powers, and only marginally related to commerce: the Department of Education, the Department of Health and Human Services, the Department of Housing and Urban Development. The principal practical obstacle that prevents Congress from using the tax-and-spend power to assume all the general-welfare responsibilities traditionally exercised by the States is the sheer impossibility of managing a Federal Government large enough to administer such a system. That obstacle can be overcome by granting funds to the States, allowing them to administer the program. That is fair and constitutional enough when the States freely agree to have their powers employed and their employees enlisted in the federal scheme. But it is a blatant violation of the constitutional structure when the States have no choice.

The Act before us here exceeds federal power both in mandating the purchase of health insurance and in denying nonconsenting States all Medicaid funding. These parts of the Act are central to its design and operation, and all the Act's other provisions would not have been enacted without them. In our view it must follow that the entire statute is inoperative.

[2644] I

The Individual Mandate

Article I, § 8, of the Constitution gives Congress the power to "regulate Commerce... among the several States." The Individual Mandate in the Act commands that every "applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage." 26 U.S.C. § 5000A(a) (2006 ed., Supp. IV). If this provision "regulates" anything, it is the failure to maintain minimum essential coverage. One might argue that it regulates that failure by requiring it to be accompanied by payment of a penalty. But that failure — that abstention from commerce — is not "Commerce." To be sure, purchasing insurance is "Commerce"; but one does not regulate commerce that does not exist by compelling its existence.

In Gibbons v. Ogden, 9 Wheat. 1, 196, 6 L.Ed. 23 (1824), Chief Justice Marshall wrote that the power to regulate commerce is the power "to prescribe the rule by which commerce is to be governed." That understanding is consistent with the original meaning of "regulate" at the time of the Constitution's ratification, when "to regulate" meant "[t]o adjust by rule, method or established mode," 2 N. Webster, An American Dictionary of the English Language (1828); "[t]o adjust by rule or method," 2 S. Johnson, A Dictionary of the English Language (7th ed. 1785); "[t]o adjust, to direct according to rule," 2 J. Ash, New and Complete Dictionary of the English Language (1775); "to put in order, set to rights, govern or keep in order," T. Dyche & W. Pardon, A New General English Dictionary (16th ed. 1777).^[42] It can mean to direct the manner of something but not to direct that something come into being. There is no instance in which this Court or Congress (or anyone else, to our knowledge) has used "regulate" in that peculiar fashion. If the word bore that meaning, Congress' authority "[t]o make Rules for the Government and Regulation of the land and naval Forces," U.S. Const., Art. I, § 8, cl. 14, would have made superfluous the later provision for authority "[t]o raise and support Armies," id., § 8, cl. 12, and "[t]o provide and maintain a Navy," id., § 8, cl. 13.

We do not doubt that the buying and selling of health insurance contracts is commerce generally subject to federal regulation. But when Congress provides that (nearly) all citizens must buy an insurance contract, it goes beyond "adjust[ing] by rule or method," Johnson, supra, or "direct[ing] according to rule," Ash, supra; it directs the creation of commerce.

In response, the Government offers two theories as to why the Individual Mandate is nevertheless constitutional. Neither theory suffices to sustain its validity.

A

First, the Government submits that § 5000A is "integral to the Affordable Care Act's insurance reforms" and "necessary to make effective the Act's core reforms." Brief for Petitioners in No. 11-398 (Minimum Coverage Provision) 24 (hereinafter Petitioners' Minimum Coverage Brief). Congress included a "finding" to similar effect in the Act itself. See 42 U.S.C. § 18091(2)(H).

[2645] As discussed in more detail in Part V, infra, the Act contains numerous health insurance reforms, but most notable for present purposes are the "guaranteed issue" and "community rating" provisions, §§ 300gg to 300gg-4. The former provides that, with a few exceptions, "each health insurance issuer that offers health insurance coverage in the individual or group market in a State must accept every employer and individual in the State that applies for such coverage." § 300gg-1(a). That is, an insurer may not deny coverage on the basis of, among other things, any pre-existing medical condition that the applicant may have, and the resulting insurance must cover that condition. See § 300gg-3.

Under ordinary circumstances, of course, insurers would respond by charging high premiums to individuals with pre-existing conditions. The Act seeks to prevent this through the community-rating provision. Simply put, the community-rating provision requires insurers to calculate an individual's insurance premium based on only four factors: (i) whether the individual's plan covers just the individual or his family also, (ii) the "rating area" in which the individual lives, (iii) the individual's age, and (iv) whether the individual uses tobacco. § 300gg(a)(1)(A). Aside from the rough proxies of age and tobacco use (and possibly rating area), the Act does not allow an insurer to factor the individual's health characteristics into the price of his insurance premium. This creates a new incentive for young and healthy individuals without pre-existing conditions. The insurance premiums for those in this group will not reflect their own low actuarial risks but will subsidize insurance for others in the pool. Many of them may decide that purchasing health insurance is not an economically sound decision — especially since the guaranteed-issue provision will enable them to purchase it at the same cost in later years and even if they have developed a pre-existing condition. But without the contribution of above-risk premiums from the young and healthy, the community-rating provision will not enable insurers to take on high-risk individuals without a massive increase in premiums.

The Government presents the Individual Mandate as a unique feature of a complicated regulatory scheme governing many parties with countervailing incentives that must be carefully balanced. Congress has imposed an extensive set of regulations on the health insurance industry, and compliance with those regulations will likely cost the industry a great deal. If the industry does not respond by increasing premiums, it is not likely to survive. And if the industry does increase premiums, then there is a serious risk that its products — insurance plans — will become economically undesirable for many and prohibitively expensive for the rest.

This is not a dilemma unique to regulation of the health-insurance industry. Government regulation typically imposes costs on the regulated industry — especially regulation that prohibits economic behavior in which most market participants are already engaging, such as "piecing out" the market by selling the product to different classes of people at different prices (in the present context, providing much lower insurance rates to young and healthy buyers). And many industries so regulated face the reality that, without an artificial increase in demand, they cannot continue on. When Congress is regulating these industries directly, it enjoys the broad power to enact "`all appropriate legislation'" to "`protec[t]'" and "`advanc[e]'" commerce, NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 36-37, 57 S.Ct. 615, 81 L.Ed. 893 (1937) (quoting The Daniel Ball, 10 Wall. 557, 564, 19 L.Ed. 999 (1871)). Thus, Congress might protect the [2646] imperiled industry by prohibiting low-cost competition, or by according it preferential tax treatment, or even by granting it a direct subsidy.

Here, however, Congress has impressed into service third parties, healthy individuals who could be but are not customers of the relevant industry, to offset the undesirable consequences of the regulation. Congress' desire to force these individuals to purchase insurance is motivated by the fact that they are further removed from the market than unhealthy individuals with pre-existing conditions, because they are less likely to need extensive care in the near future. If Congress can reach out and command even those furthest removed from an interstate market to participate in the market, then the Commerce Clause becomes a font of unlimited power, or in Hamilton's words, "the hideous monster whose devouring jaws ... spare neither sex nor age, nor high nor low, nor sacred nor profane." The Federalist No. 33, p. 202 (C. Rossiter ed. 1961).

At the outer edge of the commerce power, this Court has insisted on careful scrutiny of regulations that do not act directly on an interstate market or its participants. In New York v. United States, 505 U.S. 144, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992), we held that Congress could not, in an effort to regulate the disposal of radioactive waste produced in several different industries, order the States to take title to that waste. Id., at 174-177, 112 S.Ct. 2408. In Printz v. United States, 521 U.S. 898, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997), we held that Congress could not, in an effort to regulate the distribution of firearms in the interstate market, compel state law-enforcement officials to perform background checks. Id., at 933-935, 117 S.Ct. 2365. In United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995), we held that Congress could not, as a means of fostering an educated interstate labor market through the protection of schools, ban the possession of a firearm within a school zone. Id., at 559-563, 115 S.Ct. 1624. And in United States v. Morrison, 529 U.S. 598, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000), we held that Congress could not, in an effort to ensure the full participation of women in the interstate economy, subject private individuals and companies to suit for gender-motivated violent torts. Id., at 609-619, 120 S.Ct. 1740. The lesson of these cases is that the Commerce Clause, even when supplemented by the Necessary and Proper Clause, is not carte blanche for doing whatever will help achieve the ends Congress seeks by the regulation of commerce. And the last two of these cases show that the scope of the Necessary and Proper Clause is exceeded not only when the congressional action directly violates the sovereignty of the States but also when it violates the background principle of enumerated (and hence limited) federal power.

The case upon which the Government principally relies to sustain the Individual Mandate under the Necessary and Proper Clause is Gonzales v. Raich, 545 U.S. 1, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). That case held that Congress could, in an effort to restrain the interstate market in marijuana, ban the local cultivation and possession of that drug. Id., at 15-22, 125 S.Ct. 2195. Raich is no precedent for what Congress has done here. That case's prohibition of growing (cf. Wickard, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122), and of possession (cf. innumerable federal statutes) did not represent the expansion of the federal power to direct into a broad new field. The mandating of economic activity does, and since it is a field so limitless that it converts the Commerce Clause into a general authority to direct the economy, that mandating is not "consist[ent] with the letter and spirit of the [2647] constitution." McCulloch v. Maryland, 4 Wheat. 316, 421, 4 L.Ed. 579 (1819).

Moreover, Raich is far different from the Individual Mandate in another respect. The Court's opinion in Raich pointed out that the growing and possession prohibitions were the only practicable way of enabling the prohibition of interstate traffic in marijuana to be effectively enforced. 545 U.S., at 22, 125 S.Ct. 2195. See also Shreveport Rate Cases, 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341 (1914) (Necessary and Proper Clause allows regulations of intrastate transactions if necessary to the regulation of an interstate market). Intrastate marijuana could no more be distinguished from interstate marijuana than, for example, endangered-species trophies obtained before the species was federally protected can be distinguished from trophies obtained afterwards — which made it necessary and proper to prohibit the sale of all such trophies, see Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979).

With the present statute, by contrast, there are many ways other than this unprecedented Individual Mandate by which the regulatory scheme's goals of reducing insurance premiums and ensuring the profitability of insurers could be achieved. For instance, those who did not purchase insurance could be subjected to a surcharge when they do enter the health insurance system. Or they could be denied a full income tax credit given to those who do purchase the insurance.

The Government was invited, at oral argument, to suggest what federal controls over private conduct (other than those explicitly prohibited by the Bill of Rights or other constitutional controls) could not be justified as necessary and proper for the carrying out of a general regulatory scheme. See Tr. of Oral Arg. 27-30, 43-45 (Mar. 27, 2012). It was unable to name any. As we said at the outset, whereas the precise scope of the Commerce Clause and the Necessary and Proper Clause is uncertain, the proposition that the Federal Government cannot do everything is a fundamental precept. See Lopez, 514 U.S., at 564, 115 S.Ct. 1624 ("[I]f we were to accept the Government's arguments, we are hard pressed to posit any activity by an individual that Congress is without power to regulate"). Section 5000A is defeated by that proposition.

B

The Government's second theory in support of the Individual Mandate is that § 5000A is valid because it is actually a "regulat[ion of] activities having a substantial relation to interstate commerce, ... i.e., ... activities that substantially affect interstate commerce." Id., at 558-559, 115 S.Ct. 1624. See also Shreveport Rate Cases, supra. This argument takes a few different forms, but the basic idea is that § 5000A regulates "the way in which individuals finance their participation in the health-care market." Petitioners' Minimum Coverage Brief 33 (emphasis added). That is, the provision directs the manner in which individuals purchase health care services and related goods (directing that they be purchased through insurance) and is therefore a straightforward exercise of the commerce power.

The primary problem with this argument is that § 5000A does not apply only to persons who purchase all, or most, or even any, of the health care services or goods that the mandated insurance covers. Indeed, the main objection many have to the Mandate is that they have no intention of purchasing most or even any of such goods or services and thus no need to buy insurance for those purchases. The Government responds that the health-care market involves "essentially universal participation," [2648] id., at 35. The principal difficulty with this response is that it is, in the only relevant sense, not true. It is true enough that everyone consumes "health care," if the term is taken to include the purchase of a bottle of aspirin. But the health care "market" that is the object of the Individual Mandate not only includes but principally consists of goods and services that the young people primarily affected by the Mandate do not purchase. They are quite simply not participants in that market, and cannot be made so (and thereby subjected to regulation) by the simple device of defining participants to include all those who will, later in their lifetime, probably purchase the goods or services covered by the mandated insurance.^[43] Such a definition of market participants is unprecedented, and were it to be a premise for the exercise of national power, it would have no principled limits.

In a variation on this attempted exercise of federal power, the Government points out that Congress in this Act has purported to regulate "economic and financial decision[s] to forego [sic] health insurance coverage and [to] attempt to self-insure," 42 U.S.C. § 18091(2)(A), since those decisions have "a substantial and deleterious effect on interstate commerce," Petitioners' Minimum Coverage Brief 34. But as the discussion above makes clear, the decision to forgo participation in an interstate market is not itself commercial activity (or indeed any activity at all) within Congress' power to regulate. It is true that, at the end of the day, it is inevitable that each American will affect commerce and become a part of it, even if not by choice. But if every person comes within the Commerce Clause power of Congress to regulate by the simple reason that he will one day engage in commerce, the idea of a limited Government power is at an end.

Wickard v. Filburn has been regarded as the most expansive assertion of the commerce power in our history. A close second is Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971), which upheld a statute criminalizing the eminently local activity of loan-sharking. Both of those cases, however, involved commercial activity. To go beyond that, and to say that the failure to grow wheat or the refusal to make loans affects commerce, so that growing and lending can be federally compelled, is to extend federal power to virtually everything. All of us consume food, and when we do so the Federal Government can prescribe what its quality must be and even how much we must pay. But the mere fact that we all consume food and are thus, sooner or later, participants in the "market" for food, does not empower the Government to say when and what we will buy. That is essentially what this Act seeks to do with respect to the purchase of health care. It exceeds federal power.

C

A few respectful responses to Justice GINSBURG's dissent on the issue of the Mandate are in order. That dissent duly [2649] recites the test of Commerce Clause power that our opinions have applied, but disregards the premise the test contains. It is true enough that Congress needs only a "`rational basis' for concluding that the regulated activity substantially affects interstate commerce," ante, at 2616 (emphasis added). But it must be activity affecting commerce that is regulated, and not merely the failure to engage in commerce. And one is not now purchasing the health care covered by the insurance mandate simply because one is likely to be purchasing it in the future. Our test's premise of regulated activity is not invented out of whole cloth, but rests upon the Constitution's requirement that it be commerce which is regulated. If all inactivity affecting commerce is commerce, commerce is everything. Ultimately the dissent is driven to saying that there is really no difference between action and inaction, ante, at 2622, a proposition that has never recommended itself, neither to the law nor to common sense. To say, for example, that the inaction here consists of activity in "the self-insurance market," ibid., seems to us wordplay. By parity of reasoning the failure to buy a car can be called participation in the non-private-car-transportation market. Commerce becomes everything.

The dissent claims that we "fai[l] to explain why the individual mandate threatens our constitutional order." Ante, at 2627. But we have done so. It threatens that order because it gives such an expansive meaning to the Commerce Clause that all private conduct (including failure to act) becomes subject to federal control, effectively destroying the Constitution's division of governmental powers. Thus the dissent, on the theories proposed for the validity of the Mandate, would alter the accepted constitutional relation between the individual and the National Government. The dissent protests that the Necessary and Proper Clause has been held to include "the power to enact criminal laws,... the power to imprison, ... and the power to create a national bank," ante, at 2627. Is not the power to compel purchase of health insurance much lesser? No, not if (unlike those other dispositions) its application rests upon a theory that everything is within federal control simply because it exists.

The dissent's exposition of the wonderful things the Federal Government has achieved through exercise of its assigned powers, such as "the provision of old-age and survivors' benefits" in the Social Security Act, ante, at 2609, is quite beside the point. The issue here is whether the federal government can impose the Individual Mandate through the Commerce Clause. And the relevant history is not that Congress has achieved wide and wonderful results through the proper exercise of its assigned powers in the past, but that it has never before used the Commerce Clause to compel entry into commerce.^[44] The dissent [2650] treats the Constitution as though it is an enumeration of those problems that the Federal Government can address — among which, it finds, is "the Nation's course in the economic and social welfare realm," ibid., and more specifically "the problem of the uninsured," ante, at 2612. The Constitution is not that. It enumerates not federally soluble problems, but federally available powers. The Federal Government can address whatever problems it wants but can bring to their solution only those powers that the Constitution confers, among which is the power to regulate commerce. None of our cases say anything else. Article I contains no whatever-it-takes-to-solve-a-national-problem power.

The dissent dismisses the conclusion that the power to compel entry into the health-insurance market would include the power to compel entry into the new-car or broccoli markets. The latter purchasers, it says, "will be obliged to pay at the counter before receiving the vehicle or nourishment," whereas those refusing to purchase health-insurance will ultimately get treated anyway, at others' expense. Ante, at 2619. "[T]he unique attributes of the health-care market ... give rise to a significant free-riding problem that does not occur in other markets." Ante, at 2623. And "a vegetable-purchase mandate" (or a car-purchase mandate) is not "likely to have a substantial effect on the health-care costs" borne by other Americans. Ante, at 2624. Those differences make a very good argument by the dissent's own lights, since they show that the failure to purchase health insurance, unlike the failure to purchase cars or broccoli, creates a national, social-welfare problem that is (in the dissent's view) included among the unenumerated "problems" that the Constitution authorizes the Federal Government to solve. But those differences do not show that the failure to enter the health-insurance market, unlike the failure to buy cars and broccoli, is an activity that Congress can "regulate." (Of course one day the failure of some of the public to purchase American cars may endanger the existence of domestic automobile manufacturers; or the failure of some to eat broccoli may be found to deprive them of a newly discovered cancer-fighting chemical which only that food contains, producing health-care costs that are a burden on the rest of us — in which case, under the theory of Justice GINSBURG's dissent, moving against those inactivities will also come within the Federal Government's unenumerated problem-solving powers.)

II

The Taxing Power

As far as § 5000A is concerned, we would stop there. Congress has attempted to regulate beyond the scope of its Commerce Clause authority,^[45] and § 5000A is therefore invalid. The Government contends, however, as expressed in the caption to Part II of its brief, that "THE MINIMUM COVERAGE PROVISION IS INDEPENDENTLY AUTHORIZED BY CONGRESS'S TAXING POWER." Petitioners' Minimum Coverage Brief 52. The phrase "independently authorized" suggests the existence of a creature never hitherto seen in the United States Reports: [2651] A penalty for constitutional purposes that is also a tax for constitutional purposes. In all our cases the two are mutually exclusive. The provision challenged under the Constitution is either a penalty or else a tax. Of course in many cases what was a regulatory mandate enforced by a penalty could have been imposed as a tax upon permissible action; or what was imposed as a tax upon permissible action could have been a regulatory mandate enforced by a penalty. But we know of no case, and the Government cites none, in which the imposition was, for constitutional purposes, both.^[46] The two are mutually exclusive. Thus, what the Government's caption should have read was "ALTERNATIVELY, THE MINIMUM COVERAGE PROVISION IS NOT A MANDATE-WITH-PENALTY BUT A TAX." It is important to bear this in mind in evaluating the tax argument of the Government and of those who support it: The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so.

In answering that question we must, if "fairly possible," Crowell v. Benson, 285 U.S. 22, 62, 52 S.Ct. 285, 76 L.Ed. 598 (1932), construe the provision to be a tax rather than a mandate-with-penalty, since that would render it constitutional rather than unconstitutional (ut res magis valeat quam pereat). But we cannot rewrite the statute to be what it is not. "`"[A]lthough this Court will often strain to construe legislation so as to save it against constitutional attack, it must not and will not carry this to the point of perverting the purpose of a statute ..." or judicially rewriting it.'" Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 841, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986) (quoting Aptheker v. Secretary of State, 378 U.S. 500, 515, 84 S.Ct. 1659, 12 L.Ed.2d 992 (1964), in turn quoting Scales v. United States, 367 U.S. 203, 211, 81 S.Ct. 1469, 6 L.Ed.2d 782 (1961)). In this case, there is simply no way, "without doing violence to the fair meaning of the words used," Grenada County Supervisors v. Brogden, 112 U.S. 261, 269, 5 S.Ct. 125, 28 L.Ed. 704 (1884), to escape what Congress enacted: a mandate that individuals maintain minimum essential coverage, enforced by a penalty.

Our cases establish a clear line between a tax and a penalty: "`[A] tax is an enforced contribution to provide for the support of government; a penalty ... is an exaction imposed by statute as punishment for an unlawful act.'" United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 224, 116 S.Ct. 2106, 135 L.Ed.2d 506 (1996) (quoting United States v. La Franca, 282 U.S. 568, 572, 51 S.Ct. 278, 75 L.Ed. 551 (1931)). In a few cases, this Court has held that a "tax" imposed upon private conduct was so onerous as to be in effect a penalty. But we have never held — never — that a penalty imposed for violation of the law was so trivial as to be in effect a tax. We have never held that any exaction imposed for violation of the law is an exercise of Congress' taxing power — even when the statute calls it a tax, much less when (as here) the statute repeatedly calls it a penalty. When an act "adopt[s] the criteria of wrongdoing" and then imposes a monetary penalty as the "principal consequence on those who transgress [2652] its standard," it creates a regulatory penalty, not a tax. Child Labor Tax Case, 259 U.S. 20, 38, 42 S.Ct. 449, 66 L.Ed. 817 (1922).

So the question is, quite simply, whether the exaction here is imposed for violation of the law. It unquestionably is. The minimum-coverage provision is found in 26 U.S.C. § 5000A, entitled "Requirement to maintain minimum essential coverage." (Emphasis added.) It commands that every "applicable individual shall ... ensure that the individual ... is covered under minimum essential coverage." Ibid. (emphasis added). And the immediately following provision states that, "[i]f ... an applicable individual ... fails to meet the requirement of subsection (a) ... there is hereby imposed ... a penalty." § 5000A(b) (emphasis added). And several of Congress' legislative "findings" with regard to § 5000A confirm that it sets forth a legal requirement and constitutes the assertion of regulatory power, not mere taxing power. See 42 U.S.C. § 18091(2)(A) ("The requirement regulates activity ..."); § 18091(2)(C) ("The requirement... will add millions of new consumers to the health insurance market..."); § 18091(2)(D) ("The requirement achieves near-universal coverage"); § 18091(2)(H) ("The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market"); § 18091(3) ("[T]he Supreme Court of the United States ruled that insurance is interstate commerce subject to Federal regulation").

The Government and those who support its view on the tax point rely on New York v. United States, 505 U.S. 144, 112 S.Ct. 2408, 120 L.Ed.2d 120, to justify reading "shall" to mean "may." The "shall" in that case was contained in an introductory provision — a recital that provided for no legal consequences — which said that "[e]ach State shall be responsible for providing... for the disposal of ... low-level radioactive waste." 42 U.S.C. § 2021c(a)(1)(A). The Court did not hold that "shall" could be construed to mean "may," but rather that this preliminary provision could not impose upon the operative provisions of the Act a mandate that they did not contain: "We ... decline petitioners' invitation to construe § 2021c(a)(1)(A), alone and in isolation, as a command to the States independent of the remainder of the Act." New York, 505 U.S., at 170, 112 S.Ct. 2408. Our opinion then proceeded to "consider each [of the three operative provisions] in turn." Ibid. Here the mandate — the "shall" — is contained not in an inoperative preliminary recital, but in the dispositive operative provision itself. New York provides no support for reading it to be permissive.

Quite separately, the fact that Congress (in its own words) "imposed ... a penalty," 26 U.S.C. § 5000A(b)(1), for failure to buy insurance is alone sufficient to render that failure unlawful. It is one of the canons of interpretation that a statute that penalizes an act makes it unlawful: "[W]here the statute inflicts a penalty for doing an act, although the act itself is not expressly prohibited, yet to do the act is unlawful, because it cannot be supposed that the Legislature intended that a penalty should be inflicted for a lawful act." Powhatan Steamboat Co. v. Appomattox R. Co., 24 How. 247, 252, 16 L.Ed. 682 (1861). Or in the words of Chancellor Kent: "If a statute inflicts a penalty for doing an act, the penalty implies a prohibition, and the thing is unlawful, though there be no prohibitory words in the statute." 1 J. Kent, Commentaries on American Law 436 (1826).

[2653] We never have classified as a tax an exaction imposed for violation of the law, and so too, we never have classified as a tax an exaction described in the legislation itself as a penalty. To be sure, we have sometimes treated as a tax a statutory exaction (imposed for something other than a violation of law) which bore an agnostic label that does not entail the significant constitutional consequences of a penalty — such as "license" (License Tax Cases, 5 Wall. 462, 18 L.Ed. 497 (1867)) or "surcharge" (New York v. United States, supra.). But we have never — never — treated as a tax an exaction which faces up to the critical difference between a tax and a penalty, and explicitly denominates the exaction a "penalty." Eighteen times in § 5000A itself and elsewhere throughout the Act, Congress called the exaction in § 5000A(b) a "penalty."

That § 5000A imposes not a simple tax but a mandate to which a penalty is attached is demonstrated by the fact that some are exempt from the tax who are not exempt from the mandate — a distinction that would make no sense if the mandate were not a mandate. Section 5000A(d) exempts three classes of people from the definition of "applicable individual" subject to the minimum coverage requirement: Those with religious objections or who participate in a "health care sharing ministry," § 5000A(d)(2); those who are "not lawfully present" in the United States, § 5000A(d)(3); and those who are incarcerated, § 5000A(d)(4). Section 5000A(e) then creates a separate set of exemptions, excusing from liability for the penalty certain individuals who are subject to the minimum coverage requirement: Those who cannot afford coverage, § 5000A(e)(1); who earn too little income to require filing a tax return, § 5000A(e)(2); who are members of an Indian tribe, § 5000A(e)(3); who experience only short gaps in coverage, § 5000A(e)(4); and who, in the judgment of the Secretary of Health and Human Services, "have suffered a hardship with respect to the capability to obtain coverage," § 5000A(e)(5). If § 5000A were a tax, these two classes of exemption would make no sense; there being no requirement, all the exemptions would attach to the penalty (renamed tax) alone.

In the face of all these indications of a regulatory requirement accompanied by a penalty, the Solicitor General assures us that "neither the Treasury Department nor the Department of Health and Human Services interprets Section 5000A as imposing a legal obligation," Petitioners' Minimum Coverage Brief 61, and that "[i]f [those subject to the Act] pay the tax penalty, they're in compliance with the law," Tr. of Oral Arg. 50 (Mar. 26, 2012). These self-serving litigating positions are entitled to no weight. What counts is what the statute says, and that is entirely clear. It is worth noting, moreover, that these assurances contradict the Government's position in related litigation. Shortly before the Affordable Care Act was passed, the Commonwealth of Virginia enacted Va.Code Ann. § 38.2-3430.1:1 (Lexis Supp. 2011), which states, "No resident of [the] Commonwealth ... shall be required to obtain or maintain a policy of individual insurance coverage except as required by a court or the Department of Social Services...." In opposing Virginia's assertion of standing to challenge § 5000A based on this statute, the Government said that "if the minimum coverage provision is unconstitutional, the [Virginia] statute is unnecessary, and if the minimum coverage provision is upheld, the state statute is void under the Supremacy Clause." Brief for Appellant in No. 11-1057 etc. (CA4), p. 29. But it would be void under the Supremacy Clause only if it was contradicted by a federal "require[ment] [2654] to obtain or maintain a policy of individual insurance coverage."

Against the mountain of evidence that the minimum coverage requirement is what the statute calls it — a requirement — and that the penalty for its violation is what the statute calls it — a penalty — the Government brings forward the flimsiest of indications to the contrary. It notes that "[t]he minimum coverage provision amends the Internal Revenue Code to provide that a non-exempted individual ... will owe a monetary penalty, in addition to the income tax itself," and that "[t]he [Internal Revenue Service (IRS)] will assess and collect the penalty in the same manner as assessable penalties under the Internal Revenue Code." Petitioners' Minimum Coverage Brief 53. The manner of collection could perhaps suggest a tax if IRS penalty-collection were unheard-of or rare. It is not. See, e.g., 26 U.S.C. § 527(j) (2006 ed.) (IRS-collectible penalty for failure to make campaign-finance disclosures); § 5761(c) (IRS-collectible penalty for domestic sales of tobacco products labeled for export); § 9707 (IRS-collectible penalty for failure to make required health-insurance premium payments on behalf of mining employees). In Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 116 S.Ct. 2106, 135 L.Ed.2d 506, we held that an exaction not only enforced by the Commissioner of Internal Revenue but even called a "tax" was in fact a penalty. "[I]f the concept of penalty means anything," we said, "it means punishment for an unlawful act or omission." Id., at 224, 116 S.Ct. 2106. See also Lipke v. Lederer, 259 U.S. 557, 42 S.Ct. 549, 66 L.Ed. 1061 (1922) (same). Moreover, while the penalty is assessed and collected by the IRS, § 5000A is administered both by that agency and by the Department of Health and Human Services (and also the Secretary of Veteran Affairs), see § 5000A(e)(1)(D), (e)(5), (f)(1)(A)(v), (f)(1)(E) (2006 ed., Supp. IV), which is responsible for defining its substantive scope — a feature that would be quite extraordinary for taxes.

The Government points out that "[t]he amount of the penalty will be calculated as a percentage of household income for federal income tax purposes, subject to a floor and [a] ca[p]," and that individuals who earn so little money that they "are not required to file income tax returns for the taxable year are not subject to the penalty" (though they are, as we discussed earlier, subject to the mandate). Petitioners' Minimum Coverage Brief 12, 53. But varying a penalty according to ability to pay is an utterly familiar practice. See, e.g., 33 U.S.C. § 1319(d) (2006 ed., Supp. IV) ("In determining the amount of a civil penalty the court shall consider ... the economic impact of the penalty on the violator"); see also 6 U.S.C. § 488e(c); 7 U.S.C. §§ 7734(b)(2), 8313(b)(2); 12 U.S.C. §§ 1701q-1(d)(3), 1723i(c)(3), 1735f-14(c)(3), 1735f-15(d)(3), 4585(c)(2); 15 U.S.C. §§ 45(m)(1)(C), 77h-1(g)(3), 78u-2(d), 80a-9(d)(4), 80b-3(i)(4), 1681s(a)(2)(B), 1717a(b)(3), 1825(b)(1), 2615(a)(2)(B), 5408(b)(2); 33 U.S.C. § 2716a(a).

The last of the feeble arguments in favor of petitioners that we will address is the contention that what this statute repeatedly calls a penalty is in fact a tax because it contains no scienter requirement. The presence of such a requirement suggests a penalty — though one can imagine a tax imposed only on willful action; but the absence of such a requirement does not suggest a tax. Penalties for absolute-liability offenses are commonplace. And where a statute is silent as to scienter, we traditionally presume a mens rea requirement if the statute imposes a "severe penalty." Staples v. United States, 511 U.S. 600, 618, 114 S.Ct. 1793, 128 L.Ed.2d 608 [2655] (1994). Since we have an entire jurisprudence addressing when it is that a scienter requirement should be inferred from a penalty, it is quite illogical to suggest that a penalty is not a penalty for want of an express scienter requirement.

And the nail in the coffin is that the mandate and penalty are located in Title I of the Act, its operative core, rather than where a tax would be found — in Title IX, containing the Act's "Revenue Provisions." In sum, "the terms of [the] act rende[r] it unavoidable," Parsons v. Bedford, 3 Pet. 433, 448, 7 L.Ed. 732 (1830), that Congress imposed a regulatory penalty, not a tax.

For all these reasons, to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it. Judicial tax-writing is particularly troubling. Taxes have never been popular, see, e.g., Stamp Act of 1765, and in part for that reason, the Constitution requires tax increases to originate in the House of Representatives. See Art. I, § 7, cl. 1. That is to say, they must originate in the legislative body most accountable to the people, where legislators must weigh the need for the tax against the terrible price they might pay at their next election, which is never more than two years off. The Federalist No. 58 "defend[ed] the decision to give the origination power to the House on the ground that the Chamber that is more accountable to the people should have the primary role in raising revenue." United States v. Munoz-Flores, 495 U.S. 385, 395, 110 S.Ct. 1964, 109 L.Ed.2d 384 (1990). We have no doubt that Congress knew precisely what it was doing when it rejected an earlier version of this legislation that imposed a tax instead of a requirement-with-penalty. See Affordable Health Care for America Act, H.R. 3962, 111th Cong., 1st Sess., § 501 (2009); America's Healthy Future Act of 2009, S. 1796, 111th Cong., 1st Sess., § 1301. Imposing a tax through judicial legislation inverts the constitutional scheme, and places the power to tax in the branch of government least accountable to the citizenry.

Finally, we must observe that rewriting § 5000A as a tax in order to sustain its constitutionality would force us to confront a difficult constitutional question: whether this is a direct tax that must be apportioned among the States according to their population. Art. I, § 9, cl. 4. Perhaps it is not (we have no need to address the point); but the meaning of the Direct Tax Clause is famously unclear, and its application here is a question of first impression that deserves more thoughtful consideration than the lick-and-a-promise accorded by the Government and its supporters. The Government's opening brief did not even address the question — perhaps because, until today, no federal court has accepted the implausible argument that § 5000A is an exercise of the tax power. And once respondents raised the issue, the Government devoted a mere 21 lines of its reply brief to the issue. Petitioners' Minimum Coverage Reply Brief 25. At oral argument, the most prolonged statement about the issue was just over 50 words. Tr. of Oral Arg. 79 (Mar. 27, 2012). One would expect this Court to demand more than fly-by-night briefing and argument before deciding a difficult constitutional question of first impression.

III

The Anti-Injunction Act

There is another point related to the Individual Mandate that we must discuss — a point that logically should have been discussed first: Whether jurisdiction over the challenges to the minimum-coverage provision is precluded by the Anti-Injunction Act, which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be [2656] maintained in any court by any person," 26 U.S.C. § 7421(a) (2006 ed.).

We have left the question to this point because it seemed to us that the dispositive question whether the minimum-coverage provision is a tax is more appropriately addressed in the significant constitutional context of whether it is an exercise of Congress' taxing power. Having found that it is not, we have no difficulty in deciding that these suits do not have "the purpose of restraining the assessment or collection of any tax."^[47]

The Government and those who support its position on this point make the remarkable argument that § 5000A is not a tax for purposes of the Anti-Injunction Act, see Brief for Petitioners in No. 11-398 (Anti-Injunction Act), but is a tax for constitutional purposes, see Petitioners' Minimum Coverage Brief 52-62. The rhetorical device that tries to cloak this argument in superficial plausibility is the same device employed in arguing that for constitutional purposes the minimum-coverage provision is a tax: confusing the question of what Congress did with the question of what Congress could have done. What qualifies as a tax for purposes of the Anti-Injunction Act, unlike what qualifies as a tax for purposes of the Constitution, is entirely within the control of Congress. Compare Bailey v. George, 259 U.S. 16, 20, 42 S.Ct. 419, 66 L.Ed. 816 (1922) (Anti-Injunction Act barred suit to restrain collections under the Child Labor Tax Law), with Child Labor Tax Case, 259 U.S., at 36-41, 42 S.Ct. 449 (holding the same law unconstitutional as exceeding Congress' taxing power). Congress could have defined "tax" for purposes of that statute in such fashion as to exclude some exactions that in fact are "taxes." It might have prescribed, for example, that a particular exercise of the taxing power "shall not be regarded as a tax for purposes of the Anti-Injunction Act." But there is no such prescription here. What the Government would have us believe in these cases is that the very same textual indications that show this is not a tax under the Anti-Injunction Act show that it is a tax under the Constitution. That carries verbal wizardry too far, deep into the forbidden land of the sophists.

IV

The Medicaid Expansion

We now consider respondents' second challenge to the constitutionality of the [2657] ACA, namely, that the Act's dramatic expansion of the Medicaid program exceeds Congress' power to attach conditions to federal grants to the States.

The ACA does not legally compel the States to participate in the expanded Medicaid program, but the Act authorizes a severe sanction for any State that refuses to go along: termination of all the State's Medicaid funding. For the average State, the annual federal Medicaid subsidy is equal to more than one-fifth of the State's expenditures.^[48] A State forced out of the program would not only lose this huge sum but would almost certainly find it necessary to increase its own health-care expenditures substantially, requiring either a drastic reduction in funding for other programs or a large increase in state taxes. And these new taxes would come on top of the federal taxes already paid by the State's citizens to fund the Medicaid program in other States.

The States challenging the constitutionality of the ACA's Medicaid Expansion contend that, for these practical reasons, the Act really does not give them any choice at all. As proof of this, they point to the goal and the structure of the ACA. The goal of the Act is to provide near-universal medical coverage, 42 U.S.C. § 18091(2)(D), and without 100% State participation in the Medicaid program, attainment of this goal would be thwarted. Even if States could elect to remain in the old Medicaid program, while declining to participate in the Expansion, there would be a gaping hole in coverage. And if a substantial number of States were entirely expelled from the program, the number of persons without coverage would be even higher.

In light of the ACA's goal of near-universal coverage, petitioners argue, if Congress had thought that anything less than 100% state participation was a realistic possibility, Congress would have provided a backup scheme. But no such scheme is to be found anywhere in the more than 900 pages of the Act. This shows, they maintain, that Congress was certain that the ACA's Medicaid offer was one that no State could refuse.

In response to this argument, the Government contends that any congressional assumption about uniform state participation was based on the simple fact that the offer of federal funds associated with the expanded coverage is such a generous gift that no State would want to turn it down.

To evaluate these arguments, we consider the extent of the Federal Government's power to spend money and to attach conditions to money granted to the States.

A

No one has ever doubted that the Constitution authorizes the Federal Government to spend money, but for many years the scope of this power was unsettled. The Constitution grants Congress the power to collect taxes "to ... provide for the ... general Welfare of the United States," Art. I, § 8, cl. 1, and from "the foundation of the Nation sharp differences of opinion have persisted as to the true interpretation of the phrase" "the general welfare." Butler, 297 U.S., at 65, 56 S.Ct. 312. Madison, it has been said, thought that the phrase "amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section," while Hamilton "maintained the clause confers a power separate and distinct from those later enumerated [and] [2658] is not restricted in meaning by the grant of them." Ibid.

The Court resolved this dispute in Butler. Writing for the Court, Justice Roberts opined that the Madisonian view would make Article I's grant of the spending power a "mere tautology." Ibid. To avoid that, he adopted Hamilton's approach and found that "the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution." Id., at 66, 56 S.Ct. 312. Instead, he wrote, the spending power's "confines are set in the clause which confers it, and not in those of section 8 which bestow and define the legislative powers of the Congress." Ibid.; see also Steward Machine Co. v. Davis, 301 U.S. 548, 586-587, 57 S.Ct. 883, 81 L.Ed. 1279 (1937); Helvering v. Davis, 301 U.S. 619, 640, 57 S.Ct. 904, 81 L.Ed. 1307 (1937).

The power to make any expenditure that furthers "the general welfare" is obviously very broad, and shortly after Butler was decided the Court gave Congress wide leeway to decide whether an expenditure qualifies. See Helvering, 301 U.S., at 640-641, 57 S.Ct. 904. "The discretion belongs to Congress," the Court wrote, "unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment." Id., at 640, 57 S.Ct. 904. Since that time, the Court has never held that a federal expenditure was not for "the general welfare."

B

One way in which Congress may spend to promote the general welfare is by making grants to the States. Monetary grants, so-called grants-in-aid, became more frequent during the 1930's, G. Stephens & N. Wikstrom, American Intergovernmental Relations — A Fragmented Federal Polity 83 (2007), and by 1950 they had reached $20 billion^[49] or 11.6% of state and local government expenditures from their own sources.^[50] By 1970 this number had grown to $123.7 billion^[51] or 29.1% of state and local government expenditures from their own sources.^[52] As of 2010, federal outlays to state and local governments came to over $608 billion or 37.5% of state and local government expenditures.^[53]

When Congress makes grants to the States, it customarily attaches conditions, and this Court has long held that the Constitution generally permits Congress to do this. See Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981); South Dakota v. Dole, 483 U.S. 203, 206, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987); Fullilove v. Klutznick, 448 U.S. 448, 474, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980) (opinion of Burger, C.J.); Steward Machine, supra, at 593, 57 S.Ct. 883.

[2659] C

This practice of attaching conditions to federal funds greatly increases federal power. "[O]bjectives not thought to be within Article I's enumerated legislative fields, may nevertheless be attained through the use of the spending power and the conditional grant of federal funds." Dole, supra, at 207, 107 S.Ct. 2793 (internal quotation marks and citation omitted); see also College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666, 686, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999) (by attaching conditions to federal funds, Congress may induce the States to "tak[e] certain actions that Congress could not require them to take").

This formidable power, if not checked in any way, would present a grave threat to the system of federalism created by our Constitution. If Congress'"Spending Clause power to pursue objectives outside of Article I's enumerated legislative fields," Davis v. Monroe County Bd. of Ed., 526 U.S. 629, 654, 119 S.Ct. 1661, 143 L.Ed.2d 839 (1999) (KENNEDY, J., dissenting) (internal quotation marks omitted), is "limited only by Congress' notion of the general welfare, the reality, given the vast financial resources of the Federal Government, is that the Spending Clause gives `power to the Congress to tear down the barriers, to invade the states' jurisdiction, and to become a parliament of the whole people, subject to no restrictions save such as are self-imposed,'" Dole, supra, at 217, 107 S.Ct. 2793 (O'Connor, J., dissenting) (quoting Butler, 297 U.S., at 78, 56 S.Ct. 312). "[T]he Spending Clause power, if wielded without concern for the federal balance, has the potential to obliterate distinctions between national and local spheres of interest and power by permitting the Federal Government to set policy in the most sensitive areas of traditional state concern, areas which otherwise would lie outside its reach." Davis, supra, at 654-655, 57 S.Ct. 883 (KENNEDY, J., dissenting).

Recognizing this potential for abuse, our cases have long held that the power to attach conditions to grants to the States has limits. See, e.g., Dole, supra, at 207-208, 107 S.Ct. 2793; id., at 207, 107 S.Ct. 2793 (spending power is "subject to several general restrictions articulated in our cases"). For one thing, any such conditions must be unambiguous so that a State at least knows what it is getting into. See Pennhurst, supra, at 17, 101 S.Ct. 1531. Conditions must also be related "to the federal interest in particular national projects or programs," Massachusetts v. United States, 435 U.S. 444, 461, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978), and the conditional grant of federal funds may not "induce the States to engage in activities that would themselves be unconstitutional," Dole, supra, at 210, 107 S.Ct. 2793; see Lawrence County v. Lead-Deadwood School Dist. No. 40-1, 469 U.S. 256, 269-270, 105 S.Ct. 695, 83 L.Ed.2d 635 (1985). Finally, while Congress may seek to induce States to accept conditional grants, Congress may not cross the "point at which pressure turns into compulsion, and ceases to be inducement." Steward Machine, 301 U.S., at 590, 57 S.Ct. 883. Accord, College Savings Bank, supra, at 687, 119 S.Ct. 2219; Metropolitan Washington Airports Authority v. Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252, 285, 111 S.Ct. 2298, 115 L.Ed.2d 236 (1991) (White, J., dissenting); Dole, supra, at 211, 107 S.Ct. 2793.

When federal legislation gives the States a real choice whether to accept or decline a federal aid package, the federal-state relationship is in the nature of a contractual relationship. See Barnes v. Gorman, 536 U.S. 181, 186, 122 S.Ct. 2097, 153 L.Ed.2d [2660] 230 (2002); Pennhurst, 451 U.S., at 17, 101 S.Ct. 1531. And just as a contract is voidable if coerced, "[t]he legitimacy of Congress' power to legislate under the spending power ... rests on whether the State voluntarily and knowingly accepts the terms of the `contract.'" Ibid. (emphasis added). If a federal spending program coerces participation the States have not "exercise[d] their choice" — let alone made an "informed choice." Id., at 17, 25, 101 S.Ct. 1531.

Coercing States to accept conditions risks the destruction of the "unique role of the States in our system." Davis, supra, at 685, 57 S.Ct. 883 (KENNEDY, J., dissenting). "[T]he Constitution has never been understood to confer upon Congress the ability to require the States to govern according to Congress' instructions." New York, 505 U.S., at 162, 112 S.Ct. 2408. Congress may not "simply commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program." Id., at 161, 112 S.Ct. 2408 (internal quotation marks and brackets omitted). Congress effectively engages in this impermissible compulsion when state participation in a federal spending program is coerced, so that the States' choice whether to enact or administer a federal regulatory program is rendered illusory.

Where all Congress has done is to "encourag[e] state regulation rather than compe[l] it, state governments remain responsive to the local electorate's preferences; state officials remain accountable to the people. [But] where the Federal Government compels States to regulate, the accountability of both state and federal officials is diminished." New York, supra, at 168, 112 S.Ct. 2408.

Amici who support the Government argue that forcing state employees to implement a federal program is more respectful of federalism than using federal workers to implement that program. See, e.g., Brief for Service Employees International Union et al. as Amici Curiae in No. 11-398, pp. 25-26. They note that Congress, instead of expanding Medicaid, could have established an entirely federal program to provide coverage for the same group of people. By choosing to structure Medicaid as a cooperative federal-state program, they contend, Congress allows for more state control. Ibid.

This argument reflects a view of federalism that our cases have rejected — and with good reason. When Congress compels the States to do its bidding, it blurs the lines of political accountability. If the Federal Government makes a controversial decision while acting on its own, "it is the Federal Government that makes the decision in full view of the public, and it will be federal officials that suffer the consequences if the decision turns out to be detrimental or unpopular." New York, 505 U.S., at 168, 112 S.Ct. 2408. But when the Federal Government compels the States to take unpopular actions, "it may be state officials who will bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision." Id., at 169, 112 S.Ct. 2408; see Printz, supra, at 930, 117 S.Ct. 2365. For this reason, federal officeholders may view this "departur[e] from the federal structure to be in their personal interests ... as a means of shifting responsibility for the eventual decision." New York, 505 U.S., at 182-183, 112 S.Ct. 2408. And even state officials may favor such a "departure from the constitutional plan," since uncertainty concerning responsibility may also permit them to escape accountability. Id., at 182, 112 S.Ct. 2408. If a program is popular, state officials may claim credit; if it is unpopular, [2661] they may protest that they were merely responding to a federal directive.

Once it is recognized that spending-power legislation cannot coerce state participation, two questions remain: (1) What is the meaning of coercion in this context? (2) Is the ACA's expanded Medicaid coverage coercive? We now turn to those questions.

D

1

The answer to the first of these questions — the meaning of coercion in the present context — is straightforward. As we have explained, the legitimacy of attaching conditions to federal grants to the States depends on the voluntariness of the States' choice to accept or decline the offered package. Therefore, if States really have no choice other than to accept the package, the offer is coercive, and the conditions cannot be sustained under the spending power. And as our decision in South Dakota v. Dole makes clear, theoretical voluntariness is not enough.

In South Dakota v. Dole, we considered whether the spending power permitted Congress to condition 5% of the State's federal highway funds on the State's adoption of a minimum drinking age of 21 years. South Dakota argued that the program was impermissibly coercive, but we disagreed, reasoning that "Congress ha[d] directed only that a State desiring to establish a minimum drinking age lower than 21 lose a relatively small percentage of certain federal highway funds." 483 U.S., at 211, 107 S.Ct. 2793. Because "all South Dakota would lose if she adhere[d] to her chosen course as to a suitable minimum drinking age [was] 5% of the funds otherwise obtainable under specified highway grant programs," we found that "Congress ha[d] offered relatively mild encouragement to the States to enact higher minimum drinking ages than they would otherwise choose." Ibid. Thus, the decision whether to comply with the federal condition "remain[ed] the prerogative of the States not merely in theory but in fact," and so the program at issue did not exceed Congress' power. Id., at 211-212, 107 S.Ct. 2793 (emphasis added).

The question whether a law enacted under the spending power is coercive in fact will sometimes be difficult, but where Congress has plainly "crossed the line distinguishing encouragement from coercion," New York, supra, at 175, 112 S.Ct. 2408, a federal program that coopts the States' political processes must be declared unconstitutional. "[T]he federal balance is too essential a part of our constitutional structure and plays too vital a role in securing freedom for us to admit inability to intervene." Lopez, 514 U.S., at 578, 115 S.Ct. 1624 (KENNEDY, J., concurring).

2

The Federal Government's argument in this case at best pays lip service to the anticoercion principle. The Federal Government suggests that it is sufficient if States are "free, as a matter of law, to turn down" federal funds. Brief for Respondents in No. 11-400, p. 17 (emphasis added); see also id., at 25. According to the Federal Government, neither the amount of the offered federal funds nor the amount of the federal taxes extracted from the taxpayers of a State to pay for the program in question is relevant in determining whether there is impermissible coercion. Id., at 41-46.

This argument ignores reality. When a heavy federal tax is levied to support a federal program that offers large grants to the States, States may, as a practical matter, be unable to refuse to participate in the federal program and to substitute a state alternative. Even if a State believes that the federal program is ineffective and [2662] inefficient, withdrawal would likely force the State to impose a huge tax increase on its residents, and this new state tax would come on top of the federal taxes already paid by residents to support subsidies to participating States.^[54]

Acceptance of the Federal Government's interpretation of the anticoercion rule would permit Congress to dictate policy in areas traditionally governed primarily at the state or local level. Suppose, for example, that Congress enacted legislation offering each State a grant equal to the State's entire annual expenditures for primary and secondary education. Suppose also that this funding came with conditions governing such things as school curriculum, the hiring and tenure of teachers, the drawing of school districts, the length and hours of the school day, the school calendar, a dress code for students, and rules for student discipline. As a matter of law, a State could turn down that offer, but if it did so, its residents would not only be required to pay the federal taxes needed to support this expensive new program, but they would also be forced to pay an equivalent amount in state taxes. And if the State gave in to the federal law, the State and its subdivisions would surrender their traditional authority in the field of education. Asked at oral argument whether such a law would be allowed under the spending power, the Solicitor General responded that it would. Tr. of Oral Arg. 44-45 (Mar. 28, 2012).

E

Whether federal spending legislation crosses the line from enticement to coercion is often difficult to determine, and courts should not conclude that legislation is unconstitutional on this ground unless the coercive nature of an offer is unmistakably clear. In this case, however, there can be no doubt. In structuring the ACA, Congress unambiguously signaled its belief that every State would have no real choice but to go along with the Medicaid Expansion. If the anticoercion rule does not apply in this case, then there is no such rule.

1

The dimensions of the Medicaid program lend strong support to the petitioner States' argument that refusing to accede to the conditions set out in the ACA is not a realistic option. Before the ACA's enactment, Medicaid funded medical care for pregnant women, families with dependents, children, the blind, the elderly, and the disabled. See 42 U.S.C. § 1396a(a)(10) (2006 ed., Supp. IV). The ACA greatly expands the program's reach, making new funds available to States that agree to extend coverage to all individuals who are under age 65 and have incomes below 133% of the federal poverty line. See § 1396a(a)(10)(A)(i)(VIII). Any State that refuses to expand its Medicaid programs in this way is threatened with a severe sanction: the loss of all its federal Medicaid funds. See § 1396c (2006 ed.).

Medicaid has long been the largest federal program of grants to the States. See Brief for Respondents in No. 11-400, at 37. In 2010, the Federal Government directed [2663] more than $552 billion in federal funds to the States. See Nat. Assn. of State Budget Officers, 2010 State Expenditure Report: Examining Fiscal 2009-2011 State Spending, p. 7 (2011) (NASBO Report). Of this, more than $233 billion went to pre-expansion Medicaid. See id., at 47.^[55]This amount equals nearly 22% of all state expenditures combined. See id., at 7.

The States devote a larger percentage of their budgets to Medicaid than to any other item. Id., at 5. Federal funds account for anywhere from 50% to 83% of each State's total Medicaid expenditures, see § 1396d(b) (2006 ed., Supp. IV); most States receive more than $1 billion in federal Medicaid funding; and a quarter receive more than $5 billion, NASBO Report 47. These federal dollars total nearly two thirds — 64.6% — of all Medicaid expenditures nationwide.^[56]Id., at 46.

The Court of Appeals concluded that the States failed to establish coercion in this case in part because the "states have the power to tax and raise revenue, and therefore can create and fund programs of their own if they do not like Congress's terms." 648 F.3d 1235, 1268 (C.A.11 2011); see Brief for Sen. Harry Reid et al. as Amici Curiae in No. 11-400, p. 21 ("States may always choose to decrease expenditures on other programs or to raise revenues"). But the sheer size of this federal spending program in relation to state expenditures means that a State would be very hard pressed to compensate for the loss of federal funds by cutting other spending or raising additional revenue. Arizona, for example, commits 12% of its state expenditures to Medicaid, and relies on the Federal Government to provide the rest: $5.6 billion, equaling roughly one-third of Arizona's annual state expenditures of $17 billion. See NASBO Report 7, 47. Therefore, if Arizona lost federal Medicaid funding, the State would have to commit an additional 33% of all its state expenditures to fund an equivalent state program along the lines of pre-expansion Medicaid. This means that the State would have to allocate 45% of its annual expenditures for that one purpose. See ibid.

The States are far less reliant on federal funding for any other program. After Medicaid, the next biggest federal funding item is aid to support elementary and secondary education, which amounts to 12.8% of total federal outlays to the States, see id., at 7, 16, and equals only 6.6% of all state expenditures combined. See ibid. In Arizona, for example, although federal Medicaid expenditures are equal to 33% of all state expenditures, federal education funds amount to only 9.8% of all state [2664] expenditures. See ibid. And even in States with less than average federal Medicaid funding, that funding is at least twice the size of federal education funding as a percentage of state expenditures. Id., at 7, 16, 47.

A State forced out of the Medicaid program would face burdens in addition to the loss of federal Medicaid funding. For example, a nonparticipating State might be found to be ineligible for other major federal funding sources, such as Temporary Assistance for Needy Families (TANF), which is premised on the expectation that States will participate in Medicaid. See 42 U.S.C. § 602(a)(3) (2006 ed.) (requiring that certain beneficiaries of TANF funds be "eligible for medical assistance under the State['s Medicaid] plan"). And withdrawal or expulsion from the Medicaid program would not relieve a State's hospitals of their obligation under federal law to provide care for patients who are unable to pay for medical services. The Emergency Medical Treatment and Active Labor Act, § 1395dd, requires hospitals that receive any federal funding to provide stabilization care for indigent patients but does not offer federal funding to assist facilities in carrying out its mandate. Many of these patients are now covered by Medicaid. If providers could not look to the Medicaid program to pay for this care, they would find it exceedingly difficult to comply with federal law unless they were given substantial state support. See, e.g., Brief for Economists as Amici Curiae in No 11-400, p. 11.

For these reasons, the offer that the ACA makes to the States — go along with a dramatic expansion of Medicaid or potentially lose all federal Medicaid funding — is quite unlike anything that we have seen in a prior spending-power case. In South Dakota v. Dole, the total amount that the States would have lost if every single State had refused to comply with the 21-year-old drinking age was approximately $614.7 million — or about 0.19% of all state expenditures combined. See Nat. Assn. of State Budget Officers, 1989 (Fiscal Years 1987-1989 Data) State Expenditure Report 10, 84 (1989), http://www.nasbo.org/ publications-data/state-expenditure-report/ archives. South Dakota stood to lose, at most, funding that amounted to less than 1% of its annual state expenditures. See ibid. Under the ACA, by contrast, the Federal Government has threatened to withhold 42.3% of all federal outlays to the states, or approximately $233 billion. See NASBO Report 7, 10, 47. South Dakota stands to lose federal funding equaling 28.9% of its annual state expenditures. See id., at 7, 47. Withholding $614.7 million, equaling only 0.19% of all state expenditures combined, is aptly characterized as "relatively mild encouragement," but threatening to withhold $233 billion, equaling 21.86% of all state expenditures combined, is a different matter.

2

What the statistics suggest is confirmed by the goal and structure of the ACA. In crafting the ACA, Congress clearly expressed its informed view that no State could possibly refuse the offer that the ACA extends.

The stated goal of the ACA is near-universal health care coverage. To achieve this goal, the ACA mandates that every person obtain a minimum level of coverage. It attempts to reach this goal in several different ways. The guaranteed issue and community-rating provisions are designed to make qualifying insurance available and affordable for persons with medical conditions that may require expensive care. Other ACA provisions seek to make such policies more affordable for people of modest means. Finally, for low-income individuals who are simply not able [2665] to obtain insurance, Congress expanded Medicaid, transforming it from a program covering only members of a limited list of vulnerable groups into a program that provides at least the requisite minimum level of coverage for the poor. See 42 U.S.C. §§ 1396a(a)(10)(A)(i)(VIII) (2006 ed., Supp. IV), 1396u-7(a), (b)(5), 18022(a). This design was intended to provide at least a specified minimum level of coverage for all Americans, but the achievement of that goal obviously depends on participation by every single State. If any State — not to mention all of the 26 States that brought this suit — chose to decline the federal offer, there would be a gaping hole in the ACA's coverage.

It is true that some persons who are eligible for Medicaid coverage under the ACA may be able to secure private insurance, either through their employers or by obtaining subsidized insurance through an exchange. See 26 U.S.C. § 36B(a) (2006 ed., Supp. IV); Brief for Respondents in No. 11-400, at 12. But the new federal subsidies are not available to those whose income is below the federal poverty level, and the ACA provides no means, other than Medicaid, for these individuals to obtain coverage and comply with the Mandate. The Government counters that these people will not have to pay the penalty, see, e.g., Tr. of Oral Arg. 68 (Mar. 28, 2012); Brief for Respondents in No. 11-400, at 49-50, but that argument misses the point: Without Medicaid, these individuals will not have coverage and the ACA's goal of near-universal coverage will be severely frustrated.

If Congress had thought that States might actually refuse to go along with the expansion of Medicaid, Congress would surely have devised a backup scheme so that the most vulnerable groups in our society, those previously eligible for Medicaid, would not be left out in the cold. But nowhere in the over 900-page Act is such a scheme to be found. By contrast, because Congress thought that some States might decline federal funding for the operation of a "health benefit exchange," Congress provided a backup scheme; if a State declines to participate in the operation of an exchange, the Federal Government will step in and operate an exchange in that State. See 42 U.S.C. § 18041(c)(1). Likewise, knowing that States would not necessarily provide affordable health insurance for aliens lawfully present in the United States — because Medicaid does not require States to provide such coverage — Congress extended the availability of the new federal insurance subsidies to all aliens. See 26 U.S.C. § 36B(c)(1)(B)(ii) (excepting from the income limit individuals who are "not eligible for the medicaid program ... by reason of [their] alien status"). Congress did not make these subsidies available for citizens with incomes below the poverty level because Congress obviously assumed that they would be covered by Medicaid. If Congress had contemplated that some of these citizens would be left without Medicaid coverage as a result of a State's withdrawal or expulsion from the program, Congress surely would have made them eligible for the tax subsidies provided for low-income aliens.

These features of the ACA convey an unmistakable message: Congress never dreamed that any State would refuse to go along with the expansion of Medicaid. Congress well understood that refusal was not a practical option.

The Federal Government does not dispute the inference that Congress anticipated 100% state participation, but it argues that this assumption was based on the fact that ACA's offer was an "exceedingly generous" gift. Brief for Respondents in No. 11-400, at 50. As the Federal Government sees things, Congress is like the [2666] generous benefactor who offers $1 million with few strings attached to 50 randomly selected individuals. Just as this benefactor might assume that all of these 50 individuals would snap up his offer, so Congress assumed that every State would gratefully accept the federal funds (and conditions) to go with the expansion of Medicaid.

This characterization of the ACA's offer raises obvious questions. If that offer is "exceedingly generous," as the Federal Government maintains, why have more than half the States brought this lawsuit, contending that the offer is coercive? And why did Congress find it necessary to threaten that any State refusing to accept this "exceedingly generous" gift would risk losing all Medicaid funds? Congress could have made just the new funding provided under the ACA contingent on acceptance of the terms of the Medicaid Expansion. Congress took such an approach in some earlier amendments to Medicaid, separating new coverage requirements and funding from the rest of the program so that only new funding was conditioned on new eligibility extensions. See, e.g., Social Security Amendments of 1972, 86 Stat. 1465.

Congress' decision to do otherwise here reflects its understanding that the ACA offer is not an "exceedingly generous" gift that no State in its right mind would decline. Instead, acceptance of the offer will impose very substantial costs on participating States. It is true that the Federal Government will bear most of the initial costs associated with the Medicaid Expansion, first paying 100% of the costs of covering newly eligible individuals between 2014 and 2016. 42 U.S.C. § 1396d(y). But that is just part of the picture. Participating States will be forced to shoulder substantial costs as well, because after 2019 the Federal Government will cover only 90% of the costs associated with the Expansion, see ibid., with state spending projected to increase by at least $20 billion by 2020 as a consequence. Statement of Douglas W. Elmendorf, CBO's Analysis of the Major Health Care Legislation Enacted in March 2010, p. 24 (Mar. 30, 2011); see also R. Bovbjerg, B. Ormond, & V. Chen, Kaiser Commission on Medicaid and the Uninsured, State Budgets under Federal Health Reform: The Extent and Causes of Variations in Estimated Impacts 4, n. 27 (Feb. 2011) (estimating new state spending at $43.2 billion through 2019). After 2019, state spending is expected to increase at a faster rate; the CBO estimates new state spending at $60 billion through 2021. Statement of Douglas W. Elmendorf, supra, at 24. And these costs may increase in the future because of the very real possibility that the Federal Government will change funding terms and reduce the percentage of funds it will cover. This would leave the States to bear an increasingly large percentage of the bill. See Tr. of Oral Arg. 74-76 (Mar. 28, 2012). Finally, after 2015, the States will have to pick up the tab for 50% of all administrative costs associated with implementing the new program, see §§ 1396b(a)(2)-(5), (7) (2006 ed., Supp. IV), costs that could approach $12 billion between fiscal years 2014 and 2020, see Dept. of Health and Human Services, Center for Medicaid and Medicare Services, 2010 Actuarial Report on the Financial Outlook for Medicaid 30.

In sum, it is perfectly clear from the goal and structure of the ACA that the offer of the Medicaid Expansion was one that Congress understood no State could refuse. The Medicaid Expansion therefore exceeds Congress' spending power and cannot be implemented.

F

Seven Members of the Court agree that the Medicaid Expansion, as enacted by [2667] Congress, is unconstitutional. See Part IV-A to IV-E, supra; Part IV-A, ante, at 2598-2607 (opinion of ROBERTS, C.J., joined by BREYER and KAGAN, JJ.). Because the Medicaid Expansion is unconstitutional, the question of remedy arises. The most natural remedy would be to invalidate the Medicaid Expansion. However, the Government proposes — in two cursory sentences at the very end of its brief — preserving the Expansion. Under its proposal, States would receive the additional Medicaid funds if they expand eligibility, but States would keep their pre-existing Medicaid funds if they do not expand eligibility. We cannot accept the Government's suggestion.

The reality that States were given no real choice but to expand Medicaid was not an accident. Congress assumed States would have no choice, and the ACA depends on States' having no choice, because its Mandate requires low-income individuals to obtain insurance many of them can afford only through the Medicaid Expansion. Furthermore, a State's withdrawal might subject everyone in the State to much higher insurance premiums. That is because the Medicaid Expansion will no longer offset the cost to the insurance industry imposed by the ACA's insurance regulations and taxes, a point that is explained in more detail in the severability section below. To make the Medicaid Expansion optional despite the ACA's structure and design "`would be to make a new law, not to enforce an old one. This is no part of our duty.'" Trade-Mark Cases, 100 U.S. 82, 99, 25 L.Ed. 550 (1879).

Worse, the Government's proposed remedy introduces a new dynamic: States must choose between expanding Medicaid or paying huge tax sums to the federal fisc for the sole benefit of expanding Medicaid in other States. If this divisive dynamic between and among States can be introduced at all, it should be by conscious congressional choice, not by Court-invented interpretation. We do not doubt that States are capable of making decisions when put in a tight spot. We do doubt the authority of this Court to put them there.

The Government cites a severability clause codified with Medicaid in Chapter 7 of the United States Code stating that if "any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, the remainder of the chapter, and the application of such provision to other persons or circumstances shall not be affected thereby." 42 U.S.C. § 1303 (2006 ed.). But that clause tells us only that other provisions in Chapter 7 should not be invalidated if § 1396c, the authorization for the cut-off of all Medicaid funds, is unconstitutional. It does not tell us that § 1396c can be judicially revised, to say what it does not say. Such a judicial power would not be called the doctrine of severability but perhaps the doctrine of amendatory invalidation — similar to the amendatory veto that permits the Governors of some States to reduce the amounts appropriated in legislation. The proof that such a power does not exist is the fact that it would not preserve other congressional dispositions, but would leave it up to the Court what the "validated" legislation will contain. The Court today opts for permitting the cut-off of only incremental Medicaid funding, but it might just as well have permitted, say, the cut-off of funds that represent no more than x percent of the State's budget. The Court severs nothing, but simply revises § 1396c to read as the Court would desire.

We should not accept the Government's invitation to attempt to solve a constitutional problem by rewriting the Medicaid Expansion so as to allow States that reject it to retain their pre-existing Medicaid funds. Worse, the Government's remedy, [2668] now adopted by the Court, takes the ACA and this Nation in a new direction and charts a course for federalism that the Court, not the Congress, has chosen; but under the Constitution, that power and authority do not rest with this Court.

V

Severability

The Affordable Care Act seeks to achieve "near-universal" health insurance coverage. § 18091(2)(D) (2006 ed., Supp. IV). The two pillars of the Act are the Individual Mandate and the expansion of coverage under Medicaid. In our view, both these central provisions of the Act — the Individual Mandate and Medicaid Expansion — are invalid. It follows, as some of the parties urge, that all other provisions of the Act must fall as well. The following section explains the severability principles that require this conclusion. This analysis also shows how closely interrelated the Act is, and this is all the more reason why it is judicial usurpation to impose an entirely new mechanism for withdrawal of Medicaid funding, see Part IV-F, supra, which is one of many examples of how rewriting the Act alters its dynamics.

A

When an unconstitutional provision is but a part of a more comprehensive statute, the question arises as to the validity of the remaining provisions. The Court's authority to declare a statute partially unconstitutional has been well established since Marbury v. Madison, 1 Cranch 137, 2 L.Ed. 60 (1803), when the Court severed an unconstitutional provision from the Judiciary Act of 1789. And while the Court has sometimes applied "at least a modest presumption in favor of ... severability," C. Nelson, Statutory Interpretation 144 (2010), it has not always done so, see, e.g., Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U.S. 172, 190-195, 119 S.Ct. 1187, 143 L.Ed.2d 270 (1999).

An automatic or too cursory severance of statutory provisions risks "rewrit[ing] a statute and giv[ing] it an effect altogether different from that sought by the measure viewed as a whole." Railroad Retirement Bd. v. Alton R. Co., 295 U.S. 330, 362, 55 S.Ct. 758, 79 L.Ed. 1468 (1935). The Judiciary, if it orders uncritical severance, then assumes the legislative function; for it imposes on the Nation, by the Court's decree, its own new statutory regime, consisting of policies, risks, and duties that Congress did not enact. That can be a more extreme exercise of the judicial power than striking the whole statute and allowing Congress to address the conditions that pertained when the statute was considered at the outset.

The Court has applied a two-part guide as the framework for severability analysis. The test has been deemed "well established." Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684, 107 S.Ct. 1476, 94 L.Ed.2d 661 (1987). First, if the Court holds a statutory provision unconstitutional, it then determines whether the now truncated statute will operate in the manner Congress intended. If not, the remaining provisions must be invalidated. See id., at 685, 107 S.Ct. 1476. In Alaska Airlines, the Court clarified that this first inquiry requires more than asking whether "the balance of the legislation is incapable of functioning independently." Id., at 684, 107 S.Ct. 1476. Even if the remaining provisions will operate in some coherent way, that alone does not save the statute. The question is whether the provisions will work as Congress intended. The "relevant inquiry in evaluating severability is whether the statute will function in a manner consistent with the intent of Congress." Id., at 685, 107 S.Ct. 1476 (emphasis [2669] in original). See also Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U.S. ___, ___, 130 S.Ct. 3138, 3161, 177 L.Ed.2d 706 (2010) (the Act "remains fully operative as a law with these tenure restrictions excised") (internal quotation marks omitted); United States v. Booker, 543 U.S. 220, 227, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005) ("[T]wo provisions ... must be invalidated in order to allow the statute to operate in a manner consistent with congressional intent"); Mille Lacs, supra, at 194, 119 S.Ct. 1187 ("[E]mbodying as it did one coherent policy, [the entire order] is inseverable").

Second, even if the remaining provisions can operate as Congress designed them to operate, the Court must determine if Congress would have enacted them standing alone and without the unconstitutional portion. If Congress would not, those provisions, too, must be invalidated. See Alaska Airlines, supra, at 685, 107 S.Ct. 1476 ("[T]he unconstitutional provision must be severed unless the statute created in its absence is legislation that Congress would not have enacted"); see also Free Enterprise Fund, supra, at ___, 130 S.Ct., at 3162 ("[N]othing in the statute's text or historical context makes it `evident' that Congress, faced with the limitations imposed by the Constitution, would have preferred no Board at all to a Board whose members are removable at will"); Ayotte v. Planned Parenthood of Northern New Eng., 546 U.S. 320, 330, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006) ("Would the legislature have preferred what is left of its statute to no statute at all"); Denver Area Ed. Telecommunications Consortium, Inc. v. FCC, 518 U.S. 727, 767, 116 S.Ct. 2374, 135 L.Ed.2d 888 (1996) (plurality opinion) ("Would Congress still have passed § 10(a) had it known that the remaining provisions were invalid" (internal quotation marks and brackets omitted)).

The two inquiries — whether the remaining provisions will operate as Congress designed them, and whether Congress would have enacted the remaining provisions standing alone — often are interrelated. In the ordinary course, if the remaining provisions cannot operate according to the congressional design (the first inquiry), it almost necessarily follows that Congress would not have enacted them (the second inquiry). This close interaction may explain why the Court has not always been precise in distinguishing between the two. There are, however, occasions in which the severability standard's first inquiry (statutory functionality) is not a proxy for the second inquiry (whether the Legislature intended the remaining provisions to stand alone).

B

The Act was passed to enable affordable, "near-universal" health insurance coverage. 42 U.S.C. § 18091(2)(D). The resulting, complex statute consists of mandates and other requirements; comprehensive regulation and penalties; some undoubted taxes; and increases in some governmental expenditures, decreases in others. Under the severability test set out above, it must be determined if those provisions function in a coherent way and as Congress would have intended, even when the major provisions establishing the Individual Mandate and Medicaid Expansion are themselves invalid.

Congress did not intend to establish the goal of near-universal coverage without regard to fiscal consequences. See, e.g., ACA § 1563, 124 Stat. 270 ("[T]his Act will reduce the Federal deficit between 2010 and 2019"). And it did not intend to impose the inevitable costs on any one industry or group of individuals. The whole design of the Act is to balance the costs and benefits affecting each set of regulated [2670] parties. Thus, individuals are required to obtain health insurance. See 26 U.S.C. § 5000A(a). Insurance companies are required to sell them insurance regardless of patients' pre-existing conditions and to comply with a host of other regulations. And the companies must pay new taxes. See § 4980I (high-cost insurance plans); 42 U.S.C. §§ 300gg(a)(1), 300gg-4(b) (community rating); §§ 300gg-1, 300gg-3, 300gg-4(a) (guaranteed issue); § 300gg-11 (elimination of coverage limits); § 300gg-14(a) (dependent children up to age 26); ACA §§ 9010, 10905, 124 Stat. 865, 1017 (excise tax); Health Care and Education Reconciliation Act of 2010 (HCERA) § 1401, 124 Stat. 1059 (excise tax). States are expected to expand Medicaid eligibility and to create regulated marketplaces called exchanges where individuals can purchase insurance. See 42 U.S.C. §§ 1396a(a)(10)(A)(i)(VIII) (2006 ed., Supp. IV) (Medicaid Expansion), 18031 (exchanges). Some persons who cannot afford insurance are provided it through the Medicaid Expansion, and others are aided in their purchase of insurance through federal subsidies available on health-insurance exchanges. See 26 U.S.C. § 36B (2006 ed., Supp. IV), 42 U.S.C. § 18071 (2006 ed., Supp. IV) (federal subsidies). The Federal Government's increased spending is offset by new taxes and cuts in other federal expenditures, including reductions in Medicare and in federal payments to hospitals. See, e.g., § 1395ww(r) (Medicare cuts); ACA Title IX, Subtitle A, 124 Stat. 847 ("Revenue Offset Provisions"). Employers with at least 50 employees must either provide employees with adequate health benefits or pay a financial exaction if an employee who qualifies for federal subsidies purchases insurance through an exchange. See 26 U.S.C. § 4980H (2006 ed., Supp. IV).

In short, the Act attempts to achieve near-universal health insurance coverage by spreading its costs to individuals, insurers, governments, hospitals, and employers — while, at the same time, offsetting significant portions of those costs with new benefits to each group. For example, the Federal Government bears the burden of paying billions for the new entitlements mandated by the Medicaid Expansion and federal subsidies for insurance purchases on the exchanges; but it benefits from reductions in the reimbursements it pays to hospitals. Hospitals lose those reimbursements; but they benefit from the decrease in uncompensated care, for under the insurance regulations it is easier for individuals with pre-existing conditions to purchase coverage that increases payments to hospitals. Insurance companies bear new costs imposed by a collection of insurance regulations and taxes, including "guaranteed issue" and "community rating" requirements to give coverage regardless of the insured's pre-existing conditions; but the insurers benefit from the new, healthy purchasers who are forced by the Individual Mandate to buy the insurers' product and from the new low-income Medicaid recipients who will enroll in insurance companies' Medicaid-funded managed care programs. In summary, the Individual Mandate and Medicaid Expansion offset insurance regulations and taxes, which offset reduced reimbursements to hospitals, which offset increases in federal spending. So, the Act's major provisions are interdependent.

The Act then refers to these interdependencies as "shared responsibility." See ACA Subtitle F, Title I, 124 Stat. 242 ("Shared Responsibility"); ACA § 1501, ibid. (same); ACA § 1513, id., at 253 (same); ACA § 4980H, ibid. (same). In at least six places, the Act describes the Individual Mandate as working "together with the other provisions of this Act." 42 U.S.C. § 18091(2)(C) (2006 ed., Supp. IV) [2671] (working "together" to "add millions of new consumers to the health insurance market"); § 18091(2)(E) (working "together" to "significantly reduce" the economic cost of the poorer health and shorter lifespan of the uninsured); § 18091(2)(F) (working "together" to "lower health insurance premiums"); § 18091(2)(G) (working "together" to "improve financial security for families"); § 18091(2)(I) (working "together" to minimize "adverse selection and broaden the health insurance risk pool to include healthy individuals"); § 18091(2)(J) (working "together" to "significantly reduce administrative costs and lower health insurance premiums"). The Act calls the Individual Mandate "an essential part" of federal regulation of health insurance and warns that "the absence of the requirement would undercut Federal regulation of the health insurance market." § 18091(2)(H).

C

One preliminary point should be noted before applying severability principles to the Act. To be sure, an argument can be made that those portions of the Act that none of the parties has standing to challenge cannot be held nonseverable. The response to this argument is that our cases do not support it. See, e.g., Williams v. Standard Oil Co. of La., 278 U.S. 235, 242-244, 49 S.Ct. 115, 73 L.Ed. 287 (1929) (holding nonseverable statutory provisions that did not burden the parties). It would be particularly destructive of sound government to apply such a rule with regard to a multifaceted piece of legislation like the ACA. It would take years, perhaps decades, for each of its provisions to be adjudicated separately — and for some of them (those simply expending federal funds) no one may have separate standing. The Federal Government, the States, and private parties ought to know at once whether the entire legislation fails.

The opinion now explains in Part V-C-1, infra, why the Act's major provisions are not severable from the Mandate and Medicaid Expansion. It proceeds from the insurance regulations and taxes (C-1-a), to the reductions in reimbursements to hospitals and other Medicare reductions (C-1-b), the exchanges and their federal subsidies (C-1-c), and the employer responsibility assessment (C-1-d). Part V-C-2, infra, explains why the Act's minor provisions also are not severable.

1

The Act's Major Provisions

Major provisions of the Affordable Care Act — i.e., the insurance regulations and taxes, the reductions in federal reimbursements to hospitals and other Medicare spending reductions, the exchanges and their federal subsidies, and the employer responsibility assessment — cannot remain once the Individual Mandate and Medicaid Expansion are invalid. That result follows from the undoubted inability of the other major provisions to operate as Congress intended without the Individual Mandate and Medicaid Expansion. Absent the invalid portions, the other major provisions could impose enormous risks of unexpected burdens on patients, the health-care community, and the federal budget. That consequence would be in absolute conflict with the ACA's design of "shared responsibility," and would pose a threat to the Nation that Congress did not intend.

a

Insurance Regulations and Taxes

Without the Individual Mandate and Medicaid Expansion, the Affordable Care Act's insurance regulations and insurance taxes impose risks on insurance companies and their customers that this Court cannot measure. Those risks would undermine Congress' scheme of "shared responsibility." [2672] See 26 U.S.C. § 4980I (2006 ed., Supp. IV) (high-cost insurance plans); 42 U.S.C. §§ 300gg(a)(1) (2006 ed., Supp. IV), 300gg-4(b) (community rating); §§ 300gg-1, 300gg-3, 300gg-4(a) (guaranteed issue); § 300gg-11 (elimination of coverage limits); § 300gg-14(a) (dependent children up to age 26); ACA §§ 9010, 10905, 124 Stat. 865, 1017 (excise tax); HCERA § 1401, 124 Stat. 1059 (excise tax).

The Court has been informed by distinguished economists that the Act's Individual Mandate and Medicaid Expansion would each increase revenues to the insurance industry by about $350 billion over 10 years; that this combined figure of $700 billion is necessary to offset the approximately $700 billion in new costs to the insurance industry imposed by the Act's insurance regulations and taxes; and that the new $700-billion burden would otherwise dwarf the industry's current profit margin. See Brief for Economists as Amici Curiae in No. 11-393 etc. (Severability), pp. 9-16, 10a.

If that analysis is correct, the regulations and taxes will mean higher costs for insurance companies. Higher costs may mean higher premiums for consumers, despite the Act's goal of "lower[ing] health insurance premiums." 42 U.S.C. § 18091(2)(F) (2006 ed., Supp. IV). Higher costs also could threaten the survival of health-insurance companies, despite the Act's goal of "effective health insurance markets." § 18091(2)(J).

The actual cost of the regulations and taxes may be more or less than predicted. What is known, however, is that severing other provisions from the Individual Mandate and Medicaid Expansion necessarily would impose significant risks and real uncertainties on insurance companies, their customers, all other major actors in the system, and the government treasury. And what also is known is this: Unnecessary risks and avoidable uncertainties are hostile to economic progress and fiscal stability and thus to the safety and welfare of the Nation and the Nation's freedom. If those risks and uncertainties are to be imposed, it must not be by the Judiciary.

b

Reductions in Reimbursements to Hospitals and Other Reductions in Medicare Expenditures

The Affordable Care Act reduces payments by the Federal Government to hospitals by more than $200 billion over 10 years. See 42 U.S.C. § 1395ww(b)(3)(B)(xi)-(xii) (2006 ed., Supp. IV); § 1395ww(q); § 1395ww(r); § 1396r-4(f)(7).

The concept is straightforward: Near-universal coverage will reduce uncompensated care, which will increase hospitals' revenues, which will offset the government's reductions in Medicare and Medicaid reimbursements to hospitals. Responsibility will be shared, as burdens and benefits balance each other. This is typical of the whole dynamic of the Act.

Invalidating the key mechanisms for expanding insurance coverage, such as community rating and the Medicaid Expansion, without invalidating the reductions in Medicare and Medicaid, distorts the ACA's design of "shared responsibility." Some hospitals may be forced to raise the cost of care in order to offset the reductions in reimbursements, which could raise the cost of insurance premiums, in contravention of the Act's goal of "lower[ing] health insurance premiums." 42 U.S.C. § 18091(2)(F) (2006 ed., Supp. IV). See also § 18091(2)(I) (goal of "lower[ing] health insurance premiums"); § 18091(2)(J) (same). Other hospitals, particularly safety-net hospitals that serve a large number of uninsured patients, may be forced to shut down. Cf. National Assn. of Public [2673] Hospitals, 2009 Annual Survey: Safety Net Hospitals and Health Systems Fulfill Mission in Uncertain Times 5-6 (Feb. 2011). Like the effect of preserving the insurance regulations and taxes, the precise degree of risk to hospitals is unknowable. It is not the proper role of the Court, by severing part of a statute and allowing the rest to stand, to impose unknowable risks that Congress could neither measure nor predict. And Congress could not have intended that result in any event.

There is a second, independent reason why the reductions in reimbursements to hospitals and the ACA's other Medicare cuts must be invalidated. The ACA's $455 billion in Medicare and Medicaid savings offset the $434-billion cost of the Medicaid Expansion. See CBO Estimate, Table 2 (Mar. 20, 2010). The reductions allowed Congress to find that the ACA "will reduce the Federal deficit between 2010 and 2019" and "will continue to reduce budget deficits after 2019." ACA §§ 1563(a)(1), (2), 124 Stat. 270.

That finding was critical to the ACA. The Act's "shared responsibility" concept extends to the federal budget. Congress chose to offset new federal expenditures with budget cuts and tax increases. That is why the United States has explained in the course of this litigation that "[w]hen Congress passed the ACA, it was careful to ensure that any increased spending, including on Medicaid, was offset by other revenue-raising and cost-saving provisions." Memorandum in Support of Government's Motion for Summary Judgment in No. 3-10-cv-91, p. 41.

If the Medicare and Medicaid reductions would no longer be needed to offset the costs of the Medicaid Expansion, the reductions would no longer operate in the manner Congress intended. They would lose their justification and foundation. In addition, to preserve them would be "to eliminate a significant quid pro quo of the legislative compromise" and create a statute Congress did not enact. Legal Services Corporation v. Velazquez, 531 U.S. 533, 561, 121 S.Ct. 1043, 149 L.Ed.2d 63 (2001) (SCALIA, J., dissenting). It is no secret that cutting Medicare is unpopular; and it is most improbable Congress would have done so without at least the assurance that it would render the ACA deficit-neutral. See ACA §§ 1563(a)(1), (2), 124 Stat. 270.

c

Health Insurance Exchanges and Their Federal Subsidies

The ACA requires each State to establish a health-insurance "exchange." Each exchange is a one-stop marketplace for individuals and small businesses to compare community-rated health insurance and purchase the policy of their choice. The exchanges cannot operate in the manner Congress intended if the Individual Mandate, Medicaid Expansion, and insurance regulations cannot remain in force.

The Act's design is to allocate billions of federal dollars to subsidize individuals' purchases on the exchanges. Individuals with incomes between 100 and 400 percent of the poverty level receive tax credits to offset the cost of insurance to the individual purchaser. 26 U.S.C. § 36B (2006 ed., Supp. IV); 42 U.S.C. § 18071 (2006 ed., Supp. IV). By 2019, 20 million of the 24 million people who will obtain insurance through an exchange are expected to receive an average federal subsidy of $6,460 per person. See CBO, Analysis of the Major Health Care Legislation Enacted in March 2010, pp. 18-19 (Mar. 30, 2011). Without the community-rating insurance regulation, however, the average federal subsidy could be much higher; for community rating greatly lowers the enormous [2674] premiums unhealthy individuals would otherwise pay. Federal subsidies would make up much of the difference.

The result would be an unintended boon to insurance companies, an unintended harm to the federal fisc, and a corresponding breakdown of the "shared responsibility" between the industry and the federal budget that Congress intended. Thus, the federal subsidies must be invalidated.

In the absence of federal subsidies to purchasers, insurance companies will have little incentive to sell insurance on the exchanges. Under the ACA's scheme, few, if any, individuals would want to buy individual insurance policies outside of an exchange, because federal subsidies would be unavailable outside of an exchange. Difficulty in attracting individuals outside of the exchange would in turn motivate insurers to enter exchanges, despite the exchanges' onerous regulations. See 42 U.S.C. § 18031. That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.

There is a second reason why, if community rating is invalidated by the Mandate and Medicaid Expansion's invalidity, exchanges cannot be implemented in a manner consistent with the Act's design. A key purpose of an exchange is to provide a marketplace of insurance options where prices are standardized regardless of the buyer's pre-existing conditions. See ibid. An individual who shops for insurance through an exchange will evaluate different insurance products. The products will offer different benefits and prices. Congress designed the exchanges so the shopper can compare benefits and prices. But the comparison cannot be made in the way Congress designed if the prices depend on the shopper's pre-existing health conditions. The prices would vary from person to person. So without community rating — which prohibits insurers from basing the price of insurance on pre-existing conditions — the exchanges cannot operate in the manner Congress intended.

d

Employer-Responsibility Assessment

The employer responsibility assessment provides an incentive for employers with at least 50 employees to provide their employees with health insurance options that meet minimum criteria. See 26 U.S.C. § 4980H (2006 ed., Supp. IV). Unlike the Individual Mandate, the employer-responsibility assessment does not require employers to provide an insurance option. Instead, it requires them to make a payment to the Federal Government if they do not offer insurance to employees and if insurance is bought on an exchange by an employee who qualifies for the exchange's federal subsidies. See ibid.

For two reasons, the employer-responsibility assessment must be invalidated. First, the ACA makes a direct link between the employer-responsibility assessment and the exchanges. The financial assessment against employers occurs only under certain conditions. One of them is the purchase of insurance by an employee on an exchange. With no exchanges, there are no purchases on the exchanges; and with no purchases on the exchanges, there is nothing to trigger the employer-responsibility assessment.

Second, after the invalidation of burdens on individuals (the Individual Mandate), insurers (the insurance regulations and taxes), States (the Medicaid Expansion), the Federal Government (the federal subsidies [2675] for exchanges and for the Medicaid Expansion), and hospitals (the reductions in reimbursements), the preservation of the employer-responsibility assessment would upset the ACA's design of "shared responsibility." It would leave employers as the only parties bearing any significant responsibility. That was not the congressional intent.

2

The Act's Minor Provisions

The next question is whether the invalidation of the ACA's major provisions requires the Court to invalidate the ACA's other provisions. It does.

The ACA is over 900 pages long. Its regulations include requirements ranging from a break time and secluded place at work for nursing mothers, see 29 U.S.C. § 207(r)(1) (2006 ed., Supp. IV), to displays of nutritional content at chain restaurants, see 21 U.S.C. § 343(q)(5)(H). The Act raises billions of dollars in taxes and fees, including exactions imposed on high-income taxpayers, see ACA §§ 9015, 10906; HCERA § 1402, medical devices, see 26 U.S.C. § 4191 (2006 ed., Supp. IV), and tanning booths, see § 5000B. It spends government money on, among other things, the study of how to spend less government money. 42 U.S.C. § 1315a. And it includes a number of provisions that provide benefits to the State of a particular legislator. For example, § 10323, 124 Stat. 954, extends Medicare coverage to individuals exposed to asbestos from a mine in Libby, Montana. Another provision, § 2006, id., at 284, increases Medicaid payments only in Louisiana.

Such provisions validate the Senate Majority Leader's statement, "`I don't know if there is a senator that doesn't have something in this bill that was important to them.... [And] if they don't have something in it important to them, then it doesn't speak well of them. That's what this legislation is all about: It's the art of compromise.'" Pear, In Health Bill for Everyone, Provisions for a Few, N.Y. Times, Jan. 4, 2010, p. A10 (quoting Sen. Reid). Often, a minor provision will be the price paid for support of a major provision. So, if the major provision were unconstitutional, Congress would not have passed the minor one.

Without the ACA's major provisions, many of these minor provisions will not operate in the manner Congress intended. For example, the tax increases are "Revenue Offset Provisions" designed to help offset the cost to the Federal Government of programs like the Medicaid Expansion and the exchanges' federal subsidies. See Title IX, Subtitle A — Revenue Offset Provisions, 124 Stat. 847. With the Medicaid Expansion and the exchanges invalidated, the tax increases no longer operate to offset costs, and they no longer serve the purpose in the Act's scheme of "shared responsibility" that Congress intended.

Some provisions, such as requiring chain restaurants to display nutritional content, appear likely to operate as Congress intended, but they fail the second test for severability. There is no reason to believe that Congress would have enacted them independently. The Court has not previously had occasion to consider severability in the context of an omnibus enactment like the ACA, which includes not only many provisions that are ancillary to its central provisions but also many that are entirely unrelated — hitched on because it was a quick way to get them passed despite opposition, or because their proponents could exact their enactment as the quid pro quo for their needed support. When we are confronted with such a so-called "Christmas tree," a law to which many nongermane ornaments have been attached, we think the proper rule must be [2676] that when the tree no longer exists the ornaments are superfluous. We have no reliable basis for knowing which pieces of the Act would have passed on their own. It is certain that many of them would not have, and it is not a proper function of this Court to guess which. To sever the statute in that manner "`would be to make a new law, not to enforce an old one. This is not part of our duty.'" Trade-Mark Cases, 100 U.S., at 99.

This Court must not impose risks unintended by Congress or produce legislation Congress may have lacked the support to enact. For those reasons, the unconstitutionality of both the Individual Mandate and the Medicaid Expansion requires the invalidation of the Affordable Care Act's other provisions.

* * *

The Court today decides to save a statute Congress did not write. It rules that what the statute declares to be a requirement with a penalty is instead an option subject to a tax. And it changes the intentionally coercive sanction of a total cut-off of Medicaid funds to a supposedly noncoercive cut-off of only the incremental funds that the Act makes available.

The Court regards its strained statutory interpretation as judicial modesty. It is not. It amounts instead to a vast judicial overreaching. It creates a debilitated, inoperable version of health-care regulation that Congress did not enact and the public does not expect. It makes enactment of sensible health-care regulation more difficult, since Congress cannot start afresh but must take as its point of departure a jumble of now senseless provisions, provisions that certain interests favored under the Court's new design will struggle to retain. And it leaves the public and the States to expend vast sums of money on requirements that may or may not survive the necessary congressional revision.

The Court's disposition, invented and atextual as it is, does not even have the merit of avoiding constitutional difficulties. It creates them. The holding that the Individual Mandate is a tax raises a difficult constitutional question (what is a direct tax?) that the Court resolves with inadequate deliberation. And the judgment on the Medicaid Expansion issue ushers in new federalism concerns and places an unaccustomed strain upon the Union. Those States that decline the Medicaid Expansion must subsidize, by the federal tax dollars taken from their citizens, vast grants to the States that accept the Medicaid Expansion. If that destabilizing political dynamic, so antagonistic to a harmonious Union, is to be introduced at all, it should be by Congress, not by the Judiciary.

The values that should have determined our course today are caution, minimalism, and the understanding that the Federal Government is one of limited powers. But the Court's ruling undermines those values at every turn. In the name of restraint, it overreaches. In the name of constitutional avoidance, it creates new constitutional questions. In the name of cooperative federalism, it undermines state sovereignty.

The Constitution, though it dates from the founding of the Republic, has powerful meaning and vital relevance to our own times. The constitutional protections that this case involves are protections of structure. Structural protections — notably, the restraints imposed by federalism and separation of powers — are less romantic and have less obvious a connection to personal freedom than the provisions of the Bill of Rights or the Civil War Amendments. Hence they tend to be undervalued or even forgotten by our citizens. It should be the responsibility of the Court to teach otherwise, to remind our people that the Framers considered structural protections [2677] of freedom the most important ones, for which reason they alone were embodied in the original Constitution and not left to later amendment. The fragmentation of power produced by the structure of our Government is central to liberty, and when we destroy it, we place liberty at peril. Today's decision should have vindicated, should have taught, this truth; instead, our judgment today has disregarded it.

For the reasons here stated, we would find the Act invalid in its entirety. We respectfully dissent.

Justice THOMAS, dissenting.

I dissent for the reasons stated in our joint opinion, but I write separately to say a word about the Commerce Clause. The joint dissent and THE CHIEF JUSTICE correctly apply our precedents to conclude that the Individual Mandate is beyond the power granted to Congress under the Commerce Clause and the Necessary and Proper Clause. Under those precedents, Congress may regulate "economic activity [that] substantially affects interstate commerce." United States v. Lopez, 514 U.S. 549, 560, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995). I adhere to my view that "the very notion of a `substantial effects' test under the Commerce Clause is inconsistent with the original understanding of Congress' powers and with this Court's early Commerce Clause cases." United States v. Morrison, 529 U.S. 598, 627, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000) (THOMAS, J., concurring); see also Lopez, supra, at 584-602, 115 S.Ct. 1624 (THOMAS, J., concurring); Gonzales v. Raich, 545 U.S. 1, 67-69, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005) (THOMAS, J., dissenting). As I have explained, the Court's continued use of that test "has encouraged the Federal Government to persist in its view that the Commerce Clause has virtually no limits." Morrison, supra, at 627, 120 S.Ct. 1740. The Government's unprecedented claim in this suit that it may regulate not only economic activity but also inactivity that substantially affects interstate commerce is a case in point.

[1] The Eleventh Circuit did not consider whether the Anti-Injunction Act bars challenges to the individual mandate. The District Court had determined that it did not, and neither side challenged that holding on appeal. The same was true in the Fourth Circuit, but that court examined the question sua sponte because it viewed the Anti-Injunction Act as a limit on its subject matter jurisdiction. See Liberty Univ., 671 F.3d, at 400-401. The Sixth Circuit and the D.C. Circuit considered the question but determined that the Anti-Injunction Act did not apply. See Thomas More, 651 F.3d, at 539-540 (C.A.6); Seven-Sky, 661 F.3d, at 5-14 (C.A.D.C.).

[2] We appointed H. Bartow Farr III to brief and argue in support of the Eleventh Circuit's judgment with respect to severability, and Robert A. Long to brief and argue the proposition that the Anti-Injunction Act bars the current challenges to the individual mandate. 565 U.S. ___, 132 S.Ct. 603, 181 L.Ed.2d 420 (2011). Both amici have ably discharged their assigned responsibilities.

[3] The examples of other congressional mandates cited by Justice GINSBURG, post, at 2627, n. 10 (opinion concurring in part, concurring in judgment in part, and dissenting in part), are not to the contrary. Each of those mandates — to report for jury duty, to register for the draft, to purchase firearms in anticipation of militia service, to exchange gold currency for paper currency, and to file a tax return — are based on constitutional provisions other than the Commerce Clause. See Art. I, § 8, cl. 9 (to "constitute Tribunals inferior to the supreme Court"); id., cl. 12 (to "raise and support Armies"); id., cl. 16 (to "provide for organizing, arming, and disciplining, the Militia"); id., cl. 5 (to "coin Money"); id., cl. 1 (to "lay and collect Taxes").

[4] Justice GINSBURG suggests that "at the time the Constitution was framed, to `regulate' meant, among other things, to require action." Post, at 2621 (citing Seven-Sky v. Holder, 661 F.3d 1, 16 (C.A.D.C.2011); brackets and some internal quotation marks omitted). But to reach this conclusion, the case cited by Justice GINSBURG relied on a dictionary in which "[t]o order; to command" was the fifth-alternative definition of "to direct," which was itself the second-alternative definition of "to regulate." See Seven-Sky, supra, at 16 (citing S. Johnson, Dictionary of the English Language (4th ed. 1773) (reprinted 1978)). It is unlikely that the Framers had such an obscure meaning in mind when they used the word "regulate." Far more commonly, "[t]o regulate" meant "[t]o adjust by rule or method," which presupposes something to adjust. 2 Johnson, supra, at 1619; see also Gibbons, 9 Wheat., at 196 (defining the commerce power as the power "to prescribe the rule by which commerce is to be governed").

[5] Justice GINSBURG cites two eminent domain cases from the 1890s to support the proposition that our case law does not "toe the activity versus inactivity line." Post, at 2621 (citing Monongahela Nav. Co. v. United States, 148 U.S. 312, 335-337, 13 S.Ct. 622, 37 L.Ed. 463 (1893), and Cherokee Nation v. Southern Kansas R. Co., 135 U.S. 641, 657-659, 10 S.Ct. 965, 34 L.Ed. 295 (1890)). The fact that the Fifth Amendment requires the payment of just compensation when the Government exercises its power of eminent domain does not turn the taking into a commercial transaction between the landowner and the Government, let alone a government-compelled transaction between the landowner and a third party.

[6] In an attempt to recast the individual mandate as a regulation of commercial activity, Justice GINSBURG suggests that "[a]n individual who opts not to purchase insurance from a private insurer can be seen as actively selecting another form of insurance: self-insurance." Post, at 2622. But "self-insurance" is, in this context, nothing more than a description of the failure to purchase insurance. Individuals are no more "activ[e] in the self-insurance market" when they fail to purchase insurance, ibid., than they are active in the "rest" market when doing nothing.

[7] Sotelo, in particular, would seem to refute the joint dissent's contention that we have "never" treated an exaction as a tax if it was denominated a penalty. Post, at 2652. We are not persuaded by the dissent's attempt to distinguish Sotelo as a statutory construction case from the bankruptcy context. Post, at 2651, n. 5. The dissent itself treats the question here as one of statutory interpretation, and indeed also relies on a statutory interpretation case from the bankruptcy context. Post, at 2654-2655 (citing United States v. Reorganized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 224, 116 S.Ct. 2106, 135 L.Ed.2d 506 (1996)).

[8] In 2016, for example, individuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance. Someone with an annual income of $100,000 a year would likely owe about $200. The price of a qualifying insurance policy is projected to be around $400 per month. See D. Newman, CRS Report for Congress, Individual Mandate and Related Information Requirements Under PPACA 7, and n. 25 (2011).

[9] We do not suggest that any exaction lacking a scienter requirement and enforced by the IRS is within the taxing power. See post, at 2654-2655 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting). Congress could not, for example, expand its authority to impose criminal fines by creating strict liability offenses enforced by the IRS rather than the FBI. But the fact the exaction here is paid like a tax, to the agency that collects taxes — rather than, for example, exacted by Department of Labor inspectors after ferreting out willful malfeasance — suggests that this exaction may be viewed as a tax.

[10] The joint dissent attempts to distinguish New York v. United States on the ground that the seemingly imperative language in that case was in an "introductory provision" that had "no legal consequences." Post, at 2652. We did not rely on that reasoning in New York. See 505 U.S., at 169-170, 112 S.Ct. 2408. Nor could we have. While the Court quoted only the broad statement that "[e]ach State shall be responsible" for its waste, that language was implemented through operative provisions that also use the words on which the dissent relies. See 42 U.S.C. § 2021e(e)(1) (entitled "Requirements for non-sited compact regions and non-member States" and directing that those entities "shall comply with the following requirements"); § 2021e(e)(2) (describing "Penalties for failure to comply"). The Court upheld those provisions not as lawful commands, but as "incentives." See 505 U.S., at 152-153, 171-173, 112 S.Ct. 2408.

[11] Of course, individuals do not have a lawful choice not to pay a tax due, and may sometimes face prosecution for failing to do so (although not for declining to make the shared responsibility payment, see 26 U.S.C. § 5000A(g)(2)). But that does not show that the tax restricts the lawful choice whether to undertake or forgo the activity on which the tax is predicated. Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax.

[12] Justice GINSBURG observes that state Medicaid spending will increase by only 0.8 percent after the expansion. Post, at 2632. That not only ignores increased state administrative expenses, but also assumes that the Federal Government will continue to fund the expansion at the current statutorily specified levels. It is not unheard of, however, for the Federal Government to increase requirements in such a manner as to impose unfunded mandates on the States. More importantly, the size of the new financial burden imposed on a State is irrelevant in analyzing whether the State has been coerced into accepting that burden. "Your money or your life" is a coercive proposition, whether you have a single dollar in your pocket or $500.

[13] Nor, of course, can the number of pages the amendment occupies, or the extent to which the change preserves and works within the existing program, be dispositive. Cf. post, at 2635-2636 (opinion of GINSBURG, J.). Take, for example, the following hypothetical amendment: "All of a State's citizens are now eligible for Medicaid." That change would take up a single line and would not alter any "operational aspect[] of the program" beyond the eligibility requirements. Post, at 2635. Yet it could hardly be argued that such an amendment was a permissible modification of Medicaid, rather than an attempt to foist an entirely new health care system upon the States.

[14] Justice GINSBURG suggests that the States can have no objection to the Medicaid expansion, because "Congress could have repealed Medicaid [and,] [t]hereafter, ... could have enacted Medicaid II, a new program combining the pre-2010 coverage with the expanded coverage required by the ACA." Post, at 2636; see also post, at 2629. But it would certainly not be that easy. Practical constraints would plainly inhibit, if not preclude, the Federal Government from repealing the existing program and putting every feature of Medicaid on the table for political reconsideration. Such a massive undertaking would hardly be "ritualistic." Ibid. The same is true of Justice GINSBURG's suggestion that Congress could establish Medicaid as an exclusively federal program. Post, at 2632.

[15] According to one study conducted by the National Center for Health Statistics, the high cost of insurance is the most common reason why individuals lack coverage, followed by loss of one's job, an employer's unwillingness to offer insurance or an insurers' unwillingness to cover those with preexisting medical conditions, and loss of Medicaid coverage. See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for the U.S. Population: National Health Interview Survey — 2009, Ser. 10, No. 248, p. 71, Table 25 (Dec. 2010). "[D]id not want or need coverage" received too few responses to warrant its own category. See ibid., n. 2.

[16] Despite its success, Massachusetts' medical-care providers still administer substantial amounts of uncompensated care, much of that to uninsured patients from out-of-state. See supra, at 2611-2612.

[17] Alexander Hamilton described the problem this way: "[Often] it would be beneficial to all the states to encourage, or suppress[,] a particular branch of trade, while it would be detrimental ... to attempt it without the concurrence of the rest." The Continentalist No. V, in 3 Papers of Alexander Hamilton 75, 78 (H. Syrett ed. 1962). Because the concurrence of all States was exceedingly difficult to obtain, Hamilton observed, "the experiment would probably be left untried." Ibid.

[18] See Dept. of Health and Human Services, National Center for Health Statistics, Summary Health Statistics for U.S. Adults: National Health Interview Survey 2009, Ser. 10, No. 249, p. 124, Table 37 (Dec. 2010).

[19] Echoing THE CHIEF JUSTICE, the joint dissenters urge that the minimum coverage provision impermissibly regulates young people who "have no intention of purchasing [medical care]" and are too far "removed from the [health-care] market." See post, at 2646, 2647. This criticism ignores the reality that a healthy young person may be a day away from needing health care. See supra, at 2610. A victim of an accident or unforeseen illness will consume extensive medical care immediately, though scarcely expecting to do so.

[20] THE CHIEF JUSTICE's reliance on the quoted passages of the Constitution, see ante, at 2586-2587, is also dubious on other grounds. The power to "regulate the Value" of the national currency presumably includes the power to increase the currency's worth — i.e., to create value where none previously existed. And if the power to "[r]egulat[e] ... the land and naval Forces" presupposes "there is already [in existence] something to be regulated," i.e., an Army and a Navy, does Congress lack authority to create an Air Force?

[21] THE CHIEF JUSTICE's characterization of individuals who choose not to purchase private insurance as "doing nothing," ante, at ___, is similarly questionable. A person who self-insures opts against prepayment for a product the person will in time consume. When aggregated, exercise of that option has a substantial impact on the health-care market. See supra, at 2610-2612, 2616-2618.

[22] Some adherents to the joint dissent have questioned the existence of substantive due process rights. See McDonald v. Chicago, 561 U.S. ___, ___, 130 S.Ct. 3020, 3062, 177 L.Ed.2d 894 (2010) (THOMAS, J., concurring) (The notion that the Due Process Clause "could define the substance of th[e] righ[t to liberty] strains credulity."); Albright v. Oliver, 510 U.S. 266, 275, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994) (SCALIA, J., concurring) ("I reject the proposition that the Due Process Clause guarantees certain (unspecified) liberties[.]"). Given these Justices' reluctance to interpret the Due Process Clause as guaranteeing liberty interests, their willingness to plant such protections in the Commerce Clause is striking.

[23] The failure to purchase vegetables in THE CHIEF JUSTICE's hypothetical, then, is not what leads to higher health-care costs for others; rather, it is the failure of individuals to maintain a healthy diet, and the resulting obesity, that creates the cost-shifting problem. See ante, at 2588-2589. Requiring individuals to purchase vegetables is thus several steps removed from solving the problem. The failure to obtain health insurance, by contrast, is the immediate cause of the cost-shifting Congress sought to address through the ACA. See supra, at 2610-2612. Requiring individuals to obtain insurance attacks the source of the problem directly, in a single step.

[24] Indeed, Congress regularly and uncontroversially requires individuals who are "doing nothing," see ante, at 2587, to take action. Examples include federal requirements to report for jury duty, 28 U.S.C. § 1866(g) (2006 ed., Supp. IV); to register for selective service, 50 U.S.C.App. § 453; to purchase firearms and gear in anticipation of service in the Militia, 1 Stat. 271 (Uniform Militia Act of 1792); to turn gold currency over to the Federal Government in exchange for paper currency, see Nortz v. United States, 294 U.S. 317, 328, 55 S.Ct. 428, 79 L.Ed. 907 (1935); and to file a tax return, 26 U.S.C. § 6012 (2006 ed., Supp. IV).

[25] In a separate argument, the joint dissenters contend that the minimum coverage provision is not necessary and proper because it was not the "only ... way" Congress could have made the guaranteed-issue and community-rating reforms work. Post, at 2646-2647. Congress could also have avoided an insurance-market death spiral, the dissenters maintain, by imposing a surcharge on those who did not previously purchase insurance when those individuals eventually enter the health-insurance system. Post, at 2647. Or Congress could "den[y] a full income tax credit" to those who do not purchase insurance. Ibid.

Neither a surcharge on those who purchase insurance nor the denial of a tax credit to those who do not would solve the problem created by guaranteed-issue and community-rating requirements. Neither would prompt the purchase of insurance before sickness or injury occurred.

But even assuming there were "practicable" alternatives to the minimum coverage provision, "we long ago rejected the view that the Necessary and Proper Clause demands that an Act of Congress be `absolutely necessary' to the exercise of an enumerated power." Jinks v. Richland County, 538 U.S. 456, 462, 123 S.Ct. 1667, 155 L.Ed.2d 631 (2003) (quoting McCulloch v. Maryland, 4 Wheat. 316, 414-415, 4 L.Ed. 579 (1819)). Rather, the statutory provision at issue need only be "conducive" and "[reasonably] adapted" to the goal Congress seeks to achieve. Jinks, 538 U.S., at 462, 123 S.Ct. 1667 (internal quotation marks omitted). The minimum coverage provision meets this requirement. See supra, at 2625-2626.

[26] THE CHIEF JUSTICE states that he must evaluate the constitutionality of the minimum coverage provision under the Commerce Clause because the provision "reads more naturally as a command to buy insurance than as a tax." Ante, at 2600. THE CHIEF JUSTICE ultimately concludes, however, that interpreting the provision as a tax is a "fairly possible" construction. Ante, at 2594 (internal quotation marks omitted). That being so, I see no reason to undertake a Commerce Clause analysis that is not outcome determinative.

[27] Medicaid was "plainly an extension of the existing Kerr-Mills" grant program. Huberfeld, Federalizing Medicaid, 14 U. Pa. J. Const. L. 431, 444-445 (2011). Indeed, the "section of the Senate report dealing with Title XIX" — the title establishing Medicaid — "was entitled, `Improvement and Extension of Kerr-Mills Medical Assistance Program.'" Stevens & Stevens, Welfare Medicine in America 51 (1974) (quoting S.Rep. No. 404, 89th Cong., 1st Sess., pt. 1, p. 9 (1965)). Setting the pattern for Medicaid, Kerr-Mills reimbursed States for a portion of the cost of health care provided to welfare recipients if States met conditions specified in the federal law, e.g., participating States were obliged to offer minimum coverage for hospitalization and physician services. See Huberfeld, supra, at 443-444.

[28] Available online at http://www.cms.gov/ Research-Statistics-Data-and-Systems/ Statistics-Trends-and-Reports/NationalHealth ExpendData/NationalHealthAccountsHistorical.html.

[29] Even the study on which the plaintiffs rely, see Brief for Petitioners 10, concludes that "[w]hile most states will experience some increase in spending, this is quite small relative to the federal matching payments and low relative to the costs of uncompensated care that [the states] would bear if the[re] were no health reform." See Kaiser Commission on Medicaid & the Uninsured, Medicaid Coverage & Spending in Health Reform 16 (May 2010). Thus there can be no objection to the ACA's expansion of Medicaid as an "unfunded mandate." Quite the contrary, the program is impressively well funded.

[30] In 1972, for example, Congress ended the federal cash-assistance program for the aged, blind, and disabled. That program previously had been operated jointly by the Federal and State Governments, as is the case with Medicaid today. Congress replaced the cooperative federal program with the nationalized Supplemental Security Income (SSI) program. See Schweiker v. Gray Panthers, 453 U.S. 34, 38, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981).

[31] THE CHIEF JUSTICE and the joint dissenters perceive in cooperative federalism a "threa[t]" to "political accountability." Ante, at 2602; see post, at 2660-2661. By that, they mean voter confusion: Citizens upset by unpopular government action, they posit, may ascribe to state officials blame more appropriately laid at Congress' door. But no such confusion is apparent in this case: Medicaid's status as a federally funded, state-administered program is hardly hidden from view.

[32] Although the plaintiffs, in the proceedings below, did not contest the ACA's satisfaction of these criteria, see 648 F.3d 1235, 1263 (C.A.11 2011), THE CHIEF JUSTICE appears to rely heavily on the second criterion. Compare ante, at 2605, 2606, with infra, at 2637-2638.

[33] Compare Subchapter XIX, 42 U.S.C. §§ 1396-1396v(b) (2006 ed. and Supp. IV) with §§ 1396a(a)(10)(A)(i)(VIII) (2006 ed. and Supp. IV); 1396a(a)(10)(A)(ii)(XX), 1396a(a)(75), 1396a(k), 1396a(gg) to (hh), 1396d(y), 1396r-1(e), 1396u-7(b)(5) to (6).

[34] The Deficit Reduction Act of 2005 authorized States to provide "benchmark coverage" or "benchmark equivalent coverage" to certain Medicaid populations. See § 6044, 120 Stat. 88, 42 U.S.C. § 1396u-7 (2006 ed. and Supp. IV). States may offer the same level of coverage to persons newly eligible under the ACA. See § 1396a(k).

[35] THE CHIEF JUSTICE observes that "Spending Clause legislation [i]s much in the nature of a contract." Ante, at 2602 (internal quotation marks omitted). See also post, at 2659 (joint opinion of SCALIA, KENNEDY, THOMAS, and ALITO, JJ.) (same). But the Court previously has recognized that "[u]nlike normal contractual undertakings, federal grant programs originate in and remain governed by statutory provisions expressing the judgment of Congress concerning desirable public policy." Bennett v. Kentucky Dept. of Ed., 470 U.S. 656, 669, 105 S.Ct. 1544, 84 L.Ed.2d 590 (1985).

[36] Title I of the Elementary and Secondary Education Act of 1965 provided federal grants to finance supplemental educational programs in school districts with high concentrations of children from low-income families. See Bennett v. New Jersey, 470 U.S. 632, 634-635, 105 S.Ct. 1555, 84 L.Ed.2d 572 (1985) (citing Pub. L. No. 89-10, 79 Stat. 27).

[37] Note, in this regard, the extension of Social Security, which began in 1935 as an old-age pension program, then expanded to include survivor benefits in 1939 and disability benefits in 1956. See Social Security Act, ch. 531, 49 Stat. 622-625; Social Security Act Amendments of 1939, 53 Stat. 1364-1365; Social Security Amendments of 1956, ch. 836, § 103, 70 Stat. 815-816.

[38] The joint dissenters, for their part, would make this the entire inquiry. "[I]f States really have no choice other than to accept the package," they assert, "the offer is coercive." Post, at 2661. THE CHIEF JUSTICE recognizes Congress' authority to construct a single federal program and "condition the receipt of funds on the States' complying with restrictions on the use of those funds." Ante, at 2603-2604. For the joint dissenters, however, all that matters, it appears, is whether States can resist the temptation of a given federal grant. Post, at 2660. On this logic, any federal spending program, sufficiently large and well-funded, would be unconstitutional. The joint dissenters point to smaller programs States might have the will to refuse. See post, at 2663-2664 (elementary and secondary education). But how is a court to judge whether "only 6.6% of all state expenditures," post,at 2663, is an amount States could or would do without?

Speculations of this genre are characteristic of the joint dissent. See, e.g., post, at 2660 ("it may be state officials who will bear the brunt of public disapproval" for joint federal-state endeavors); ibid., ("federal officials ... may remain insulated from the electoral ramifications of their decision"); post, at 2661 ("a heavy federal tax ... levied to support a federal program that offers large grants to the States ... may, as a practical matter, [leave States] unable to refuse to participate"); ibid. (withdrawal from a federal program "would likely force the State to impose a huge tax increase"); post, at 2666 (state share of ACA expansion costs "may increase in the future") (all emphasis added; some internal quotation marks omitted). The joint dissenters are long on conjecture and short on real-world examples.

[39] The joint dissenters also rely heavily on Congress' perceived intent to coerce the States. Post, at 2664-2666; see, e.g., post, at 2664 ("In crafting the ACA, Congress clearly expressed its informed view that no State could possibly refuse the offer that the ACA extends."). We should not lightly ascribe to Congress an intent to violate the Constitution (at least as my colleagues read it). This is particularly true when the ACA could just as well be comprehended as demonstrating Congress' mere expectation, in light of the uniformity of past participation and the generosity of the federal contribution, that States would not withdraw. Cf. South Dakota v. Dole, 483 U.S. 203, 211, 107 S.Ct. 2793, 97 L.Ed.2d 171 (1987) ("We cannot conclude ... that a conditional grant of federal money ... is unconstitutional simply by reason of its success in achieving the congressional objective.").

[40] Federal taxation of a State's citizens, according to the joint dissenters, may diminish a State's ability to raise new revenue. This, in turn, could limit a State's capacity to replace a federal program with an "equivalent" state-funded analog. Post, at 2663. But it cannot be true that "the amount of the federal taxes extracted from the taxpayers of a State to pay for the program in question is relevant in determining whether there is impermissible coercion." Post, at 2661. When the United States Government taxes United States citizens, it taxes them "in their individual capacities" as "the people of America" — not as residents of a particular State. See U.S. Term Limits, Inc. v. Thornton, 514 U.S. 779, 839, 115 S.Ct. 1842, 131 L.Ed.2d 881 (1995) (KENNEDY, J., concurring). That is because the "Framers split the atom of sovereignty[,]... establishing two orders of government" — "one state and one federal" — "each with its own direct relationship" to the people. Id.,at 838, 115 S.Ct. 1842.

A State therefore has no claim on the money its residents pay in federal taxes, and federal "spending programs need not help people in all states in the same measure." See Brief for David Satcher et al. as Amici Curiae 19. In 2004, for example, New Jersey received 55 cents in federal spending for every dollar its residents paid to the Federal Government in taxes, while Mississippi received $1.77 per tax dollar paid. C. Dubay, Tax Foundation, Federal Tax Burdens and Expenditures by State: Which States Gain Most from Federal Fiscal Operations? 2 (Mar. 2006). Thus no constitutional problem was created when Arizona declined for 16 years to participate in Medicaid, even though its residents' tax dollars financed Medicaid programs in every other State.

[41] As THE CHIEF JUSTICE observes, the Secretary is authorized to withhold all of a State's Medicaid funding. See ante, at 2604. But total withdrawal is what the Secretary may, not must, do. She has discretion to withhold only a portion of the Medicaid funds otherwise due a noncompliant State. See § 1396c; cf. 45 CFR § 80.10(f) (2011) (Secretary may enforce Title VI's nondiscrimination requirement through "refusal to grant or continue Federal financial assistance, in whole or in part." (emphasis added)). The Secretary, it is worth noting, may herself experience political pressures, which would make her all the more reluctant to cut off funds Congress has appropriated for a State's needy citizens.

[42] The most authoritative legal dictionaries of the founding era lack any definition for "regulate" or "regulation," suggesting that the term bears its ordinary meaning (rather than some specialized legal meaning) in the constitutional text. See R. Burn, A New Law Dictionary 281 (1792); G. Jacob, A New Law Dictionary (10th ed. 1782); 2 T. Cunningham, A New and Complete Law Dictionary (2d ed. 1771).

[43] Justice GINSBURG is therefore right to note that Congress is "not mandating the purchase of a discrete, unwanted product." Ante, at 2620 (opinion concurring in part, concurring in judgment in part, and dissenting in part). Instead, it is mandating the purchase of an unwanted suite of products — e.g., physician office visits, emergency room visits, hospital room and board, physical therapy, durable medical equipment, mental health care, and substance abuse detoxification. See Selected Medical Benefits: A Report from the Dept. of Labor to the Dept. of Health & Human Services (April 15, 2011) (reporting that over two-thirds of private industry health plans cover these goods and services), online at http://www.bls.gov/ncs/ ebs/sp/selmedbensreport.pdf (all Internet materials as visited June 26, 2012, and available in Clerk of Court's case file).

[44] In its effort to show the contrary, Justice GINSBURG's dissent comes up with nothing more than two condemnation cases, which it says demonstrate "Congress' authority under the commerce power to compel an `inactive' landholder to submit to an unwanted sale." Ante, at 2621. Wrong on both scores. As its name suggests, the condemnation power does not "compel" anyone to do anything. It acts in rem,against the property that is condemned, and is effective with or without a transfer of title from the former owner. More important, the power to condemn for public use is a separate sovereign power, explicitly acknowledged in the Fifth Amendment, which provides that "private property [shall not] be taken for public use, without just compensation."

Thus, the power to condemn tends to refute rather than support the power to compel purchase of unwanted goods at a prescribed price: The latter is rather like the power to condemn cash for public use. If it existed, why would it not (like the condemnation power) be accompanied by a requirement of fair compensation for the portion of the exacted price that exceeds the goods' fair market value (here, the difference between what the free market would charge for a health-insurance policy on a young, healthy person with no pre-existing conditions, and the government-exacted community-rated premium)?

[45] No one seriously contends that any of Congress' other enumerated powers gives it the authority to enact § 5000A as a regulation.

[46] Of course it can be both for statutory purposes, since Congress can define "tax" and "penalty" in its enactments any way it wishes. That is why United States v. Sotelo, 436 U.S. 268, 98 S.Ct. 1795, 56 L.Ed.2d 275 (1978), does not disprove our statement. That case held that a "penalty" for willful failure to pay one's taxes was included among the "taxes" made non-dischargeable under the Bankruptcy Code. 436 U.S., at 273-275, 98 S.Ct. 1795. Whether the "penalty" was a "tax" within the meaning of the Bankruptcy Code had absolutely no bearing on whether it escaped the constitutional limitations on penalties.

[47] The amicus appointed to defend the proposition that the Anti-Injunction Act deprives us of jurisdiction stresses that the penalty for failing to comply with the mandate "shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68," 26 U.S.C. § 5000A(g)(1) (2006 ed., Supp. IV), and that such penalties "shall be assessed and collected in the same manner as taxes," § 6671(a) (2006 ed.). But that point seems to us to confirm the inapplicability of the Anti-Injunction Act. That the penalty is to be "assessed and collected in the same manner as taxes" refutes the proposition that it is a tax for all statutory purposes, including with respect to the Anti-Injunction Act. Moreover, elsewhere in the Internal Revenue Code, Congress has provided both that a particular payment shall be "assessed and collected" in the same manner as a tax and that no suit shall be maintained to restrain the assessment or collection of the payment. See, e.g.,§§ 7421(b)(1), § 6901(a); § 6305(a), (b). The latter directive would be superfluous if the former invoked the Anti-Injunction Act.

Amicus also suggests that the penalty should be treated as a tax because it is an assessable penalty, and the Code's assessment provision authorizes the Secretary of the Treasury to assess "all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title." § 6201(a) (2006 ed., Supp. IV). But the fact that such items are included as "taxes" for purposes of assessment does not establish that they are included as "taxes" for purposes of other sections of the Code, such as the Anti-Injunction Act, that do not contain similar "including" language.

[48] "State expenditures" is used here to mean annual expenditures from the States' own funding sources, and it excludes federal grants unless otherwise noted.

[49] This number is expressed in billions of Fiscal Year 2005 dollars.

[50] See Office of Management and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2013, Table 12.1 — Summary Comparison of Total Outlays for Grants to State and Local Governments: 1940-2017 (hereinafter Table 12.1), http://www. whitehouse.gov/omb/budget/Historicals; id., Table 15.2 — Total Government Expenditures: 1948-2011 (hereinafter Table 15.2).

[51] This number is expressed in billions of Fiscal Year 2005 dollars.

[52] See Table 12.1; Dept. of Commerce, Bureau of Census, Statistical Abstract of the United States: 2001, p. 262 (Table 419, Federal Grants-in-Aid Summary: 1970 to 2001).

[53] See Statistical Abstract of the United States: 2012, p. 268 (Table 431, Federal Grants-in-Aid to State and Local Governments: 1990 to 2011).

[54] Justice GINSBURG argues that "[a] State... has no claim on the money its residents pay in federal taxes." Ante, at 2641, n. 26. This is true as a formal matter. "When the United States Government taxes United States citizens, it taxes them `in their individual capacities' as `the people of America' — not as residents of a particular State." Ante, at 2641, n. 26 (quoting U.S. Term Limits, Inc. v. Thornton, 514 U.S. 779, 839, 115 S.Ct. 1842, 131 L.Ed.2d 881 (1995) (KENNEDY, J., concurring)). But unless Justice GINSBURG thinks that there is no limit to the amount of money that can be squeezed out of taxpayers, heavy federal taxation diminishes the practical ability of States to collect their own taxes.

[55] The Federal Government has a higher number for federal spending on Medicaid. According to the Office of Management and Budget, federal grants to the States for Medicaid amounted to nearly $273 billion in Fiscal Year 2010. See Office of Management and Budget, Historical Tables, Budget of the U.S. Government, Fiscal Year 2013, Table 12.3 — Total Outlays for Grants to State and Local Governments by Function, Agency, and Program: 1940-2013, http://www.whitehouse. gov/omb/budget/Historicals. In that Fiscal Year, total federal outlays for grants to state and local governments amounted to over $608 billion, see Table 12.1, and state and local government expenditures from their own sources amounted to $1.6 trillion, see Table 15.2. Using these numbers, 44.8% of all federal outlays to both state and local governments was allocated to Medicaid, amounting to 16.8% of all state and local expenditures from their own sources.

[56] The Federal Government reports a higher percentage. According to Medicaid.gov, in Fiscal Year 2010, the Federal Government made Medicaid payments in the amount of nearly $260 billion, representing 67.79% of total Medicaid payments of $383 billion. See www.medicaid.gov/Medicaid-CHIP-Program-Information/By-State/By-State.html.

[364] Mr. Bernard Chazen argued the cause for plaintiffs (Mr. Carmen C. Rusignola, attorney; Messrs. Baker, Garber & Chazen, of counsel; Mr. Martin Itzikman, on the brief).

Mr. Samuel Weitzman argued the cause for defendant Bloomfield Motors, Inc. (Messrs. Parsonnet, Weitzman & Oransky, attorneys).

Mr. Sidney M. Schreiber argued the cause for defendant Chrysler Corporation (Messrs. Schreiber, Lancaster & Demos, attorneys; Mr. Roger F. Lancaster, of counsel).

The opinion of the court was delivered by FRANCIS, J.

Plaintiff Claus H. Henningsen purchased a Plymouth automobile, manufactured by defendant Chrysler Corporation, from defendant Bloomfield Motors, Inc. His wife, plaintiff Helen Henningsen, was injured while driving it and instituted suit against both defendants to recover damages on account of her injuries. Her husband joined in the action seeking compensation for his consequential [365] losses. The complaint was predicated upon breach of express and implied warranties and upon negligence. At the trial the negligence counts were dismissed by the court and the cause was submitted to the jury for determination solely on the issues of implied warranty of merchantability. Verdicts were returned against both defendants and in favor of the plaintiffs. Defendants appealed and plaintiffs cross-appealed from the dismissal of their negligence claim. The matter was certified by this court prior to consideration in the Appellate Division.

The facts are not complicated, but a general outline of them is necessary to an understanding of the case.

On May 7, 1955 Mr. and Mrs. Henningsen visited the place of business of Bloomfield Motors, Inc., an authorized De Soto and Plymouth dealer, to look at a Plymouth. They wanted to buy a car and were considering a Ford or a Chevrolet as well as a Plymouth. They were shown a Plymouth which appealed to them and the purchase followed. The record indicates that Mr. Henningsen intended the car as a Mother's Day gift to his wife. He said the intention was communicated to the dealer. When the purchase order or contract was prepared and presented, the husband executed it alone. His wife did not join as a party.

The purchase order was a printed form of one page. On the front it contained blanks to be filled in with a description of the automobile to be sold, the various accessories to be included, and the details of the financing. The particular car selected was described as a 1955 Plymouth, Plaza "6," Club Sedan. The type used in the printed parts of the form became smaller in size, different in style, and less readable toward the bottom where the line for the purchaser's signature was placed. The smallest type on the page appears in the two paragraphs, one of two and one-quarter lines and the second of one and one-half lines, on which great stress is laid by the defense in the case. These two paragraphs are the least legible and the most difficult to read in the instrument, but they are most important in [366] the evaluation of the rights of the contesting parties. They do not attract attention and there is nothing about the format which would draw the reader's eye to them. In fact, a studied and concentrated effort would have to be made to read them. De-emphasis seems the motif rather than emphasis. More particularly, most of the printing in the body of the order appears to be 12 point block type, and easy to read. In the short paragraphs under discussion, however, the type appears to be six point script and the print is solid, that is, the lines are very close together.

The two paragraphs are:

"The front and back of this Order comprise the entire agreement affecting this purchase and no other agreement or understanding of any nature concerning same has been made or entered into, or will be recognized. I hereby certify that no credit has been extended to me for the purchase of this motor vehicle except as appears in writing on the face of this agreement.

I have read the matter printed on the back hereof and agree to it as a part of this order the same as if it were printed above my signature. I certify that I am 21 years of age, or older, and hereby acknowledge receipt of a copy of this order."

On the right side of the form, immediately below these clauses and immediately above the signature line, and in 12 point block type, the following appears:

"CASH OR CERTIFIED CHECK ONLY ON DELIVERY."

On the left side, just opposite and in the same style type as the two quoted clauses, but in eight point size, this statement is set out:

"This agreement shall not become binding upon the Dealer until approved by an officer of the company."

The two latter statements are in the interest of the dealer and obviously an effort is made to draw attention to them.

The testimony of Claus Henningsen justifies the conclusion that he did not read the two fine print paragraphs referring [367] to the back of the purchase contract. And it is uncontradicted that no one made any reference to them, or called them to his attention. With respect to the matter appearing on the back, it is likewise uncontradicted that he did not read it and that no one called it to his attention.

The reverse side of the contract contains 8 1/2 inches of fine print. It is not as small, however, as the two critical paragraphs described above. The page is headed "Conditions" and contains ten separate paragraphs consisting of 65 lines in all. The paragraphs do not have headnotes or margin notes denoting their particular subject, as in the case of the "Owner Service Certificate" to be referred to later. In the seventh paragraph, about two-thirds of the way down the page, the warranty, which is the focal point of the case, is set forth. It is as follows:

"7. It is expressly agreed that there are no warranties, express or implied, made by either the dealer or the manufacturer on the motor vehicle, chassis, or parts furnished hereunder except as follows:

"The manufacturer warrants each new motor vehicle (including original equipment placed thereon by the manufacturer except tires), chassis or parts manufactured by it to be free from defects in material or workmanship under normal use and service. Its obligation under this warranty being limited to making good at its factory any part or parts thereof which shall, within ninety (90) days after delivery of such vehicle to the original purchaser or before such vehicle has been driven 4,000 miles, whichever event shall first occur, be returned to it with transportation charges prepaid and which its examination shall disclose to its satisfaction to have been thus defective; this warranty being expressly in lieu of all other warranties expressed or implied, and all other obligations or liabilities on its part, and it neither assumes nor authorizes any other person to assume for it any other liability in connection with the sale of its vehicles. * * *.'" (Emphasis ours)

After the contract had been executed, plaintiffs were told the car had to be serviced and that it would be ready in two days. According to the dealer's president, a number of cars were on hand at the time; they had come in from the factory about three or four weeks earlier and at least [368] some of them, including the one selected by the Henningsens, were kept in the back of the shop for display purposes. When sold, plaintiffs' vehicle was not "a serviced car, ready to go." The testimony shows that Chrysler Corporation sends from the factory to the dealer a "New Car Preparation Service Guide" with each new automobile. The guide contains detailed instructions as to what has to be done to prepare the car for delivery. The dealer is told to "Use this form as a guide to inspect and prepare this new Plymouth for delivery." It specifies 66 separate items to be checked, tested, tightened or adjusted in the course of the servicing, but dismantling the vehicle or checking all of its internal parts is not prescribed. The guide also calls for delivery of the Owner Service Certificate with the car.

This Certificate, which at least by inference is authorized by Chrysler, was in the car when released to Claus Henningsen on May 9, 1955. It was not made part of the purchase contract, nor was it shown to him prior to the consummation of that agreement. The only reference to it therein is that the dealer "agrees to promptly perform and fulfill all terms and conditions of the owner service policy." The Certificate contains a warranty entitled "Automobile Manufacturers Association Uniform Warranty." The provisions thereof are the same as those set forth on the reverse side of the purchase order, except that an additional paragraph is added by which the dealer extends that warranty to the purchaser in the same manner as if the word "Dealer" appeared instead of the word "Manufacturer."

The new Plymouth was turned over to the Henningsens on May 9, 1955. No proof was adduced by the dealer to show precisely what was done in the way of mechanical or road testing beyond testimony that the manufacturer's instructions were probably followed. Mr. Henningsen drove it from the dealer's place of business in Bloomfield to their home in Keansburg. On the trip nothing unusual appeared in the way in which it operated. Thereafter, it was used for short trips on paved streets about the town. It had [369] no servicing and no mishaps of any kind before the event of May 19. That day, Mrs. Henningsen drove to Asbury Park. On the way down and in returning the car performed in normal fashion until the accident occurred. She was proceeding north on Route 36 in Highlands, New Jersey, at 20-22 miles per hour. The highway was paved and smooth, and contained two lanes for northbound travel. She was riding in the right-hand lane. Suddenly she heard a loud noise "from the bottom, by the hood." It "felt as if something cracked." The steering wheel spun in her hands; the car veered sharply to the right and crashed into a highway sign and a brick wall. No other vehicle was in any way involved. A bus operator driving in the left-hand lane testified that he observed plaintiffs' car approaching in normal fashion in the opposite direction; "all of a sudden [it] veered at 90 degrees * * * and right into this wall." As a result of the impact, the front of the car was so badly damaged that it was impossible to determine if any of the parts of the steering wheel mechanism or workmanship or assembly were defective or improper prior to the accident. The condition was such that the collision insurance carrier, after inspection, declared the vehicle a total loss. It had 468 miles on the speedometer at the time.

The insurance carrier's inspector and appraiser of damaged cars, with 11 years of experience, advanced the opinion, based on the history and his examination, that something definitely went "wrong from the steering wheel down to the front wheels" and that the untoward happening must have been due to mechanical defect or failure; "something down there had to drop off or break loose to cause the car" to act in the manner described.

As has been indicated, the trial court felt that the proof was not sufficient to make out a prima facie case as to the negligence of either the manufacturer or the dealer. The case was given to the jury, therefore, solely on the warranty theory, with results favorable to the plaintiffs against both defendants.

[370] I.

THE CLAIM OF IMPLIED WARRANTY AGAINST THE MANUFACTURER.

In the ordinary case of sale of goods by description an implied warranty of merchantability is an integral part of the transaction. R.S. 46:30-20. If the buyer, expressly or by implication, makes known to the seller the particular purpose for which the article is required and it appears that he has relied on the seller's skill or judgment, an implied warranty arises of reasonable fitness for that purpose. R.S. 46:30-21(1). The former type of warranty simply means that the thing sold is reasonably fit for the general purpose for which it is manufactured and sold. Giant Mfg. Co. v. Yates-American Mach. Co., 111 F.2d 360 (8 Cir. 1940); Dunbar Bros. Co. v. Consolidated Iron-Steel Mfg. Co., 23 F.2d 416, 419 (2 Cir. 1928); Simmons v. Rhodes & Jamieson, Ltd., 46 Cal.2d 190, 293 P.2d 26 (Sup. Ct. 1956); Mead v. Coca Cola Bottling Co., 329 Mass. 440, 108 N.E.2d 757 (Sup. Jud. Ct. 1952); Ryan v. Progressive Grocery Stores, 255 N.Y. 388, 175 N.E. 105, 74 A.L.R. 339 (Ct. App. 1931); 1 Williston on Sales, § 243 (Rev. ed. 1948). As Judge (later Justice) Cardozo remarked in Ryan, supra, the distinction between a warranty of fitness for a particular purpose and of merchantability in many instances is practically meaningless. In the particular case he was concerned with food for human consumption in a sealed container. Perhaps no more apt illustration of the notion can be thought of than the instance of the ordinary purchaser who informs the automobile dealer that he desires a car for the purpose of business and pleasure driving on the public highway.

In this connection, it is appropriate to note that sale of an article by a trade name does not negate the warranty of merchantability. Adams v. Peter Tramontin Motor Sales, 42 N.J. Super. 313 (App. Div. 1956); Ryan v. Progressive [371] Grocery Stores, supra; Frigidinners, Inc. v. Branchtown Gun Club, 176 Pa. Super. 643, 109 A.2d 202 (Super. Ct. 1954); 2 Harper & James, Law of Torts, § 28.20, p. 1082 (1956). An informative statement of the rule (said to be supported by overwhelming authority) was made by the Supreme Court of Pennsylvania in Frantz Equipment Co. v. Leo Butler Co., 370 Pa. 459, 88 A.2d 702, 706 (Sup. Ct. 1952):

"It is perfectly clear, then, that even if the sale be under a trade name there is implied an obligation on the part of the seller that the article delivered will be of the same quality, material, workmanship, and availability for use as articles generally sold under such name. It would be wholly unreasonable to hold that, if one were to purchase, for example, an automobile under the trade name of `Ford' or `Buick' or `Cadillac' or the like, no implied warranty of merchantable quality could be asserted by the purchaser even though the particular car delivered was in such bad condition, so gravely defective in materials and construction, that it could not be operated at all and was wholly useless for the ordinary purpose which an automobile is designed to serve."

Of course such sales, whether oral or written, may be accompanied by an express warranty. Under the broad terms of the Uniform Sale of Goods Law any affirmation of fact relating to the goods is an express warranty if the natural tendency of the statement is to induce the buyer to make the purchase. R.S. 46:30-18. And over the years since the almost universal adoption of the act, a growing awareness of the tremendous development of modern business methods has prompted the courts to administer that provision with a liberal hand. Vold, Law of Sales, § 86, p. 429 (2d ed. 1959). Solicitude toward the buyer plainly harmonizes with the intention of the Legislature. That fact is manifested further by the later section of the act which preserves and continues any permissible implied warranty, despite an express warranty, unless the two are inconsistent. R.S. 46:30-21(6).

The uniform act codified, extended and liberalized the common law of sales. The motivation in part was to [372] ameliorate the harsh doctrine of caveat emptor, and in some measure to impose a reciprocal obligation on the seller to beware. The transcendent value of the legislation, particularly with respect to implied warranties, rests in the fact that obligations on the part of the seller were imposed by operation of law, and did not depend for their existence upon express agreement of the parties. And of tremendous significance in a rapidly expanding commercial society was the recognition of the right to recover damages on account of personal injuries arising from a breach of warranty. R.S. 46:30-75, 76; Simon v. Graham Bakery, 31 N.J. Super. 117 (App. Div. 1954), reversed on other grounds 17 N.J. 525 (1955); Marko v. Sears, Roebuck and Co., 24 N.J. Super. 295, 303 (App. Div. 1953); Ryan v. Progressive Grocery Stores, supra; Stonebrink v. Highland Motors, 171 Or. 415, 137 P.2d 986 (Sup. Ct. 1953); Wells v. Oldsmobile Co., 147 Or. 687, 35 P.2d 232 (Sup. Ct. 1934); Ebbert v. Philadelphia Electric Co., 126 Pa. Super. 351, 191 A. 384 (Super. Ct. 1937), affirmed 330 Pa. 257, 198 A. 323 (Sup. Ct. 1938); 77 C.J.S., Sales, § 383; Prosser, Law of Torts, p. 493 (1955). The particular importance of this advance resides in the fact that under such circumstances strict liability is imposed upon the maker or seller of the product. Recovery of damages does not depend upon proof of negligence or knowledge of the defect. Simon v. Graham Bakery, supra; Tomlinson v. Armour & Co., 75 N.J.L. 748, 754 (E. & A. 1907); Frank R. Jelleff, Inc. v. Braden, 98 U.S. App. D.C. 180, 233 F.2d 671, 63 A.L.R.2d 400 (D.C. App. 1956); 2 Harper & James, supra, § 28.15; Prosser, supra, 494, 506, 523.

As the Sales Act and its liberal interpretation by the courts threw this protective cloak about the buyer, the decisions in various jurisdictions revealed beyond doubt that many manufacturers took steps to avoid these ever increasing warranty obligations. Realizing that the act governed the relationship of buyer and seller, they undertook to withdraw from actual and direct contractual contact with the [373] buyer. They ceased selling products to the consuming public through their own employees and making contracts of sale in their own names. Instead, a system of independent dealers was established; their products were sold to dealers who in turn dealt with the buying public, ostensibly solely in their own personal capacity as sellers. In the past in many instances, manufacturers were able to transfer to the dealers burdens imposed by the act and thus achieved a large measure of immunity for themselves. But, as will be noted in more detail hereafter, such marketing practices, coupled with the advent of large scale advertising by manufacturers to promote the purchase of these goods from dealers by members of the public, provided a basis upon which the existence of express or implied warranties was predicated, even though the manufacturer was not a party to the contract of sale.

The general observations that have been made are important largely for purposes of perspective. They are helpful in achieving a point from which to evaluate the situation now presented for solution. Primarily, they reveal a trend and a design in legislative and judicial thinking toward providing protection for the buyer. It must be noted, however, that the sections of the Sales Act, to which reference has been made, do not impose warranties in terms of unalterable absolutes. R.S. 46:30-3 provides in general terms that an applicable warranty may be negatived or varied by express agreement. As to disclaimers or limitations of the obligations that normally attend a sale, it seems sufficient at this juncture to say they are not favored, and that they are strictly construed against the seller. 2 Harper & James, supra, § 28.25; Vold, supra, p. 459; "Warranties of Kind & Quality," 57 Yale L.J. 1388, 1400-1401 (1948).

With these considerations in mind, we come to a study of the express warranty on the reverse side of the purchase order signed by Claus Henningsen. At the outset we take notice that it was made only by the manufacturer and that by its terms it runs directly to Claus Henningsen. [374] On the facts detailed above, it was to be extended to him by the dealer as the agent of Chrysler Corporation. The consideration for this warranty is the purchase of the manufacturer's product from the dealer by the ultimate buyer. Studebaker Corp. v. Nail, 82 Ga. App. 779, 62 S.E.2d 198 (Ct. App. 1950).

Although the franchise agreement between the defendants recites that the relationship of principal and agent is not created, in particular transactions involving third persons the law will look at their conduct and not to their intent or their words as between themselves but to their factual relation. Restatement (Second), Agency § 27 (1958). The normal pattern that the manufacturer-dealer relationship follows relegates the position of the dealer to the status of a way station along the car's route from maker to consumer. This is indicated by the language of the warranty. Obviously the parties knew and so intended that the dealer would not use the automobile for 90 days or drive it 4,000 miles. And the words "original purchaser," taken in their context, signify the purchasing member of the public. Columbia Motors Co. v. Williams, 209 Ala. 640, 96 So. 900 (Sup. Ct. 1923); Miller Rubber Co. v. Blewster-Stephens Service Station, 171 Ark. 1179, 287 S.W. 577, 59 A.L.R. 1237 (Sup. Ct. 1926). Moreover, the language of this warranty is that of the uniform warranty of the Automobile Manufacturers Association, of which Chrysler is a member. See Automotive Facts & Figures, 1958 Edition, published by Automotive Manufacturers Association, p. 69; Automotive News 1959 Almanac (Slocum Publishing Co., Inc., Detroit) p. 25. And it is the form appearing in the Plymouth Owner Service Certificate mentioned in the servicing instruction guide sent with the new car from the factory. The evidence is overwhelming that the dealer acted for Chrysler in including the warranty in the purchase contract. And see, Studebaker Corp. v. Nail, supra; Advance Rumley Thresher Co. v. Briggs Hardware Co., 202 Mo. App. 603, 206 S.W. 587 (Ct. App. 1918); New Way Motor [375] Co. v. Farmers' Electro-Lighting Co., 48 S.D. 4, 201 N.W. 1000 (Sup. Ct. 1925); Pelletier v. Brown Bros. Chevrolet & Oldsmobile, 164 (N.Y.S.2d 249 (Sup. Ct. 1956); Fetzer v. Haralson, 147 S.W. 290 (Tex. Civ. App. 1912); cf. General Motors Corporation v. Dodson, ___ Tenn. ___, ___ S.W.2d ___ (Jan. 15, 1960).

The terms of the warranty are a sad commentary upon the automobile manufacturers' marketing practices. Warranties developed in the law in the interest of and to protect the ordinary consumer who cannot be expected to have the knowledge or capacity or even the opportunity to make adequate inspection of mechanical instrumentalities, like automobiles, and to decide for himself whether they are reasonably fit for the designed purpose. Greenland Develop. Corp. v. Allied Heat. Prod. Co., 184 Va. 588, 35 S.E.2d 801, 164 A.L.R. 1312 (Sup. Ct. App. 1945); 1 Williston, supra, pp. 625, 626. But the ingenuity of the Automobile Manufacturers Association, by means of its standardized form, has metamorphosed the warranty into a device to limit the maker's liability. To call it an "equivocal" agreement, as the Minnesota Supreme Court did, is the least that can be said in criticism of it. Federal Motor Truck Sales Corporation v. Shanus, 190 Minn. 5, 250 N.W. 713, 714 (Sup. Ct. 1933).

The manufacturer agrees to replace defective parts for 90 days after the sale or until the car has been driven 4,000 miles, whichever is first to occur, if the part is sent to the factory, transportation charges prepaid, and if examination discloses to its satisfaction that the part is defective. It is difficult to imagine a greater burden on the consumer, or less satisfactory remedy. Aside from imposing on the buyer the trouble of removing and shipping the part, the maker has sought to retain the uncontrolled discretion to decide the issue of defectiveness. Some courts have removed much of the force of that reservation by declaring that the purchaser is not bound by the manufacturer's decision. Mills v. Maxwell Motor Sales Corporation, 105 Neb. 105, Neb. 465, 181 N.W. [376] 152, 22 A.L.R. 130 (Sup. Ct. 1920); Cannon v. Pulliam Motor Company, 230 S.C. 131, 94 S.E.2d 397 (Sup. Ct. 1956). In the Mills case, the court said:

"It would nevertheless be repugnant to every conception of justice to hold that, if the parts thus returned for examination were, in point of fact, so defective as to constitute a breach of warranty, the appellee's right of action could be defeated by the appellant's arbitrary refusal to recognize that fact. Such an interpretation would substitute the appellant for the courts in passing upon the question of fact, and would be unreasonable." Supra, 181 N.W., at page 154.

Also suppose, as in this case, a defective part or parts caused an accident and that the car was so damaged as to render it impossible to discover the precise part or parts responsible, although the circumstances clearly pointed to such fact as the cause of the mishap. Can it be said that the impossibility of performance deprived the buyer of the benefit of the warranty?

Moreover, the guaranty is against defective workmanship. That condition may arise from good parts improperly assembled. There being no defective parts to return to the maker, is all remedy to be denied? One court met that type of problem by holding that where the purchaser does not know the precise cause of inoperability, calling a car a "vibrator" would be sufficient to state a claim for relief. It said that such a car is not an uncommon one in the industry. The general cause of the vibration is not known. Some part or parts have been either defectively manufactured or improperly assembled in the construction and manufacture of the automobile. In the operation of the car, these parts give rise to vibrations. The difficulty lies in locating the precise spot and cause. Allen v. Brown, 181 Kan. 301, 310 P.2d 923 (Sup. Ct. 1957). But the warranty does not specify what the purchaser must do to obtain relief in such case, if a remedy is intended to be provided. Must the purchaser return the car, transportation charges prepaid, over a great distance to the factory? It may be said that in the usual [377] case the dealer also gives the same warranty and that as a matter of expediency the purchaser should turn to him. But under the law the buyer is entitled to proceed against the manufacturer. Further, dealers' franchises are precarious (see, Automobile Franchise Agreements, Hewitt (1956)). For example, Bloomfield Motors' franchise may be cancelled by Chrysler on 90 days' notice. And obviously dealers' facilities and capacity, financial and otherwise, are not as sufficient as those of the primarily responsible manufacturer in his distant factory.

The matters referred to represent only a small part of the illusory character of the security presented by the warranty. Thus far the analysis has dealt only with the remedy provided in the case of a defective part. What relief is provided when the breach of the warranty results in personal injury to the buyer? (Injury to third persons using the car in the purchaser's right will be treated hereafter.) As we have said above, the law is clear that such damages are recoverable under an ordinary warranty. The right exists whether the warranty sued on is express or implied. See, e.g., Ryan v. Progressive Grocery Stores, supra. And, of course, it has long since been settled that where the buyer or a member of his family driving with his permission suffers injuries because of negligent manufacture or construction of the vehicle, the manufacturer's liability exists. Prosser, supra, §§ 83, 84. But in this instance, after reciting that defective parts will be replaced at the factory, the alleged agreement relied upon by Chrysler provides that the manufacturer's "obligation under this warranty" is limited to that undertaking; further, that such remedy is "in lieu of all other warranties, express or implied, and all other obligations or liabilities on its part." The contention has been raised that such language bars any claim for personal injuries which may emanate from a breach of the warranty. Although not urged in this case, it has been successfully maintained that the exclusion "of all other obligations and liabilities on its part" precludes [378] a cause of action for injuries based on negligence. Shafer v. Reo Motors, 205 F.2d 685 (3 Cir. 1953). Another Federal Circuit Court of Appeals holds to the contrary. Doughnut Mach. Corporation v. Bibbey, 65 F.2d 634 (1 Cir. 1933). There can be little doubt that justice is served only by the latter ruling.

Putting aside for the time being the problem of the efficacy of the disclaimer provisions contained in the express warranty, a question of first importance to be decided is whether an implied warranty of merchantability by Chrysler Corporation accompanied the sale of the automobile to Claus Henningsen.

Preliminarily, it may be said that the express warranty against defective parts and workmanship is not inconsistent with an implied warranty of merchantability. Such warranty cannot be excluded for that reason. Knapp v. Willys-Ardmore, Inc., 174 Pa. Super. 90, 100 A.2d 105 (1953). And see, Hambrick v. Peoples Mercantile & Implement Co., 228 Ark. 1021, 311 S.W.2d 785 (Sup. Ct. 1958); Hardy v. General Motors Acceptance Corporation, 38 Ga. App. 463, 144 S.E. 327 (Ct. App. 1928); Bekkevold v. Potts, 173 Minn. 87, 216 N.W. 790, 59 A.L.R. 1164 (Sup. Ct. 1927); Hooven & Allison Co. v. Wirtz, 15 N.D. 477, 107 N.W. 1078 (Sup. Ct. 1906); Frigidinners, Inc. v. Branchtown Gun Club, supra.

Chrysler points out that an implied warranty of merchantability is an incident of a contract of sale. It concedes, of course, the making of the original sale to Bloomfield Motors, Inc., but maintains that this transaction marked the terminal point of its contractual connection with the car. Then Chrysler urges that since it was not a party to the sale by the dealer to Henningsen, there is no privity of contract between it and the plaintiffs, and the absence of this privity eliminates any such implied warranty.

There is no doubt that under early common-law concepts of contractual liability only those persons who were parties to the bargain could sue for a breach of it. In more recent [379] times a noticeable disposition has appeared in a number of jurisdictions to break through the narrow barrier of privity when dealing with sales of goods in order to give realistic recognition to a universally accepted fact. The fact is that the dealer and the ordinary buyer do not, and are not expected to, buy goods, whether they be foodstuffs or automobiles, exclusively for their own consumption or use. Makers and manufacturers know this and advertise and market their products on that assumption; witness, the "family" car, the baby foods, etc. The limitations of privity in contracts for the sale of goods developed their place in the law when marketing conditions were simple, when maker and buyer frequently met face to face on an equal bargaining plane and when many of the products were relatively uncomplicated and conducive to inspection by a buyer competent to evaluate their quality. See, Freezer, "Manufacturer's Liability for Injuries Caused by His Products," 37 Mich. L. Rev. 1 (1938). With the advent of mass marketing, the manufacturer became remote from the purchaser, sales were accomplished through intermediaries, and the demand for the product was created by advertising media. In such an economy it became obvious that the consumer was the person being cultivated. Manifestly, the connotation of "consumer" was broader than that of "buyer." He signified such a person who, in the reasonable contemplation of the parties to the sale, might be expected to use the product. Thus, where the commodities sold are such that if defectively manufactured they will be dangerous to life or limb, then society's interests can only be protected by eliminating the requirement of privity between the maker and his dealers and the reasonably expected ultimate consumer. In that way the burden of losses consequent upon use of defective articles is borne by those who are in a position to either control the danger or make an equitable distribution of the losses when they do occur. As Harper & James put it, "The interest in consumer protection calls for warranties by the maker that do run with the goods, to reach all who are [380] likely to be hurt by the use of the unfit commodity for a purpose ordinarily to be expected." 2 Harper & James, supra, 1571, 1572; also see, 1535; Prosser, supra, 506-511. As far back as 1932, in the well known case of Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409 (Sup. Ct. 1932), affirmed 15 P.2d 1118, 88 A.L.R. 521 (Sup. Ct. 1932), the Supreme Court of Washington gave recognition to the impact of then existing commercial practices on the strait jacket of privity, saying:

"It would be unjust to recognize a rule that would permit manufacturers of goods to create a demand for their products by representing that they possess qualities which they, in fact, do not possess, and then, because there is no privity of contract existing between the consumer and the manufacturer, deny the consumer the right to recover if damages result from the absence of those qualities, when such absence is not readily noticeable." 12 P.2d, at page 412.

The concept was expressed in a practical way by the Supreme Court of Texas in Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828, 833, 142 A.L.R. 1479 (1942):

"In fact, the manufacturer's interest in the product is not terminated when he has sold it to the wholesaler. He must get it off the wholesaler's shelves before the wholesaler will buy a new supply. The same is not only true of the retailer, but of the house wife, for the house wife will not buy more until the family has consumed that which she has in her pantry. Thus the manufacturer or other vendor intends that this appearance of suitability of the article for human consumption should continue and be effective until some one is induced thereby to consume the goods. It would be but to acknowledge a weakness in the law to say that he could thus create a demand for his products by inducing a belief that they are suitable for human consumption, when, as a matter of fact, they are not, and reap the benefits of the public confidence thus created, and then avoid liability for the injuries caused thereby merely because there was no privity of contract between him and the one whom he induced to consume the food. * * *"

Although only a minority of jurisdictions have thus far departed from the requirement of privity, the movement in that direction is most certainly gathering momentum. Liability [381] to the ultimate consumer in the absence of direct contractual connection has been predicated upon a variety of theories. Some courts hold that the warranty runs with the article like a covenant running with land; others recognize a third-party beneficiary thesis; still others rest their decision on the ground that public policy requires recognition of a warranty made directly to the consumer. Welter v. Bowman Dairy Co., 318 Ill. App. 305, 47 N.E.2d 739 (App. Ct. 1943); Bahlman v. Hudson Motor Car Co., 290 Mich. 683, 288 N.W. 309 (Sup. Ct. 1939); Worley v. Procter & Gamble Mfg. Co., 241 Mo. App. 1114, 253 S.W.2d 532 (Ct. App. 1953); Markovich v. McKesson and Robbins, Inc., 106 Ohio App. 265, 149 N.E.2d 181 (Ct. App. 1958); 2 Harper & James, supra, 1573; Prosser, supra, 507; Jeanblanc, "Manufacturers' Liability to Persons other than their Immediate Vendees," 24 Va. L. Rev. 134, 156 (1937).

Further reference to Decker, supra, is enlightening:

"There certainly is justification for indulging a presumption of a warranty that runs with the article in the sale of food products. A party who processes a product and gives it the appearance of being suitable for human consumption, and places it in the channels of commerce, expects some one to consume the food in reliance on its appearance that it is suitable for human consumption. He expects the appearance of suitableness to continue with the product until some one is induced to consume it as food. But a modern manufacturer or vendor does even more than this under modern practices. He not only processes the food and dresses it up so as to make it appear appetizing, but he uses the newspapers, magazines, bill-boards, and the radio to build up the psychology to buy and consume his products. The invitation extended by him is not only to the house wife to buy and serve his product, but to the members of the family and guest to eat it. * * * The mere fact that a manufacturer or other vendor may thus induce the public to consume unwholesome food evidences the soundness of the rule which imposes a warranty, as a matter of public policy on the sale of food or other products intended for human consumption." 164 S.W.2d, at pages 832, 833. (Emphasis added)

In Patargias v. Coca-Cola Bottling Co. of Chicago, 332 Ill. App. 117, 74 N.E.2d 162 (App. Ct. 1947), involving the sale of a bottle of coca-cola by a dealer, the court said:

[382] "We are impelled to hold that, where an article of food or drink is sold in a sealed container for human consumption, public policy demands that an implied warranty be imposed upon the manufacturer thereof that such article is wholesome and fit for use, that said warranty runs with the sale of the article for the benefit of the consumer thereof * * *." 74 N.E.2d, at page 169. (Emphasis added)

And in Worley v. Procter & Gamble Mfg. Co., supra, it was said that:

"In the case of food products sold in original packages, and other articles dangerous to life [here a box of soap powder], if defective, the manufacturer, who alone is in a position to inspect and control their preparation, should be held as a warrantor, whether he purveys his products by his own hand, or through a network of independent distributing agencies. In either case, the essence of the situation is the same — the placing of goods in the channels of trade, representations directed to the ultimate consumer, and damaging reliance by the latter on those representations. Such representations, being inducements to the buyers making the purchase, should be regarded as warranties imposed by law, independent of the vendors' contractual intentions. The liability thus imposed springs from representations directed to the ultimate consumer, and not from the breach of any contractual undertaking on the part of the vendor. This is in accord with the original theory of the action * * *." 253 S.W.2d at page 537. (Insertion ours)

See to the same effect: Davis v. Van Camp Packing Co., 189 Iowa 775, 176 N.W. 382, 17 A.L.R. 649 (Sup. Ct. 1920); Nichols v. Nold, 174 Kan. 613, 258 P.2d 317, 38 A.L.R.2d 887 (Sup. Ct. 1953); Parks v. G.C. Yost Pie Co., 93 Kan. 334, 144 P. 202, L.R.A. 1915C, 179 (Sup. Ct. 1914); Madouros v. Kansas City Coca-Cola Bottling Co., 230 Mo. App. 275, 90 S.W.2d 445 (Ct. App. 1936); Ward v. Morehead City Sea Food Co., 171 N.C. 33, 87 S.E. 958 (Sup. Ct. 1916).

Most of the cases where lack of privity has not been permitted to interfere with recovery have involved food and drugs. Haut v. Kleene, 320 Ill. App. 273, 50 N.E.2d 855 (App. Ct. 1943); Welter v. Bowman Dairy Co., supra; Davis v. Van Camp Packing Co., supra; Madouros v. Kansas [383] City Coca-Cola Bottling Co., supra; Greenberg v. Lorenz, 12 Misc.2d 883, 178 N.Y.S.2d 407 (Sup. Ct. 1958); Ryan v. Progressive Grocery Stores, Inc., supra; Jacob E. Decker & Sons, Inc. v. Capps, supra; La Hue v. Coca-Cola Bottling, 50 Wash.2d 645, 314 P.2d 421 (Sup. Ct. 1957). In fact, the rule as to such products has been characterized as an exception to the general doctrine. But more recently courts, sensing the inequity of such limitation, have moved into broader fields: home permanent wave set, Markovich v. McKesson and Robbins, Inc., supra; Rogers v. Toni Home Permanent Co., 167 Ohio St. 244, 147 N.E.2d 612 (Sup. Ct. 1958); soap detergent, Worley v. Procter & Gamble Mfg. Co., supra; inflammable cowboy suit (by clear implication), Blessington v. McCrory Stores Corp., 305 N.Y. 140, 111 N.E.2d 421, 37 A.L.R.2d 698 (Ct. App. 1953); exploding bottle, Mahoney v. Shaker Square Beverages, 46 Ohio Op. 250, 102 N.E.2d 281 (C.P. 1951); defective emery wheel, DiVello v. Gardner Machine Co., 46 Ohio Op. 161, 102 N.E.2d 289 (C.P. 1951); defective wire rope, Mannsz v. Macwhyte Co., 155 F.2d 445 (3 Cir. 1946); defective cinder blocks, Spence v. Three Rivers Builders & Masonry Supply, 353 Mich. 120, 90 N.W.2d 873 (Sup. Ct. 1958).

We see no rational doctrinal basis for differentiating between a fly in a bottle of beverage and a defective automobile. The unwholesome beverage may bring illness to one person, the defective car, with its great potentiality for harm to the driver, occupants, and others, demands even less adherence to the narrow barrier of privity. 2 Harper & James, supra, 1572; 1 Williston, supra, § 244a, p. 648; Note, 46 Harv. L. Rev. 161 (1932). In Mannsz v. Macwhyte Co., supra, Chief Judge Biggs, speaking for the Third Circuit Court of Appeals, said:

"We think it is clear that whether the approach to the problem be by way of warranty or under the doctrine of negligence, the requirement of privity between the injured party and the manufacturer [384] of the article which has injured him has been obliterated from the Pennsylvania law. The abolition of the doctrine occurred first in the food cases, next in the beverage decisions and now it has been extended to those cases in which the article manufactured, not dangerous or even beneficial if properly made, injured a person because it was manufactured improperly." 155 F.2d, at pages 449-450.

Under modern conditions the ordinary layman, on responding to the importuning of colorful advertising, has neither the opportunity nor the capacity to inspect or to determine the fitness of an automobile for use; he must rely on the manufacturer who has control of its construction, and to some degree on the dealer who, to the limited extent called for by the manufacturer's instructions, inspects and services it before delivery. In such a marketing milieu his remedies and those of persons who properly claim through him should not depend "upon the intricacies of the law of sales. The obligation of the manufacturer should not be based alone on privity of contract. It should rest, as was once said, upon `the demands of social justice.'" Mazetti v. Armour & Co., 75 Wash. 622, 135 P. 633, 48 L.R.A., N.S., 213 (Sup. Ct. 1913). "If privity of contract is required," then, under the circumstances of modern merchandising, "privity of contract exists in the consciousness and understanding of all right-thinking persons." Madouros v. Kansas City Coca-Cola Bottling Co., supra, 90 S.W.2d, at page 450.

Accordingly, we hold that under modern marketing conditions, when a manufacturer puts a new automobile in the stream of trade and promotes its purchase by the public, an implied warranty that it is reasonably suitable for use as such accompanies it into the hands of the ultimate purchaser. Absence of agency between the manufacturer and the dealer who makes the ultimate sale is immaterial.

[385] II.

THE EFFECT OF THE DISCLAIMER AND LIMITATION OF LIABILITY CLAUSES ON THE IMPLIED WARRANTY OF MERCHANTABILITY.

Judicial notice may be taken of the fact that automobile manufacturers, including Chrysler Corporation, undertake large scale advertising programs over television, radio, in newspapers, magazines and all media of communication in order to persuade the public to buy their products. As has been observed above, a number of jurisdictions, conscious of modern marketing practices, have declared that when a manufacturer engages in advertising in order to bring his goods and their quality to the attention of the public and thus to create consumer demand, the representations made constitute an express warranty running directly to a buyer who purchases in reliance thereon. The fact that the sale is consummated with an independent dealer does not obviate that warranty. Mannsz v. Macwhyte Co., supra; Bahlman v. Hudson Motor Car Co., supra; Rogers v. Toni Home Permanent Co., supra; Meyer v. Packard Cleveland Motor Co., 106 Ohio St. 328, 140 N.E. 118, 28 A.L.R. 986 (1922); Baxter v. Ford Motor Co., supra; 1 Williston, Sales, supra, § 244a.

In view of the cases in various jurisdictions suggesting the conclusion which we have now reached with respect to the implied warranty of merchantability, it becomes apparent that manufacturers who enter into promotional activities to stimulate consumer buying may incur warranty obligations of either or both the express or implied character. These developments in the law inevitably suggest the inference that the form of express warranty made part of the Henningsen purchase contract was devised for general use in the automobile industry as a possible means of avoiding the consequences of the growing judicial acceptance of the thesis that the described express or implied warranties run directly to the consumer.

[386] In the light of these matters, what effect should be given to the express warranty in question which seeks to limit the manufacturer's liability to replacement of defective parts, and which disclaims all other warranties, express or implied? In assessing its significance we must keep in mind the general principle that, in the absence of fraud, one who does not choose to read a contract before signing it, cannot later relieve himself of its burdens. Fivey v. Pennsylvania R.R. Co., 67 N.J.L. 627 (E. & A. 1902). And in applying that principle, the basic tenet of freedom of competent parties to contract is a factor of importance. But in the framework of modern commercial life and business practices, such rules cannot be applied on a strict, doctrinal basis. The conflicting interests of the buyer and seller must be evaluated realistically and justly, giving due weight to the social policy evinced by the Uniform Sales Act, the progressive decisions of the courts engaged in administering it, the mass production methods of manufacture and distribution to the public, and the bargaining position occupied by the ordinary consumer in such an economy. The history of the law shows that legal doctrines, as first expounded, often prove to be inadequate under the impact of later experience. In such case, the need for justice has stimulated the necessary qualifications or adjustments. Perkins v. Endicott Johnson Corporation, 128 F.2d 208, 217 (2 Cir. 1942), affirmed 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424 (1943); Greenberg v. Lorenz, supra.

In these times, an automobile is almost as much a servant of convenience for the ordinary person as a household utensil. For a multitude of other persons it is a necessity. Crowded highways and filled parking lots are a commonplace of our existence. There is no need to look any farther than the daily newspaper to be convinced that when an automobile is defective, it has great potentiality for harm.

No one spoke more graphically on this subject than Justice Cardozo in the landmark case of MacPherson v. Buick Motor [387] Co., 217 N.Y. 382, 111 N.E. 1050, 1053, L.R.A. 1916 F, 696 (Ct. App. 1916):

"Beyond all question, the nature of an automobile gives warning of probable danger if its construction is defective. This automobile was designed to go 50 miles per hour. Unless its wheels were sound and strong, injury was almost certain. It was as much a thing of danger as a defective engine for a railroad. * * * The dealer was indeed the one person of whom it might be said with some approach to certainty that by him the car would not be used. * * * Precedents drawn from the days of travel by stagecoach do not fit the conditions of travel to-day. The principle that the danger must be imminent does not change, but the things subject to the principle do change. They are whatever the needs of life in a developing civilization require them to be."

In the 44 years that have intervened since that utterance, the average car has been constructed for almost double the speed mentioned; 60 miles per hour is permitted on our parkways. The number of automobiles in use has multiplied many times and the hazard to the user and the public has increased proportionately. The Legislature has intervened in the public interest, not only to regulate the manner of operation on the highway but also to require periodic inspection of motor vehicles and to impose a duty on manufacturers to adopt certain safety devices and methods in their construction. R.S. 39:3-43 et seq. It is apparent that the public has an interest not only in the safe manufacture of automobiles, but also, as shown by the Sales Act, in protecting the rights and remedies of purchasers, so far as it can be accomplished consistently with our system of free enterprise. In a society such as ours, where the automobile is a common and necessary adjunct of daily life, and where its use is so fraught with danger to the driver, passengers and the public, the manufacturer is under a special obligation in connection with the construction, promotion and sale of his cars. Consequently, the courts must examine purchase agreements closely to see if consumer and public interests are treated fairly.

[388] What influence should these circumstances have on the restrictive effect of Chrysler's express warranty in the framework of the purchase contract? As we have said, warranties originated in the law to safeguard the buyer and not to limit the liability of the seller or manufacturer. It seems obvious in this instance that the motive was to avoid the warranty obligations which are normally incidental to such sales. The language gave little and withdrew much. In return for the delusive remedy of replacement of defective parts at the factory, the buyer is said to have accepted the exclusion of the maker's liability for personal injuries arising from the breach of the warranty, and to have agreed to the elimination of any other express or implied warranty. An instinctively felt sense of justice cries out against such a sharp bargain. But does the doctrine that a person is bound by his signed agreement, in the absence of fraud, stand in the way of any relief?

In the modern consideration of problems such as this, Corbin suggests that practically all judges are "chancellors" and cannot fail to be influenced by any equitable doctrines that are available. And he opines that "there is sufficient flexibility in the concepts of fraud, duress, misrepresentation and undue influence, not to mention differences in economic bargaining power" to enable the courts to avoid enforcement of unconscionable provisions in long printed standardized contracts. 1 Corbin on Contracts (1950) § 128, p. 188. Freedom of contract is not such an immutable doctrine as to admit of no qualification in the area in which we are concerned. As Chief Justice Hughes said in his dissent in Morehead v. People of State of New York ex rel. Tipaldo, 298 U.S. 587, 627, 56 S.Ct. 918, 80 L.Ed. 1347, 1364 (1936):

"We have had frequent occasion to consider the limitations on liberty of contract. While it is highly important to preserve that liberty from arbitrary and capricious interference, it is also necessary to prevent its abuse, as otherwise it could be used to override all public interests and thus in the end destroy the very freedom of opportunity which it is designed to safeguard." [389] That sentiment was echoed by Justice Frankfurter in his dissent in United States v. Bethlehem Steel Corp., 315 U.S. 289, 326, 62 S.Ct. 581, 86 L.Ed. 855, 876 (1942):

"It is said that familiar principles would be outraged if Bethlehem were denied recovery on these contracts. But is there any principle which is more familiar or more firmly embedded in the history of Anglo-American law than the basic doctrine that the courts will not permit themselves to be used as instruments of inequity and injustice? Does any principle in our law have more universal application than the doctrine that courts will not enforce transactions in which the relative positions of the parties are such that one has unconscionably taken advantage of the necessities of the other?

These principles are not foreign to the law of contracts. Fraud and physical duress are not the only grounds upon which courts refuse to enforce contracts. The law is not so primitive that it sanctions every injustice except brute force and downright fraud. More specifically, the courts generally refuse to lend themselves to the enforcement of a `bargain' in which one party has unjustly taken advantage of the economic necessities of the other. * * *"

The traditional contract is the result of free bargaining of parties who are brought together by the play of the market, and who meet each other on a footing of approximate economic equality. In such a society there is no danger that freedom of contract will be a threat to the social order as a whole. But in present-day commercial life the standardized mass contract has appeared. It is used primarily by enterprises with strong bargaining power and position. "The weaker party, in need of the goods or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses. His contractual intention is but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood in a vague way, if at all." Kessler, "Contracts of Adhesion — Some Thoughts About Freedom of Contract," 43 Colum. L. Rev. 629, 632 (1943); Ehrenzweig, "Adhesion Contracts in the Conflict of Laws," 53 Colum. L. Rev. 1072, 1075, 1089 (1953). Such standardized contracts have been [390] described as those in which one predominant party will dictate its law to an undetermined multiple rather than to an individual. They are said to resemble a law rather than a meeting of the minds. Siegelman v. Cunard White Star, 221 F.2d 189, 206 (2 Cir. 1955).

Vold, in the recent revision of his Law of Sales (2d ed. 1959), at page 447, wrote of this type of contract and its effect upon the ordinary buyer:

"In recent times the marketing process has been getting more highly organized than ever before. Business units have been expanding on a scale never before known. The standardized contract with its broad disclaimer clauses is drawn by legal advisers of sellers widely organized in trade associations. It is encountered on every hand. Extreme inequality of bargaining between buyer and seller in this respect is now often conspicuous. Many buyers no longer have any real choice in the matter. They must often accept what they can get though accompanied by broad disclaimers. The terms of these disclaimers deprive them of all substantial protection with regard to the quality of the goods. In effect, this is by force of contract between very unequal parties. It throws the risk of defective articles on the most dependent party. He has the least individual power to avoid the presence of defects. He also has the least individual ability to bear their disastrous consequences."

The warranty before us is a standardized form designed for mass use. It is imposed upon the automobile consumer. He takes it or leaves it, and he must take it to buy an automobile. No bargaining is engaged in with respect to it. In fact, the dealer through whom it comes to the buyer is without authority to alter it; his function is ministerial — simply to deliver it. The form warranty is not only standard with Chrysler but, as mentioned above, it is the uniform warranty of the Automobile Manufacturers Association. Members of the Association are: General Motors, Inc., Ford, Chrysler, Studebaker-Packard, American Motors (Rambler), Willys Motors, Checker Motors Corp., and International Harvester Company. Automobile Facts and Figures (1958 Ed., Automobile Manufacturers Association) 69. Of these companies, the "Big Three" (General Motors, Ford, and Chrysler) represented 93.5% of the passenger-car production for 1958 [391] and the independents 6.5%. Standard & Poor (Industrial Surveys, Autos, Basic Analysis, June 25, 1959) 4109. And for the same year the "Big Three" had 86.72% of the total passenger vehicle registrations. Automotive News, 1959 Almanac (Slocum Publishing Co., Inc.) p. 25.

The gross inequality of bargaining position occupied by the consumer in the automobile industry is thus apparent. There is no competition among the car makers in the area of the express warranty. Where can the buyer go to negotiate for better protection? Such control and limitation of his remedies are inimical to the public welfare and, at the very least, call for great care by the courts to avoid injustice through application of strict common-law principles of freedom of contract. Because there is no competition among the motor vehicle manufacturers with respect to the scope of protection guaranteed to the buyer, there is no incentive on their part to stimulate good will in that field of public relations. Thus, there is lacking a factor existing in more competitive fields, one which tends to guarantee the safe construction of the article sold. Since all competitors operate in the same way, the urge to be careful is not so pressing. See "Warranties of Kind and Quality," 57 Yale L.J. 1389, 1400 (1948).

Although the courts, with few exceptions, have been most sensitive to problems presented by contracts resulting from gross disparity in buyer-seller bargaining positions, they have not articulated a general principle condemning, as opposed to public policy, the imposition on the buyer of a skeleton warranty as a means of limiting the responsibility of the manufacturer. They have endeavored thus far to avoid a drastic departure from age-old tenets of freedom of contract by adopting doctrines of strict construction, and notice and knowledgeable assent by the buyer to the attempted exculpation of the seller. 1 Corbin, supra, 337; 2 Harper & James, supra, 1590; Prosser, "Warranty of Merchantable Quality," 27 Minn. L. Rev. 117, 159 (1932). Accordingly to be found in the cases are statements that disclaimers and [392] the consequent limitation of liability will not be given effect if "unfairly procured," Davis Motors, Dodge and Plymouth Co. v. Avett, 294 S.W.2d 882, 887 (Tex. Civ. App. 1956); International Harvester Co. of America v. Bean, 159 Ky. 842, 169 S.W. 549 (Ct. App. 1914); if not brought to the buyer's attention and he was not made understandingly aware of it, Vaughan's Seed Store v. Stringfellow, 56 Fla. 708, 48 So. 410 (Sup. Ct. 1908); Parsons Band Cutter & Self-Feeder Co. v. Haub, 83 Minn. 180, 86 N.W. 14 (Sup. Ct. 1901); Bell v. Mills, 78 App. Div. 42, 80 N.Y.S. 34 (1902); Landreth v. Wyckoff, 67 App. Div. 145, 73 N.Y.S. 388 (1901); St. Louis Cordage Mills v. Western Supply Co., 54 Okl. 757, 154 P. 646 (Sup. Ct. 1916); Reliance Varnish Co. v. Mullins Lumber Co., 213 S.C. 84, 48 S.E.2d 653 (Sup. Ct. 1948); Stevenson v. B.B. Kirkland Seed Co., 176 S.C. 345, 180 S.E. 197 (Sup. Ct. 1935); Black v. B.B. Kirkland Seed Co., 158 S.C. 112, 155 S.E. 268 (Sup. Ct. 1930); or if not clear and explicit, McPeak v. Boker, 236 Minn. 420, 53 N.W.2d 130 (Sup. Ct. 1952).

Some of these cases are worthy of more specific reference. In Stevenson v. B.B. Kirkland Seed Co., supra [176 S.C. 345, 180 S.E. 199], plaintiff asked for Abruzzi rye seed and defendant's agent sold seed to him as such. The invoice contained a non-warranty or disclaimer clause to the effect that no warranty, express or implied, was given by the seller "as to description, quality, productiveness, or any other matter of any seeds, bulbs, or plants," that there would be no responsibility for the crop, and that if the goods were not acceptable they were to be returned at once. The seed was discovered not to be Abruzzi when it had grown sufficiently to be distinguished. In the absence of proof that the disclaimer was actually brought to the attention of the buyer, it was declared not binding.

In St. Louis Cordage Mills v. Western Supply Co., supra [54 Okl. 757, 154 P. 648], the seller claimed that a card was attached to certain cables when they were sold. It purported to notify plaintiff that defendant "sells no goods [393] with a warranty." On this basis, the contention was advanced that any oral guaranty was rebutted. The "complete answer" was adjudged to be that the record failed to show that the card was brought to the attention of the plaintiff. And the court went on to say that if there was evidence tending to establish the fact, the problem was for determination by the jury.

International Harvester Co. of America v. Bean, supra, involved the purchase of an "auto wagon" which the buyer wanted for use in the transportation of passengers and their baggage between two cities. He explained the kind of roads to be traversed and the salesman recommended the type of vehicle purchased. The car could not operate on the roads described and rescission was sought.

International Harvester contended that the only warranty extended was contained in the purchase order. It was substantially similar to the one in the present case, providing for the replacement of defective parts over a 60-day period and reciting that "This express warranty excludes all implied warranties." The Kentucky Court of Appeals affirmed a rescission judgment saying:

"It must be borne in mind that the warranty of fitness for a particular use, which is implied by law where a manufacturer sells machinery for a purpose made known to him by the buyer thereof, relying on the skill and judgment of the manufacturer in selecting machinery adapted thereto, is a warranty which attaches itself to the contract of sale, independent of any express representation by the manufacturer of the suitability of the machinery for such use. It attaches by implication of law as a direct result of the communication by the buyer to the manufacturer of the nature of the intended use.

And while, if the parties to a contract for the sale of machinery, under such circumstances, expressly stipulate against all warranties implied by law, none will be imposed by the court against their consent, still such stipulation will not be given effect unless fairly made as a part of the contract of sale. Such a stipulation, relieving, as it does, the manufacturer from duties imposed by law, will be conclusively presumed to have been inserted in the contract of sale for the sole benefit of the manufacturer, the beneficiary of such relieving stipulation, and effect will not be given to such stipulation unless its inclusion in the contract was fairly procured.

[394] In the case under consideration, this stipulation was contained in a printed form of order blank or contract used by appellant company. The language of the stipulation is extremely technical, `This express warranty excludes all implied warranties'; its meaning is clear to but few persons. The writing in which such stipulation appears directs appellant company to furnish to appellee an auto vehicle, a class of machinery concerning which appellee was indisputably ignorant; and the particular style or pattern of auto vehicle ordered was that selected and recommended by the company's agent; this is undenied. Appellee testified that he explained to the company's agent the purposes for which he intended to use the auto wagon; and it is apparent that, had he understood the full import of the stipulation, he would not have signed the order. Under these circumstances, the court will not say that the stipulation against implied warranties was fairly procured to be included in the contract of sale. To hold that it was so included would be to give life to the letter of the contract and render inanimate the spirit thereof." 169 S.W., at pages 550, 551. (Emphasis ours)

The same court, in Myers v. Land, 314 Ky. 514, 235 S.W.2d 988 (1950), made a similar forthright declaration. The plaintiff purchased a new machine designed and represented as capable of making concrete blocks. It would not do the work and recovery of the purchase price was sought.

The purchase order contained this provision:

"There are no understandings, agreements, representations or warranties, expressed or implied, not specified herein respecting this order. The warranties, provisions, terms and conditions on the reverse side hereof are expressly made a part of this agreement." 235 S.W.2d, at page 990.

The back of the order contained special warranties limiting the seller's liability to defects in material and workmanship which might develop under normal use and service, the obligation being limited to making good at its factory any defective parts.

Attention is attracted to the fact that the language quoted above is more comprehensive and formidable in its adverse implications to the buyer than in our case. The clause in the Henningsen purchase order makes no express reference to the exclusion of warranties express or implied except those appearing on the back of the contract. But in the case under [395] discussion, a jury question was held to exist as to the binding effect of the limitation of liability. The court said:

"In short, this contract undertakes to eliminate and to avoid practically every sort of warranty except the very limited one stated. There is no remedy provided in case the machinery proves to be worthless. The appellant relies upon this negation of an implied warranty.

The statute is, in the particulars involved here, a codification of the prevailing common law on the subject. This court long before its enactment recognized the principle that it was competent for the parties to a contract to stipulate expressly against implied or extrinsic warranties and to confine the obligations of the seller to specific terms. But we have always required that such limitation of liability shall be plainly expressed. * * * Though the present disclaimer of warranty is clear in its terms, we cannot overlook the fact that it is to be found in a long and formidable document prepared by the seller and that it was doubtless unnoticed or its import uncomprehended by the buyer. Anyone brought up to believe that for every wrong there is a remedy will pause before saying that the seller will escape all liability by merely putting in an order blank a statement to the effect that there is no assurance that the buyer will get a machine that will work. We have paused for the moment and have readily concluded that the avoidance of liability under such a circumstance is not permitted by the law. * * *" 235 S.W.2d, at page 990. (Emphasis ours)

The sales contract in Reliance Varnish Co. v. Mullins Lumber Co., supra, contained a limited liability warranty in fine print. The officers of the buyer who made the purchase testified they had not observed the limiting clause and that it was not called to their attention. The court pointed out that it was "so located as to easily escape attention" and declared:

"Certainly it could not be said as a matter of law that appellant should have been aware of the stipulation. `The rule in this state is that for such a clause to be applicable in any case it must be shown that it was brought to the attention of the purchaser.'" 48 S.E.2d, at page 659.

Although Cutler Corp. v. Latshaw, 374 Pa. 1, 97 A.2d 234 (Sup. Ct. 1953), involves a contract for the performance of work for a homeowner, and not a sale, the result reached [396] by the court reflects a pertinent point of view. The contract for the work contained on its reverse side a warrant of attorney for the confession of judgment. In denying enforcement, this was said:

"Equally in the case at bar the defendant did not sign the warrant of attorney-confession of judgment. The reference on the face side of the contract to the `conditions' on the reverse side, among which was buried the supposed authority for a warrant of attorney, can hardly be accepted in a court of law as an acknowledgment of a confession of judgment. While the word `condition' may conceivably embrace almost any circumstance, upon which, or, because of which, a right is created or a liability attaches, it cannot be used to mean surrender of fundamental personal and property absolutes unless the word appears within a setting which warns of the potency of the capitulation being made.

* * * * * * * *

The case at bar falls far short of producing evidence that Miss Latshaw was even aware that a warrant of attorney was remotely contemplated. The physical characteristics of the five-page document demonstrate that the reverse sides were entirely ignored." 97 A.2d, at page 236.

The rigid scrutiny which the courts give to attempted limitations of warranties and of the liability that would normally flow from a transaction is not limited to the field of sales of goods. Clauses on baggage checks restricting the liability of common carriers for loss or damage in transit are not enforceable unless the limitation is fairly and honestly negotiated and understandingly entered into. If not called specifically to the patron's attention, it is not binding. It is not enough merely to show the form of a contract; it must appear also that the agreement was understandingly made. Hill v. Adams Express Co., 82 N.J.L. 373 (E. & A. 1911); S.S. Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294 U.S. 494, 55 S.Ct. 483, 79 L.Ed. 1016 (1935) (clause void as against public policy); Ferris v. Minneapolis & St. L. Ry. Co., 143 Minn. 90, 173 N.W. 178 (Sup. Ct. 1919); Healy v. New York Cent. & H.R.R. Co., 153 App. Div. 516, 138 N.Y.S. 287 (1912). The same holds true in cases of such limitations [397] on parcel check room tickets, Jones v. Great Northern Ry. Co., 68 Mont. 231, 217 P. 673, 37 A.L.R. 754 (1923); Klar v. H. & M. Parcel Room, 270 App. Div. 538, 61 N.Y.S.2d 285 (1946), affirmed 296 N.Y. 1044, 73 N.E.2d 912 (Ct. App. 1947); and on storage warehouse receipts, French v. Bekins Moving & Storage Co., 118 Colo. 424, 195 P.2d 968 (Sup. Ct. 1948); Denver Public Warehouse Co. v. Munger, 20 Colo. App. 56, 77 P. 5 (1904); Brasch v. Sloan's Moving & Storage Co., 237 Mo. App. 597, 176 S.W.2d 58 (1943); Voyt v. Bekins Moving & Storage Co., 169 Or. 30, 119 P.2d 586 (Sup. Ct. 1941), affirmed on rehearing 127 P.2d 360 (Sup. Ct. 1942); on automobile parking lot or garage tickets or claim checks, Kravitz v. Parking Service Co., 29 Ala. App. 523, 199 So. 727 (Ct. App. 1940); Hoel v. Flour City Fuel & Transfer Co., 144 Minn. 280, 175 N.W. 300 (Sup. Ct. 1919); Miller's Mut. Fire Ins. Ass'n of Alton, Ill. v. Parker, 234 N.C. 20, 65 S.E.2d 341 (Sup. Ct. 1951); Agricultural Ins. Co. v. Constantine, 144 Ohio St. 275, 58 N.E.2d 658 (Sup. Ct. 1944); as to exculpatory clauses in leases releasing a landlord of apartments in a multiple dwelling house from all liability for negligence where inequality of bargaining exists, see Annotation, 175 A.L.R. 8 (1948). And the validity of release clauses in orders signed by a depositor directing a bank to stop payment of his check, exonerating the bank from liability for negligent payment, has been seriously questioned on public policy grounds in this State, Reinhardt v. Passaic-Clifton Nat. Bank, 16 N.J. Super. 430, 436 (App. Div. 1951), affirmed 9 N.J. 607 (1952). Elsewhere they have been declared void as opposed to public policy. Speroff v. First-Cent. Trust Co., 149 Ohio St. 415, 79 N.E.2d 119, 1 A.L.R.2d 1150 (Sup. Ct. 1948).

French v. Bekins Moving & Storage Co., supra [118 Colo. 425, 195 P.2d 970], is particularly significant in the present connection. There the patron signed a storage receipt which contained blanks in which were written the details of removal of the household articles, charges and other information. [398] Toward the bottom, in "smaller poorly printed five-point type" were eight lines authorizing the handling of the goods at a limited valuation. Plaintiff testified that she did not read the provision and no one informed her of it or of its implications. The Supreme Court of Colorado, in commenting upon the clause, said:

"`While a warehouseman may not avoid his liability for negligence, he may nevertheless stipulate with the owner as to what the extent of the latter's recovery shall be, where the rate charged the owner is based upon an agreed valuation which is put upon the property. * * * if the condition was to become a part of the contract, it was necessary that plaintiff's attention be called to it, and that she be advised that the rate to be charged was a reduced rate to be applied in consideration of her consent to the limitation of defendant's liability.'" 195 P.2d, at page 971.

It is true that the rule governing the limitation of liability cases last referred to is generally applied in situations said to involve services of a public or semi-public nature. Typical, of course, are the public carrier or storage or parking lot cases. Kuzmiak v. Brookchester, 33 N.J. Super. 575 (App. Div. 1954); Annotation, supra, 175 A.L.R., at pp. 14-17. But in recent times the books have not been barren of instances of its application in private contract controversies, witness, e.g., Kuzmiak v. Brookchester, supra; Fairfax Gas & Supply Co. v. Hadary, 151 F.2d 939 (4 Cir. 1945); and Cutler Corp. v. Latshaw, supra. In the last named matter, which has been noted earlier, the court relied upon the public interest cases as authority. It said:

"Although these cases have to do with limitation on the liability of common carriers, their reasoning applies with equal force to the facts in the case at bar. When a party to a contract seeks to bind the other party with the unyielding thongs of a warrant of attorney-confession of judgment, a device not ordinarily expected by a homeowner in a simple agreement for alterations and repairs, the inclusion of such a self-abnegating provision must appear in the body of the contract and cannot be incorporated by casual reference with a designation not its own." 97 A.2d, at page 238. [399] Basically, the reason a contracting party offering services of a public or quasi-public nature has been held to the requirements of fair dealing, and, when it attempts to limit its liability, of securing the understanding consent of the patron or consumer, is because members of the public generally have no other means of fulfilling the specific need represented by the contract. Having in mind the situation in the automobile industry as detailed above, and particularly the fact that the limited warranty extended by the manufacturers is a uniform one, there would appear to be no just reason why the principles of all of the cases set forth should not chart the course to be taken here.

It is undisputed that the president of the dealer with whom Henningsen dealt did not specifically call attention to the warranty on the back of the purchase order. The form and the arrangement of its face, as described above, certainly would cause the minds of reasonable men to differ as to whether notice of a yielding of basic rights stemming from the relationship with the manufacturer was adequately given. The words "warranty" or "limited warranty" did not even appear in the fine print above the place for signature, and a jury might well find that the type of print itself was such as to promote lack of attention rather than sharp scrutiny. The inference from the facts is that Chrysler placed the method of communicating its warranty to the purchaser in the hands of the dealer. If either one or both of them wished to make certain that Henningsen became aware of that agreement and its purported implications, neither the form of the document nor the method of expressing the precise nature of the obligation intended to be assumed would have presented any difficulty.

But there is more than this. Assuming that a jury might find that the fine print referred to reasonably served the objective of directing a buyer's attention to the warranty on the reverse side, and, therefore, that he should be charged with awareness of its language, can it be said that an ordinary layman would realize what he was relinquishing in [400] return for what he was being granted? Under the law, breach of warranty against defective parts or workmanship which caused personal injuries would entitle a buyer to damages even if due care were used in the manufacturing process. Because of the great potential for harm if the vehicle was defective, that right is the most important and fundamental one arising from the relationship. Difficulties so frequently encountered in establishing negligence in manufacture in the ordinary case make this manifest. 2 Harper & James, supra, §§ 28.14, 28.15; Prosser, supra, 506. Any ordinary layman of reasonable intelligence, looking at the phraseology, might well conclude that Chrysler was agreeing to replace defective parts and perhaps replace anything that went wrong because of defective workmanship during the first 90 days or 4,000 miles of operation, but that he would not be entitled to a new car. It is not unreasonable to believe that the entire scheme being conveyed was a proposed remedy for physical deficiencies in the car. In the context of this warranty, only the abandonment of all sense of justice would permit us to hold that, as a matter of law, the phrase "its obligation under this warranty being limited to making good at its factory any part or parts thereof" signifies to an ordinary reasonable person that he is relinquishing any personal injury claim that might flow from the use of a defective automobile. Such claims are nowhere mentioned. The draftsmanship is reflective of the care and skill of the Automobile Manufacturers Association in undertaking to avoid warranty obligations without drawing too much attention to its effort in that regard. No one can doubt that if the will to do so were present, the ability to inform the buying public of the intention to disclaim liability for injury claims arising from breach of warranty would present no problem.

In this connection, attention is drawn to the Plymouth Owner Certificate mentioned earlier. Obviously, Chrysler is aware of it because the New Car Preparation Service Guide sent from the factory to the dealer directs that it be given to the purchaser. That certificate contains a paragraph called [401] "Explanation of Warranty." Its entire tenor relates to replacement of defective parts. There is nothing about it to stimulate the idea that the intention of the warranty is to exclude personal injury claims.

At this point, a recent decision of the New York Court of Appeals is relevant. In Lachs v. Fidelity & Casualty Co. of New York, 306 N.Y. 357, 118 N.E.2d 555, 557 (1954), the plaintiff's mother went to Newark Airport in order to obtain a plane flight to Miami, Florida. A vending machine was located in front of the Air Service counter where she obtained her transportation ticket. On the machine, in letters ten times as large as any other words on it, appeared "Airline Trip Insurance." Over that legend was a well illuminated display of airplanes flying round and round, and in large characters the words and numerals "25¢ For Each $5,000. Maximum $25,000." Below that on a placard, in letters "many times" the size of the other words thereon, was printed:

"Domestic

Airline Trip Insurance

25¢ for each $5,000. Maximum $25,000."

Below, in much smaller print on the same placard, appeared:

"Covers one-way flight shown on application * * * completed in 12 months within [certain points] on any scheduled airline. Policy void outside above limits."

The application mentioned was obtained by inserting 25¢ in a slot for each $5,000 of insurance desired. The application says, among other things: "I hereby apply to Company named below for Airline Trip Insurance to insure me on one Airline trip between:- * * *." Provision is made therein for the naming of a beneficiary and for the signature of the applicant.

Upon completion of the application, the prospective insured pressed a button and a policy of insurance emerged from the machine. The contract was about 11 inches long [402] and both sides of it were filled with printed matter. Across the front of it, in large letters which obliterated some of the printing beneath, was the statement: "This Policy Is Limited To Aircraft Accidents. Read It Carefully." The coverage clause on page 1 said:

"This insurance shall apply only to such injuries sustained following the purchase by or for the Insured of a transportation ticket from * * * a Scheduled Airline during any portion of the first one way or round airline trip covered by such transportation ticket * * * in consequence of: (a) boarding, riding as a passenger in * * * any aircraft operated on a regular or special or chartered flight by a Civilian Scheduled Airline maintaining regular, published schedules and licensed for interstate, intrastate or international transportation of passengers by the Governmental Authority having jurisdiction over Civil Aviation * * *." 118 N.E.2d, at page 557.

The mother's plane ticket (plaintiff was the named beneficiary) was for transportation on a Miami Airline, Inc. plane. It crashed on the way to Florida and she was killed. The insurance carrier refused to pay on the ground that the flight was not operated by a Civilian Scheduled Airline. The court sustained the refusal to dismiss the complaint, saying:

"What contract of insurance, then, did the decedent purchase? She intended to buy coverage for her flight to Miami. The defendant says it did not intend to cover her on that flight. We all know that a contract of insurance, drawn by the insurer, must be read through the eyes of the average man on the street or the average housewife who purchases it. Neither of them is expected to carry the Civil Aeronautics Act or the Code of Federal Regulations when taking a plane. * * * Was the decedent entitled to believe that she had purchased `Airline Trip Insurance' through a policy `Limited To Aircraft Accidents'? It seems to us that a jury could find that when decedent purchased her policy on an application for `Airline Trip Insurance' from a machine having in prominent lighting those same three words, before obtaining her ticket from a counter in front of which the machine stood, she was covered on her flight, since the minds of the decedent and the company had met on that basis. * * *

* * * As we pointed out in Hartol Products Corp. v. Prudential Ins. Co., supra, the burden in such a case as this is on the [403] defendant to establish that the words and expressions used not only are susceptible of the construction sought by defendant but that it is the only construction which may fairly be placed on them. The defendant in its large illuminated lettering and in its application could have added proper, unambiguous words or a definition or could have avoided allowing its vending machine to be placed in front of the ticket counter `utilized by all non-scheduled airlines operating out of the Newark Airport,' thus removing the ambiguity or equivocal character of the invitation to insure, of the application for insurance and the contract of insurance itself." 118 N.E.2d, at pages 558-559. (Emphasis ours)

The task of the judiciary is to administer the spirit as well as the letter of the law. On issues such as the present one, part of that burden is to protect the ordinary man against the loss of important rights through what, in effect, is the unilateral act of the manufacturer. The status of the automobile industry is unique. Manufacturers are few in number and strong in bargaining position. In the matter of warranties on the sale of their products, the Automotive Manufacturers Association has enabled them to present a united front. From the standpoint of the purchaser, there can be no arms length negotiating on the subject. Because his capacity for bargaining is so grossly unequal, the inexorable conclusion which follows is that he is not permitted to bargain at all. He must take or leave the automobile on the warranty terms dictated by the maker. He cannot turn to a competitor for better security.

Public policy is a term not easily defined. Its significance varies as the habits and needs of a people may vary. It is not static and the field of application is an ever increasing one. A contract, or a particular provision therein, valid in one era may be wholly opposed to the public policy of another. See Collopy v. Newark Eye & Ear Infirmary, 27 N.J. 29, 39 (1958). Courts keep in mind the principle that the best interests of society demand that persons should not be unnecessarily restricted in their freedom to contract. But they do not hesitate to declare void as against public policy contractual provisions which clearly tend to the injury of [404] the public in some way. Hodnick v. Fidelity Trust Co., 96 Ind. App. 342, 183 N.E. 488 (App. Ct. 1932).

Public policy at a given time finds expression in the Constitution, the statutory law and in judicial decisions. In the area of sale of goods, the legislative will has imposed an implied warranty of merchantability as a general incident of sale of an automobile by description. The warranty does not depend upon the affirmative intention of the parties. It is a child of the law; it annexes itself to the contract because of the very nature of the transaction. Minneapolis Steel & Machinery Co. v. Casey Land Agency, 51 N.D. 832, 201 N.W. 172 (Sup. Ct. 1924). The judicial process has recognized a right to recover damages for personal injuries arising from a breach of that warranty. The disclaimer of the implied warranty and exclusion of all obligations except those specifically assumed by the express warranty signify a studied effort to frustrate that protection. True, the Sales Act authorizes agreements between buyer and seller qualifying the warranty obligations. But quite obviously the Legislature contemplated lawful stipulations (which are determined by the circumstances of a particular case) arrived at freely by parties of relatively equal bargaining strength. The lawmakers did not authorize the automobile manufacturer to use its grossly disproportionate bargaining power to relieve itself from liability and to impose on the ordinary buyer, who in effect has no real freedom of choice, the grave danger of injury to himself and others that attends the sale of such a dangerous instrumentality as a defectively made automobile. In the framework of this case, illuminated as it is by the facts and the many decisions noted, we are of the opinion that Chrysler's attempted disclaimer of an implied warranty of merchantability and of the obligations arising therefrom is so inimical to the public good as to compel an adjudication of its invalidity. See 57 Yale L.J., supra, at pp. 1400-1404; proposed Uniform Commercial Code, 1958 Official Text, § 202.

[405] The trial court sent the case to the jury against Chrysler on the theory that the evidence would support a finding of breach of an implied warranty of merchantability. In fact, at one point in his charge he seemed to say that as a matter of law such a warranty existed. He also told them that:

"A provision in a purchase order for an automobile that an express warranty shall exclude all implied warranties will not be given effect so as to defeat an implied warranty that the machine shall be fit for the purposes for which it was intended unless its inclusion in the contract was fairly procured or obtained."

Thereafter, the court charged that when the car was sold a warranty arose that it was reasonably suited for ordinary use, and that if they found that it was defective and "not reasonably suited for ordinary driving" liability would exist "provided * * * you find there was an implied warranty and a breach thereof." The reasonable inference to be drawn from the whole context is that a preliminary finding against the binding effect of the disclaimer would have to be made, i.e., that the disclaimer was not "fairly procured," before an implied warranty could be deemed to exist. Even assuming that the duty to make such a finding was not as explicit as it should have been, in view of our holding that the disclaimer is void as a matter of law, the charge was more favorable to the defendant than the law required it to be. The verdict in favor of the plaintiffs and against Chrysler Corporation establishes that the jury found that the disclaimer was not fairly obtained. Thus, this defendant cannot claim to have been prejudiced by a jury finding on an aspect of the case which the court should have disposed of as a matter of law.

Chrysler raises in this court for the first time the defense that plaintiffs' failure to give reasonable notice of the breach of warranty bars their recovery. The claim was not made in the answer, pretrial order, at the trial or as a ground of appeal in the brief filed on this review. It [406] was added by letter filed after oral argument. It comes too late for consideration at this point in the proceedings.

The same situation arose in National Equipment Corporation v. Moore, 189 Minn. 632, 250 N.W. 677 (Sup. Ct. 1933). The contention was rejected, the court saying:

"It is enough to say that no such defense to the counterclaim was pleaded, litigated, or submitted to the jury. There was some testimony as to whether certain complaints were made * * * but nothing to indicate to the court or opposing counsel that such evidence was directed to prove noncompliance with said section 8423, and no such issue was submitted, or requested to be submitted, to the jury." 250 N.W., at page 679.

III.

THE DEALER'S IMPLIED WARRANTY.

The principles that have been expounded as to the obligation of the manufacturer apply with equal force to the separate express warranty of the dealer. This is so, irrespective of the absence of the relationship of principal and agent between these defendants, because the manufacturer and the Association establish the warranty policy for the industry. The bargaining position of the dealer is inextricably bound by practice to that of the maker and the purchaser must take or leave the automobile, accompanied and encumbered as it is by the uniform warranty.

Moreover, it must be remembered that the actual contract was between Bloomfield Motors, Inc., and Claus Henningsen, and that the description of the car sold was included in the purchase order. Therefore, R.S. 46:30-21(2) annexed an implied warranty of merchantability to the agreement. Stuart v. Burlington Co. Farmers' Exchange, 90 N.J.L. 584 (E. & A. 1917); Adams v. Peter Tramontin Motor Sales, supra; Cassini v. Curtis Candy Co., 113 N.J.L. 91 (Sup. Ct. 1934); McCabe v. L.K. Liggett Drug Co., 330 Mass. 177, 112 N.E.2d 254 [407] (Sup. Jud. Ct. 1953); Ryan v. Progressive Grocery Stores, supra; Mahoney v. Shaker Square Beverages, Inc., supra; Prosser, Law of Torts, supra, at p. 495; Vold on Sales, supra, at pp. 436, 442-443; 1 Williston on Sales, supra, §§ 233, 242. It remains operative unless the disclaimer and liability limitation clauses were competent to exclude it and the ordinary remedy for its breach. It has been said that this doctrine is harsh on retailers who generally have only a limited opportunity for inspection of the car. But, as Chief Judge Cardozo said in Ryan, supra:

"The burden may be heavy. It is one of the hazards of the business.

* * * * * * * *

* * * In such circumstances, the law casts the burden on the seller, who may vouch in the manufacturer, if the latter was to blame. The loss in its final incidence will be borne where it is placed by the initial wrong." 175 N.E., at pages 106 and 107.

Re-examination of the purchase contract discloses an ambiguous situation with respect to the warranty position of the dealer. Section 7, on the reverse side thereof, says no warranties, express or implied, are made by the dealer or manufacturer except the express warranty of the manufacturer discussed above. However, the last paragraph of the section says that: "The dealer also agrees to promptly perform and fulfill all terms and conditions of the owner service policy." That policy, as noted above, sets forth the same manufacturer's warranty and then adds a stipulation substituting "dealer" in the context wherever "manufacturer" appears. Presumably the intention was to incorporate the policy into the sales contract by reference. Accepting that to be the dealer's intention, the binding character of the limitation on its liability to the buyer under the warranty is even less apparent than in the case of Chrysler. The uncontradicted proof shows that the policy was not shown or given to Henningsen prior to or at the time of execution of the sales agreement; it was delivered with the car. No [408] one suggests that the clause limiting the dealer's liability to replacement of defective parts and excluding implied warranties as well as responsibility for personal injury claims was specifically brought to Henningsen's attention, or that any attempt was made to make him understand that he was yielding his right, and that of any third person claiming in his right, to recover for such injuries.

For the reasons set forth in Part I hereof, we conclude that the disclaimer of an implied warranty of merchantability by the dealer, as well as the attempted elimination of all obligations other than replacement of defective parts, are violative of public policy and void.

The trial court submitted to the jury, on the same basis as in the claim against the manufacturer, the issue of whether the disclaimer provisions in the contract were fairly procured by the dealer. The dealer also contends that the language is susceptible of the conclusion that the jurors were told as a matter of law that an implied warranty of merchantability came into existence once the sale was made by him. As we have said, a reasonable purport of the instructions in context is that upon the evidence adduced at the trial a decision was to be made as to whether the disclaimer clauses were valid, and if it was found that they were not valid, then an implied warranty existed, breach of which would support plaintiffs' action. Submission of the case to the jury on that basis represented more favorable treatment than the dealer was entitled to receive. But assuming the contention to be correct that the only conclusion to be drawn from the court's statements is that the jury were told that an implied warranty of merchantability arose from the sale as a matter of law, and that they were to decide if the proof demonstrated a breach of it, such advice was correct for the public policy reasons already expressed. Under the circumstances, there is nothing in defendant Bloomfield Motors' criticism of the charge on that score which would warrant reversal of the judgment.

[409] IV.

PROOF OF BREACH OF THE IMPLIED WARRANTY OF MERCHANTABILITY.

Both defendants argue that the proof adduced by plaintiffs as to the happening of the accident was not sufficient to demonstrate a breach of warranty. Consequently, they claim that their motion for judgment should have been granted by the trial court. We cannot agree. In our view, the total effect of the circumstances shown from purchase to accident is adequate to raise an inference that the car was defective and that such condition was causally related to the mishap. See, Yormack v. Farmers' Co-op. Ass'n of N.J., 11 N.J. Super. 416 (App. Div. 1951); Knapp v. Willys-Ardmore, Inc., supra. Thus, determination by the jury was required.

The proof adduced by the plaintiffs disclosed that after servicing and delivery of the car, it operated normally during the succeeding ten days, so far as the Henningsens could tell. They had no difficulty or mishap of any kind, and it neither had nor required any servicing. It was driven by them alone. The owners service certificate provided for return for further servicing at the end of the first 1,000 miles — less than half of which had been covered at the time of Mrs. Henningsen's injury.

The facts, detailed above, show that on the day of the accident, ten days after delivery, Mrs. Henningsen was driving in a normal fashion, on a smooth highway, when unexpectedly the steering wheel and the front wheels of the car went into the bizarre action described. Can it reasonably be said that the circumstances do not warrant an inference of unsuitability for ordinary use against the manufacturer and the dealer? Obviously there is nothing in the proof to indicate in the slightest that the most unusual action of the steering wheel was caused by Mrs. Henningsen's operation of the automobile on this day, or by the use of the car between delivery and the happening of the incident. Nor is there [410] anything to suggest that any external force or condition unrelated to the manufacturing or servicing of the car operated as an inducing or even concurring factor.

It is a commonplace of our law that on a motion for dismissal all of the evidence and the inferences therefrom must be taken most favorably to the plaintiff. And if reasonable men studying the proof in that light could conclude that the car was not merchantable, the issue had to be submitted to the jury for determination. Applying that test here, we have no hesitation in holding that the settlement of the question of breach of warranty as to both defendants was properly placed in the hands of the jury. In our judgment, the evidence shown, as a matter of preponderance of probabilities, would justify the conclusion by the ultimate triers of the facts that the accident was caused by a failure of the steering mechanism of the car and that such failure constituted a breach of the warranty of both defendants.

A somewhat similar case is Knapp v. Willys-Ardmore, Inc., supra, where liability was predicated upon breach of implied warranty of merchantability. Plaintiff bought a new car from defendant and drove it 107 miles in eight days. During that period it was used only for pleasure and was driven properly and without incident. Immediately before the accident, Mrs. Knapp was driving along at a moderate speed, when the steering mechanism failed to function and the car suddenly veered to the right over the curb and into a telephone pole. After the collision it was noted that the tie-rod at the right end of the steering assembly had become disconnected and had dropped to the ground. Inspection showed that the rod had been bent and a connecting sleeve or turn-buckle had been broken. A witness who had been driving in the opposite direction testified that he observed the right front wheel "wobbling" and the car "seemed to go out of control," over the curb and into the pole. A mechanic gave some testimony from which it might be inferred that the tie-rod had been broken before the impact with the pole. [411] It was held that the facts created a reasonable inference that the car was defective when delivered and that the defect was not caused by subsequent conduct of the plaintiff. The court pointed out that while existence of a defect cannot be found on the basis of mere conjecture or guess, yet it is not necessary to exclude every other possible cause which the ingenuity of counsel might suggest. The finding of breach of an implied warranty of merchantability was held to be circumstantially supportable by the necessary quantum of proof.

It may be conceded that the opinion of the automobile expert produced by the plaintiffs in the present case was not entitled to very much probative force. However, his assertion in answer to the hypothetical question that the unusual action of the steering wheel and front wheels must have been due to a mechanical defect or failure of something from the steering wheel down to the front wheels, that "something down there had to drop off or break loose" to cause the car to act in the manner it did, cannot be rejected as a matter of law. Its evaluation under all of the circumstances was a matter for jury consideration. Defendants argue that the proof of his qualifications was not adequate to warrant the admission of his testimony. But the matter of an expert's competency to testify is primarily for the discretion of the trial court. An appellate tribunal will not interfere unless a clear abuse of discretion appears. Carbone v. Warburton, 11 N.J. 418 (1953). In our view, the experience of the witness, as an automobile repairman and as an appraiser of damaged cars, was such as to preclude a holding by us that the trial court accepted his qualifications without any reasonable basis.

In M. Dietz & Sons, Inc. v. Miller, 43 N.J. Super. 334 (App. Div. 1957), defendant purchased a new car from a dealer. He drove it only 50 miles when, on the day of the accident while driving in traffic, he applied the brakes in order to stop in back of the Dietz vehicle. The brakes failed completely and Miller ran into the rear of that car. [412] Dietz sued Miller, who cross-claimed against the dealer for negligent installation or inspection of the power brakes. The Appellate Division properly declared that "even where the rule of res ipsa loquitur does not apply, the plaintiff may nevertheless show `defendant's negligence by circumstantial or direct evidence of specific acts from which liability may be inferred.'" Supra, at page 338. And further that: "The real issue here is the efficacy of the circumstantial proof to create a fact issue as to defendant's negligence either in installation or inspection of the unit upon installation. There can be no doubt as to the sufficiency of the evidence to justify the finding that there was a power brake failure * * *." Supra, at pages 338-339. And see, Mazzietelle v. Belleville Nutley Buick Co., 46 N.J. Super. 410 (App. Div. 1957); Yormack v. Farmers' Co-op. Ass'n of N.J., supra. Although these latter cases sound in negligence, the test for finding a jury question in them is even more stringent. Circumstantial evidence sufficient to create a jury question as to the negligence of a manufacturer or dealer would clearly justify the same result where the issue is breach of warranty. As the late Chief Justice Vanderbilt said, in Simon v. Graham Bakery, supra, liability would exist notwithstanding all care was used to prevent a breach.

V.

THE DEFENSE OF LACK OF PRIVITY AGAINST MRS. HENNINGSEN.

Both defendants contend that since there was no privity of contract between them and Mrs. Henningsen, she cannot recover for breach of any warranty made by either of them. On the facts, as they were developed, we agree that she was not a party to the purchase agreement. Faber v. Creswick, 31 N.J. 234 (1959). Her right to maintain the action, therefore, depends upon whether she occupies such legal status thereunder as to permit her to take advantage of a breach of defendants' implied warranties.

[413] For the most part the cases that have been considered dealt with the right of the buyer or consumer to maintain an action against the manufacturer where the contract of sale was with a dealer and the buyer had no contractual relationship with the manufacturer. In the present matter, the basic contractual relationship is between Claus Henningsen, Chrysler, and Bloomfield Motors, Inc. The precise issue presented is whether Mrs. Henningsen, who is not a party to their respective warranties, may claim under them. In our judgment, the principles of those cases and the supporting texts are just as proximately applicable to her situation. We are convinced that the cause of justice in this area of the law can be served only by recognizing that she is such a person who, in the reasonable contemplation of the parties to the warranty, might be expected to become a user of the automobile. Accordingly, her lack of privity does not stand in the way of prosecution of the injury suit against the defendant Chrysler.

The context in which the problem of privity with respect to the dealer must be considered, is much the same. Defendant Bloomfield Motors is chargeable with an implied warranty of merchantability to Claus Henningsen. There is no need to engage in a separate or extended discussion of the question. The legal principles which control are the same in quality. The manufacturer establishes the network of trade and the dealer is a unit utilized in that network to accomplish sales. He is the beneficiary of the same express and implied warranties from the manufacturer as he extends to the buyer of the automobile. If he is sued alone, he may implead the manufacturer. Davis v. Radford, 233 N.C. 283, 63 S.E.2d 822, 24 A.L.R.2d 906 (Sup. Ct. 1951); Annotation, 24 A.L.R.2d 913 (1952). His understanding of the expected use of the car by persons other than the buyer is the same as that of the manufacturer. And so, his claim to the doctrine of privity should rise no higher than that of the manufacturer. See, e.g., Haut v. [414] Kleene, supra; Greenberg v. Lorenz, supra; Ryan v. Progressive Grocery Stores, Inc., supra.

The situation before us in its legal aspects is very similar to that which we dealt with recently in Faber v. Creswick, supra. There, in a landlord and tenant relationship the lease contained a covenant to have the premises in good repair at the inception of the occupancy. The wife of the tenant was injured by reason of a breach of that agreement. We held that she was entitled to recover damages even though she was not a party to the lease. In doing so, our approval was given to the doctrine proposed by Section 357 of the Restatement of Torts that where a lessor agrees to keep the premises let in good repair, he is subject to liability for bodily harm caused to the lessee and others on the land with his consent by a condition of disrepair. True, the suit in Faber was in tort while this one is in contract. But it cannot be overlooked that historically actions on warranties were in tort also, sounding in deceit. Simon v. Graham Bakery, supra, 17 N.J., at pages 528, 529; 1 Williston on Sales, supra, §§ 195-197. The contract theory gradually emerged, although the tort idea has continued to lurk in the background, making the warranty "a curious hybrid of tort and contract." Prosser, supra, § 83. An awareness of this evolution makes for ready acceptance of the relaxation of rigid concepts of privity when third persons, who in the reasonable contemplation of the parties to a warranty might be expected to use or consume the product sold, are injured by its unwholesome or defective state.

It is important to express the right of Mrs. Henningsen to maintain her action in terms of a general principle. To what extent may lack of privity be disregarded in suits on such warranties? In that regard, the Faber case points the way. By a parity of reasoning, it is our opinion that an implied warranty of merchantability chargeable to either an automobile manufacturer or a dealer extends to the purchaser of the car, members of his family, and to other persons occupying or using it with his consent. It would be [415] wholly opposed to reality to say that use by such persons is not within the anticipation of parties to such a warranty of reasonable suitability of an automobile for ordinary highway operation. Those persons must be considered within the distributive chain.

Harper and James suggest that this remedy ought to run to members of the public, bystanders, for example, who are in the path of harm from a defective automobile. 2 Harper & James, supra, note 6, p. 1572. Section 2-318 of the Uniform Commercial Code proposes that the warranty be extended to "any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty." And the section provides also that "A seller may not exclude or limit the operation" of the extension. A footnote thereto says that beyond this provision "the section is neutral and is not intended to enlarge or restrict the developing case law on whether the seller's warranties, given to his buyer, who resells, extend to other persons in the distributive chain." Uniform Commercial Code, supra, at p. 100.

It is not necessary in this case to establish the outside limits of the warranty protection. For present purposes, with respect to automobiles, it suffices to promulgate the principle set forth above.

In his charge as to Mrs. Henningsen's right to recover on the implied warranty, the trial court referred to her husband's testimony that he was buying the car for her use, and then instructed the jury that on such facts the warranty extended to her. In view of our holding, obviously the protection of the warranty runs to her as an incident of the sale without regard to such testimony. Accordingly, the contention that the instruction was reversible error must be rejected.

Defendants rely upon certain cases for the proposition that lack of privity of contract bars Mrs. Henningsen's recovery. [416] The pertinent ones are Tomlinson v. Armour & Co., supra; Cassini v. Curtis Candy Co., supra; Schlosser v. Goldberg, 123 N.J.L. 470 (Sup. Ct. 1939); General Home, etc., Co. v. American, etc., Inc., 26 N.J. Misc. 24 (Cir. Ct. 1947). Tomlinson v. Armour & Co. provides the foundation for the others. It was decided 52 years ago and the principle on which defendants seek support for their case is contained in a short statement which, if applied in the light of the modern marketing conditions, is not inconsistent with the basic substance of the rule we have now espoused. In discussing the legal consequences of a sale of canned ham, Chancellor Pitney said:

"Whether a warranty be express or implied, it is a matter of contract, rendering the maker liable in case of breach, notwithstanding he used all care to prevent a breach, but rendering him liable in ordinary circumstances only to the party with whom he contracted, or to others for whose benefit the contract was made." 75 N.J.L., at pages 754-755. (Emphasis ours)

In 1908, the need of the community for the making of distinctions growing out of the nature of the contract was not as pressing as it is in this commercial era. A common rule was applied, as indicated by the citation of Marvin Safe Co. v. Ward, 46 N.J.L. 19 (Sup. Ct. 1884), and Styles v. F.R. Long Company, 67 N.J.L. 413 (Sup. Ct. 1902), which involved agreements wholly unrelated to the sale of products for consumer use. In this day, given the present situation, it is extremely unlikely that such an enlightened jurist as Chancellor Pitney would not find his expression that "others for whose benefit the contract was made" could sue for its breach compatible in spirit with the doctrine we deem to be necessary in the interest of justice. In any event, to the extent that Tomlinson v. Armour & Co. and its cited progeny conflict with our ruling, they can no longer be considered the law of this State. See Collopy v. Newark Eye and Ear Infirmary, supra.

The final argument on this point relates to the damage claim of Claus Henningsen. That claim has two [417] aspects: one for property damage to the automobile and the other for medical and hospital expenses and loss of his wife's society and services. As to the first, he being an actual party to the contract of sale, and the owner of the automobile, clearly the property damage is recoverable. The second claim is a derivative one, stemming from his wife's right. Faber v. Creswick, supra. But it is universally known that in family relations husbands and fathers are ordinarily responsible for such expenses of spouses and children. It would be illogical to accept the right of a wife to recover in contract for breach of warranty and to hold that the husband's derivative claim was not within the contemplation of the parties when the agreement of sale was made. For this reason it was proper to submit Henningsen's consequential losses to the jury as an element of damage.

VI.

Plaintiffs contend on cross-appeal that the negligence claim against the defendants should not have been dismissed. Their position is that on the facts developed, the issue should have been submitted to the jury for determination. The result we have reached on the other aspects of the case makes it unnecessary to consider the problem. For that reason we express no opinion thereon.

All other ground of appeal raised by both parties have been examined and we find no reversible error in any of them.

VII.

Under all of the circumstances outlined above, the judgments in favor of the plaintiffs and against defendants are affirmed.

For affirmance — Chief Justice WEINTRAUB, and Justices BURLING, JACOBS, FRANCIS, PROCTOR and SCHETTINO — 6.

For reversal — None.

350 F.2d 445

Ora Lee WILLIAMS, Appellant, v. WALKER-THOMAS FURNITURE COMPANY, Appellee. William THORNE et al., Appellants, v. WALKER-THOMAS FURNITURE COMPANY, Appellee.

Nos. 18604, 18605.

United States Court of Appeals District of Columbia Circuit

Argued April 9, 1965.

Decided Aug. 11, 1965.

Mr. Pierre E. Dostert, Washington, D. C., counsel for appellants in No. 18,605, argued for all appellants.

Mr. R. R. Curry, Washington, D. C., for appellant in No. 18,604.

Mr. Harry Protas, Washington, D. C., for appellee.

Mr. Gerhard P. Van Arkel (appointed by this court), Washington, D. C., as amicus curiae.

Before Bazelon, Chief Judge, and Danaher and Wright, Circuit Judges.

J. SKELLY WRIGHT, Circuit Judge:

Appellee, Walker-Thomas Furniture Company, operates a retail furniture store in the District of Columbia. During the period from 1957 to 1962 each appellant in these cases purchased a number of household items from Walker-Thomas, for which payment was to be made in installments. The terms of each purchase were contained in a printed form contract which set forth the value of the purchased item and purported to lease the item to appellant for a stipulated monthly rent payment. The contract then provided, in substance, that title would remain in Walker-Thomas until the total of all the monthly payments made equaled the stated value of the item, at which time appellants could take title. In the event of a default in the payment of any monthly installment, Walker-Thomas could repossess the item.

The contract further provided that “the amount of each periodical installment payment to be made by [purchaser] to the Company under this present lease shall be inclusive of and not in addition to the amount of each installment payment to be made by [purchaser] under such prior leases, bills or accounts; and all payments now and hereafter made by [:purchaser] shall be credited pro rata on all outstanding leases, bills and accounts due the Company by [purchaser] at the time each such payment is made.” Emphasis added.) The effect of this rather obscure provision was to keep a balance due on every item purchased until the balance due on all items, whenever purchased, was liquidated. As a result, the debt incurred at the time of purchase of each item was secured by the right to repossess all the items previously purchased by the same purchaser, and each new item purchased automatically became subject to a security interest arising out of the previous dealings.

On May 12, 1962, appellant Thorne purchased an item described as a Daveno, three tables, and two lamps, having total stated value of $391.10. Shortly thereafter, he defaulted on his monthly payments and appellee sought to replevy all the items purchased since the first transaction in 1958. Similarly, on April 17, 1962, appellant Williams bought a stereo set of stated value of $514.95.1 She too defaulted shortly thereafter, and appellee sought to replevy all the items purchased since December, 1957. The Court of General Sessions granted judgment for appellee. The District of Columbia Court of Appeals affirmed, and we granted appellants’ motion for leave to appeal to this court.

Appellants’ principal contention, rejected by both the trial and the appellate courts below, is that these contracts, or at least some of them, are unconscionable and, hence, not enforceable. In its opinion in Williams v. Walker-Thomas Furniture Company, 198 A.2d 914, 916 (1964), the District of Columbia Court of Appeals explained its rejection of this contention as follows:

“Appellant’s second argument presents a more serious question. The record reveals that prior to the last purchase appellant had reduced the balance in her account to $164. The last purchase, a stereo set, raised the balance due to $678. Significantly, at the time of this and the preceding purchases, appellee was aware of appellant’s financial position. The reverse side of the stereo contract listed the name of appellant’s social worker and her $218 monthly stipend from the government. Nevertheless, with full knowledge that appellant had to feed, clothe and support both herself and seven children on this amount, appellee sold her a $514 stereo set.

“We cannot condemn too strongly appellee’s conduct. It raises serious questions of sharp practice and irresponsible business dealings. A review of the legislation in the District of Columbia affecting retail sales and the pertinent decisions of the highest court in this jurisdiction disclose, however, no ground upon which this court can declare the contracts in question contrary to public policy. We note that were the Maryland Retail Installment Sales Act, Art. 83 §§ 128-153, or its equivalent, in force in the District of Columbia, we could grant appellant appropriate relief. We think Congress should consider corrective legislation to protect the public from such exploitive contracts as were utilized in the case at bar.”

We do not agree that the court lacked the power to refuse enforcement to contracts found to be unconscionable. In other jurisdictions, it has been held as a matter of common law that unconscionable contracts are not enforceable.2 While no decision of this court so holding has been found, the notion that an unconscionable bargain should not be given full enforcement is by no means novel. In Scott v. United States, 79 U.S. (12 Wall.) 443, 445, 20 L.Ed. 438 (1870), the Supreme Court stated:

“ ■>:■ -x- * j£ a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to. * * * ” 3

Since we have never adopted or rejected such a rule,4 the question here presented is actually one of first impression.

Congress has recently enacted the Uniform Commercial Code, which specifically provides that the court may refuse - to enforce a contract which it finds to be unconscionable at the time it was made. 28 D.C.Code § 2-302 (Supp. IV 1965). The enactment of this section, which occurred subsequent to the contracts here in suit, does not mean that the common law of the District of Columbia was otherwise at the time of enactment, nor does it preclude the court from adopting a similar rule in the exercise of its powers to develop the common law for the District of Columbia. In fact, in view of the absence of prior authority-on the point, we consider the congressional adoption of § 2-302 persuasive authority for following the rationale of the cases from which the section is explicitly derived.5 Accordingly, we hold that where the element of unconscionability is present at the time a contract is made, the contract should not be enforced.

Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.6 Whether a meaningful choice is present in a particular case can only be determined by consideration of all the circumstances surrounding the transaction. In many cases the meaningfulness of the choice is negated by a gross inequality of bargaining power.7 The manner in which the contract was entered is also relevant to this consideration. Did each party to the contract, considering his obvious education or lack of it, have a reasonable opportunity to understand the terms of the contract, or were the important terms hidden in a maze of fine print and minimized by deceptive sales practices? Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain.8 But when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms. In such a case the usual rule that the terms of the agreement are not to be questioned9 should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld.10

In determining reasonableness or fairness, the primary concern must be with the terms of the contract considered in light of the circumstances existing when the contract was made. The test is not simple, nor can it be mechanically applied. The terms are to be considered “in the light of the general commercial background and the commercial needs of the particular trade or case.”11 Corbin suggests the test as being whether the terms are “so extreme as to appear unconscionable according to the mores and business practices of the time and place.” 1 CORBIN, op. cit. supra Note 2.12 We think this formulation correctly states the test to be applied in those cases where no meaningful choice was exercised upon entering the contract.

Because the trial court and the appellate court did not feel that enforcement could be refused, no findings were made on the possible unconscionability of the contracts in these cases. Since the record is not sufficient for our deciding the issue as a matter of law, the cases must be remanded to the trial court for further proceedings.

So ordered.

1

. At the time of this purchase her account showed a balance of $164 still owing from her prior purchases. The total of all the purchases made over the years in Question came to $1,800. The total payments amounted to $1,400.

2

. Campbell Soup Co. v. Wentz, 3 Cir., 172 F.2d 80 (1948); Indianapolis Morris Plan Corporation v. Sparks, 132 Ind.App. 145, 172 N.E.2d 899 (1961); Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69, 84-96, 75 A.L.R.2d 1 (1960). Cf. 1 Corbin, Contracts § 128 (1963).

3

. See Luing v. Peterson, 143 Minn. 6, 172 N.W. 692 (1919); Greer v. Tweed, N.Y. C.P., 13 Abb.Pr., N.S., 427 (1872); Schnell v. Nell, 17 Ind. 29 (1861); and see generally the discussion of the English authorities in Hume v. United States, 132 U.S. 406, 10 S.Ct. 134, 33 L.Ed. 393 (1889).

4

.Wliile some of tbe statements in the court’s opinion in District of Columbia v. Harlan & Hollingsworth Co., 30 App.D.C. 270 (1908), may appear to reject the rule, in reaching its decision upholding the liquidated damages clause in that ease the court considered the circumstances existing at the time the contract was made, see 30 App.D.C. at 279, and applied the usual rule on liquidated damages. See 5 Corbin, Contracts §§ 1054-075 (1964); Note, 72 Yale L.J. 723, 746-755 (1963). Compare Jaeger v. O’Donoghue, 57 App.D.C. 191, 18 F.2d 1013 (1927).

5

. See Comment, § 2-302, Uniform Commercial Code (1962). Compare Note, 45 Ya.L.Rev. 583, 590 (1959), where it is predicted that the rule of § 2-302 will be followed by analogy in cases which involve contracts not specifically covered by the section. Gf. 1 State of New York Law Revision Commission, Report and Record of Hearings on the Uniform Commercial Code 108-110 (1954) (remarks of Professor Llewellyn).

6

. See Henningsen v. Bloomfield Motors, Inc., supra Note 2; Campbell Soup Co. v. Wentz, supra Note 2.

7

. See Henningsen v. Bloomfield Motors, Inc., supra Note 2, 161 A.2d at 86, and authorities there cited. Inquiry into the relative bargaining power of the two parties is not an inquiry wholly divorced from the general question of uneonscionability, since a one-sided bargain is itself evidence of the inequality of the bargaining parties. This fact was vaguely recognized in the common law doctrine of intrinsic fraud, that is, fraud which can be presumed from the grossly unfair nature of the terms of the contract. See the oft-quoted statement of Lord Hardwicke in Earl of Chesterfield v. Janssen, 28 Eng. Rep. 82, 100 (1751) :

11 * * * [Fraud] may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make * *

And of. Hume v. United States, supra Note 3, 132 U.S. at 413, 10 S.Ct. at 137, where the Court characterized the English cases as “eases in which one party took advantage of the other’s ignorance of arithmetic to impose upon him, and the fraud was apparent from the face of the contracts.” See also Greer v. Tweed, supra Note 3.

8

. See Restatement, Contracts § 70 (1932); Note, 63 Harv.L.Rev. 494 (1950). See also Daley v. People’s Building, Loan & Savings Ass’n, 178 Mass. 13, 59 N.E. 452, 453 (1901), in which Mr. Justice Holmes, while sitting on the Supreme Judicial Court of Massachusetts, made this observation:

“ * * * Courts are less and loss disposed to interfere with parties making such contracts as they choose, so long as they interfere with no one’s welfare but their own. * * * It will be understood that we are speaking of parties standing in an equal position where neither has any oppressive advantage or power * *

9

. Tliis rule has never been without exception. In eases involving merely the transfer of unequal amounts of the same commodity, the courts have held the bargain unenforceable for the reason that “in such a case, it is clear, that the law cannot indulge in the presumption of equivalence between the consideration and the promise.” 1 Williston, Contracts § 115 (3d cd. 1957).

10

. See the general discussion of “BoilerPlate Agreements” in Llewellyn, Tiie Common Law Tradition 362-371 (1960).

11

. Comment, Uniform Commercial Code § 2-307.

12

. See Henningsen v. Bloomfield Motors, Inc., supra Note 2; Mandel v. Liebman, 303 N.Y. 88, 100 N.E.2d 149 (1951). The traditional test as stated in Greer v. Tweed, supra Note 3, 13 Abb.Pr.,N.S., at 429, is “such as no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other.”

DANAHER, Circuit Judge

(dissenting) :

The District of Columbia Court of Appeals obviously was as unhappy about the situation here presented as any of us can possibly be. Its opinion in the Williams case, quoted in the majority text, concludes: “We think Congress should consider corrective legislation to protect the public from such exploitive contracts as were utilized in the case at bar.”

My view is thus summed up by an able court which made no finding that there had actually been sharp practice. Rather the appellant seems to have known precisely where she stood.

There are many aspects of public policy here involved. What is a luxury to some may seem an outright necessity to others. Is public oversight to be required of the expenditures of relief funds? A washing machine, e. g., in the hands of a relief client might become a fruitful source of income. Many relief clients may well need credit, and certain business establishments will take long chances on the sale of items, expecting their pricing policies will afford a degree of protection commensurate with the risk. Perhaps a remedy when necessary will be found within the provisions of the “Loan Shark” law, D.C.Code §§ 26-601 et seq. (1961).

I mention such matters only to emphasize the desirability of a cautious approach to any such problem, particularly since the law for so long has allowed parties such great latitude in making their own contracts. I dare say there must annually be thousands upon thousands of installment credit transactions in this jurisdiction, and one can only speculate as to the effect the decision in these cases will have.1

I join the District of Columbia Court of Appeals in its disposition of the issues.

1

. However the provision ultimately may be applied or in what circumstances, D.C. Code § 28-2-301 (Supp. IV, 1965) did not become effective until January 1, 1965.

          This is a writ of error to the county court of Oneida county, in the state of New York (to which court the record had been remitted), to review the judgment of the court of appeals of that state, affirming the judgment of the supreme court, which itself affirmed the judgment of the county court, convicting the defendant of a misdemeanor on an indictment under a statute of that state, known, by its short title, as the labor

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law. The section of the statute under which the indictment was found is § 110, and is reproduced in the margin (together with the other sections of the labor law upon the subject of bakeries, being §§ 111 to 115, both inclusive).

          The indictment averred that the defendant 'wrongfully and unlawfully required and permitted an employee working for him in his biscuit, bread, and cake bakery and confectionery establishment, at the city of Utica, in this county, to work more than sixty hours in one week,' after having been theretofore convicted of a violation of the name act; and therefore, as averred, he committed the crime of misdemeanor, second offense. The plaintiff in error demurred to the indictment on several grounds, one of which was that the facts stated did not

                '§ 110, Hours of labor in bakeries and confectionery establishments.—No employee shall be required or permitted to work in a biscuit, bread, or cake bakery or confectionery establishment more than sixty hours in any one week, or more than ten hours in any one day, unless for the purpose of making a shorter work day on the last day of the week; nor more hours in any one week than will make an average of ten hours per day for the number of days during such week in which such employee shall work.

          '§ 111. Drainage and plumbing of buildings and rooms occupied by bakeries.—All buildings or rooms occupied as biscuit, bread, pie, or cake bakeries, shall be drained and plumbed in a manner conducive to the proper and healthful sanitary condition thereof, and shall be constructed with air shafts, windows, or ventilating pipes, sufficient to insure ventilation. The factory inspector may direct the proper drainage, plumbing, and ventilation of such rooms or buildings. No cellar or basement, not now used for a bakery, shall hereafter be so occupied or used, unless the proprietor shall comply with the sanitary provisions of this article.

          '§ 112. Requirements as to rooms, furniture, utensils, and manufactured products.—Every room used for the manufacture of flour or meal food products shall be at least 8 feet in height and shall have, if deemed necessary by the factory inspector, an impermeable floor constructed of cement, or of tiles laid in cement, or an additional flooring of wood properly saturated with linseed oil. The side walls of such rooms shall be plastered or wainscoted. The factory inspector may require the side walls and ceiling to be whitewashed at least once in three months. He may also require the wood work of such walls to be painted. The furniture and utensils shall be so arranged as to be readily cleansed and not prevent the proper cleaning of any part of the room. The manufactured flour or meal food products shall be kept in dry and airy rooms, so arranged that the floors, shelves, and all other facilities for storing the same can be properly cleaned. No domestic animals, except cats, shall be allowed to remain in a room used as a biscuit, bread, pie, or cake bakery, or any room in such bakery where flour or meal products are stored.

          '§ 113. Wash rooms and closets; sleeping places.—Every such bakery shall be provided with a proper wash room and water-closet, or water-closets, apart from the bake room, or rooms where the manufacture of such food product is conducted, and no water-closet, earth closet, privy, or ashpit shall be within, or connected directly with, the bake room of any bakery, hotel, or public restaurant.

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constitute a crime. The demurrer was overruled, and, the plaintiff in error having refused to plead further, a plea of not guilty was entered by order of the court and the trial commenced, and he was convicted of misdemeanor, second offense, as indicted, and sentenced to pay a fine of $50, and to stand committed until paid, not to exceed fifty days in the Oneida county jail. A certificate of reasonable doubt was granted by the county judge of Oneida county, whereon an appeal was taken to the appellate division of the supreme court, fourth department, where the judgment of conviction was affirmed. 73 App. Div. 120, 76 N. Y. Supp. 396. A further appeal was then taken to the court of appeals, where the judgment of conviction was again affirmed. 177 N. Y. 145, 101 Am. St. Rep. 773, 69 N. E. 373.

          Messrs. Frank Harvey Field and Henry Weismann (by special leave) for plaintiff in error.

Page 50

          Mr. Julius M. Mayer for defendant in error.

  [Argument of Counsel from pages 50-52 intentionally omitted]

Page 52

           Mr. Justice Peckham, after making the foregoing statement of the facts, delivered the opinion of the court:

          The indictment, it will be seen, charges that the plaintiff in error violated the 110th section of article 8, chapter 415, of the Laws of 1897, known as the labor law of the state of New York, in that he wrongfully and unlawfully required and permitted an employee working for him to work more than sixty hours in one week. There is nothing in any of the opinions delivered in this case, either in the supreme court or the court of appeals of the state, which construes the section, in using the word 'required,' as referring to any physical force being used to obtain the labor of an employee. It is assumed that the word means nothing more than the requirement arising from voluntary contract for such labor in excess of the number of hours specified in the statute. There is no pretense in any of the opinions that the statute was intended to meet a case of involuntary labor in any form. All the opinions assume that there is no real distinction, so far as this question is concerned, between the words 'required' and 'permitted.' The mandate of the statute, that 'no employee shall be required or permitted to work,' is the substantial equivalent of an enactment that 'no employee shall contract or agree to work,' more than ten hours per day; and, as there is no provision for special emergencies, the statute is mandatory in all cases. It is not an act merely fixing the number of hours which shall constitute a legal day's work, but an absolute prohibition upon the employer permitting, under any circumstances, more than ten hours' work to be done in his establishment. The employee may desire to earn the extra money which would arise from his working more than the prescribed

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time, but this statute forbids the employer from permitting the employee to earn it.

          The statute necessarily interferes with the right of contract between the employer and employees, concerning the number of hours in which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is part of the liberty of the individual protected by the 14th Amendment of the Federal Constitution. Allgeyer v. Louisiana, 165 U. S. 578, 41 L. ed. 832, 17 Sup. Ct. Rep. 427. Under that provision no state can deprive any person of life, liberty, or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment, unless there are circumstances which exclude the right. There are, however, certain powers, existing in the sovereignty of each state in the Union, somewhat vaguely termed police powers, the exact description and limitation of which have not been attempted by the courts. Those powers, broadly stated, and without, at present, any attempt at a more specific limitation, relate to the safety, health, morals, and general welfare of the public. Both property and liberty are held on such reasonable conditions as may be imposed by the governing power of the state in the exercise of those powers, and with such conditions the 14th Amendment was not designed to interfere. Mugler v. Kansas, 123 U. S. 623, 31 L. ed. 205, 8 Sup. Ct. Rep. 273; Re Kemmler, 136 U. S. 436, 34 L. ed. 519, 10 Sup. Ct. Rep. 930; Crowley v. Christensen, 137 U. S. 86, 34 L. ed. 620, 11 Sup. Ct. Rep. 13; Re Converse, 137 U. S. 624, 34 L. ed. 796, 11 Sup. Ct. Rep. 191.

          The state, therefore, has power to prevent the individual from making certain kinds of contracts, and in regard to them the Federal Constitution offers no protection. If the contract be one which the state, in the legitimate exercise of its police power, has the right to prohibit, it is not prevented from prohibiting it by the 14th Amendment. Contracts in violation of a statute, either of the Federal or state government, or a contract to let one's property for immoral purposes, or to do any other unlawful act, could obtain no protection from the Federal Constitution, as coming under the liberty of

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person or of free contract. Therefore, when the state, by its legislature, in the assumed exercise of its police powers, has passed an act which seriously limits the right to labor or the right of contract in regard to their means of livelihood between persons who are sui juris (both employer and employee), it becomes of great importance to determine which shall prevail,—the right of the individual to labor for such time as he may choose, or the right of the state to prevent the individual from laboring, or from entering into any contract to labor, beyond a certain time prescribed by the state.

          This court has recognized the existence and upheld the exercise of the police powers of the states in many cases which might fairly be considered as border ones, and it has, in the course of its determination of questions regarding the asserted invalidity of such statutes, on the ground of their violation of the rights secured by the Federal Constitution, been guided by rules of a very liberal nature, the application of which has resulted, in numerous instances, in upholding the validity of state statutes thus assailed. Among the later cases where the state law has been upheld by this court is that of Holden v. Hardy, 169 U. S. 366, 42 L. ed. 780, 18 Sup. Ct. Rep. 383. A provision in the act of the legislature of Utah was there under consideration, the act limiting the employment of workmen in all underground mines or workings, to eight hours per day, 'except in cases of emergency, where life or property is in imminent danger.' It also limited the hours of labor in smelting and other institutions for the reduction or refining of ores or metals to eight hours per day, except in like cases of emergency. The act was held to be a valid exercise of the police powers of the state. A review of many of the cases on the subject, decided by this and other courts, is given in the opinion. It was held that the kind of employment, mining, smelting, etc., and the character of the employees in such kinds of labor, were such as to make it reasonable and proper for the state to interfere to prevent the employees from being constrained by the rules laid down by the proprietors in regard to labor. The following citation

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from the observations of the supreme court of Utah in that case was made by the judge writing the opinion of this court, and approved: 'The law in question is confined to the protection of that class of people engaged in labor in underground mines, and in smelters and other works wherein ores are reduced and refined. This law applies only to the classes subjected by their employment to the peculiar conditions and effects attending underground mining and work in smelters, and other works for the reduction and refining of ores. Therefore it is not necessary to discuss or decide whether the legislature can fix the hours of labor in other employments.'

          It will be observed that, even with regard to that class of labor, the Utah statute provided for cases of emergency wherein the provisions of the statute would not apply. The statute now before this court has no emergency clause in it, and, if the statute is valid, there are no circumstances and no emergencies under which the slightest violation of the provisions of the act would be innocent. There is nothing in Holden v. Hardy which covers the case now before us. Nor does Atkin v. Kansas, 191 U. S. 207, 48 L. ed. 148, 24 Sup. Ct. Rep. 124, touch the case at bar. The Atkin Case was decided upon the right of the state to control its municipal corporations, and to prescribe the conditions upon which it will permit work of a public character to be done for a municipality. Knoxville Iron Co. v. Harbison, 183 U. S. 13, 46 L. ed. 55, 22 Sup. Ct. Rep. 1, is equally far from an authority for this legislation. The employees in that case were held to be at a disadvantage with the employer in matters of wages, they being miners and coal workers, and the act simply provided for the cashing of coal orders when presented by the miner to the employer.

          The latest case decided by this court, involving the police power, is that of Jacobson v. Massachusetts, decided at this term and reported in 197 U. S. 11, 25 Sup. Ct. Rep. 358, 49 L. ed.——. It related to compulsory vaccination, and the law was held vaild as a proper exercise of the police powers with reference to the public health. It was stated in the opinion that it was a case 'of an adult who, for aught that appears, was himself in perfect health and a fit

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subject of vaccination, and yet, while remaining in the community, refused to obey the statute and the regulation, adopted in execution of its provisions, for the protection of the public health and the public safety, confessedly endangered by the presence of a dangerous disease.' That case is also far from covering the one now before the court.

          Petit v. Minnesota, 177 U. S. 164, 44 L. ed. 716, 20 Sup. Ct. Rep. 666, was upheld as a proper exercise of the police power relating to the observance of Sunday, and the case held that the legislature had the right to declare that, as matter of law, keeping barber shops open on Sunday was not a work of necessity or charity.

          It must, of course, be conceded that there is a limit to the valied exercise of the police power by the state. There is no dispute concerning this general proposition. Otherwise the 14th Amendment would have no efficacy and the legislatures of the states would have unbounded power, and it would be enough to say that any piece of legislation was enacted to conserve the morals, the health, or the safety of the people; such legislation would be valid, no matter how absolutely without foundation the claim might be. The claim of the police power would be a mere pretext,—become another and delusive name for the supreme sovereignty of the state to be exercised free from constitutional restraint. This is not contended for. In every case that comes before this court, therefore, where legislation of this character is concerned, and where the protection of the Federal Constitution is sought, the question necessarily arises: Is this a fair, reasonable, and appropriate exercise of the police power of the state, or is it an unreasonable, unnecessary, and arbitrary interference with the right of the individual to his personal liberty, or to enter into those contracts in relation to labor which may seem to him appropriate or necessary for the support of himself and his family? Of course the liberty of contract relating to labor includes both parties to it. The one has as much right to purchase as the other to sell labor.

          This is not a question of substituting the judgment of the

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court for that of the legislature. If the act be within the power of the state it is valid, although the judgment of the court might be totally opposed to the enactment of such a law. But the question would still remain: Is it within the police power of the state? and that question must be answered by the court.

          The question whether this act is valid as a labor law, pure and simple, may be dismissed in a few words. There is no reasonable ground for interfering with the liberty of person or the right of free contract, by determining the hours of labor, in the occupation of a baker. There is no contention that bakers as a class are not equal in intelligence and capacity to men in other trades or manual occupations, or that they are not able to assert their rights and care for themselves without the protecting arm of the state, interfering with their independence of judgment and of action. They are in no sense wards of the state. Viewed in the light of a purely labor law, with no reference whatever to the question of health, we think that a law like the one before us involves neither the safety, the morals, nor the welfare, of the public, and that the interest of the public is not in the slightest degree affected by such an act. The law must be upheld, if at all, as a law pertaining to the health of the individual engaged in the occupation of a baker. It does not affect any other portion of the public than those who are engaged in that occupation. Clean and wholesome bread does not depend upon whether the baker works but ten hours per day or only sixty hours a week. The limitation of the hours of labor does not come within the police power on that ground.

          It is a question of which of two powers or rights shall prevail,—the power of the state to legislate or the right of the individual to liberty of person and freedom of contract. The mere assertion that the subject relates, though but in a remote degree, to the public health, does not necessarily render the enactment valid. The act must have a more direct relation, as a means to an end, and the end itself must be appropriate and legitimate, before an act can be held to be valid which interferes

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with the general right of an individual to be free in his person and in his power to contract in relation to his own labor.

          This case has caused much diversity of opinion in the state courts. In the supreme court two of the five judges composing the court dissented from the judgment affirming the validity of the act. In the court of appeals three of the seven judges also dissented from the judgment upholding the statute. Although found in what is called a labor law of the state, the court of appeals has upheld the act as one relating to the public health,—in other words, as a health law. One of the judges of the court of appeals, in upholding the law, stated that, in his opinion, the regulation in question could not be sustained unless they were able to say, from common knowledge, that working in a bakery and candy factory was an unhealthy employment. The judge held that, while the evidence was not uniform, it still led him to the conclusion that the occupation of a baker or confectioner was unhealthy and tended to result in diseases of the respiratory organs. Three of the judges dissented from that view, and they thought the occupation of a baker was not to such an extent unhealthy as to warrant the interference of the legislature with the liberty of the individual.

          We think the limit of the police power has been reached and passed in this case. There is, in our judgment, no reasonable foundation for holding this to be necessary or appropriate as a health law to safeguard the public health, or the health of the individuals who are following the trade of a baker. If this statute be valid, and if, therefore, a proper case is made out in which to deny the right of an individual, sui juris, as employer or employee, to make contracts for the labor of the latter under the protection of the provisions of the Federal Constitution, there would seem to be no length to which legislation of this nature might not go. The case differs widely, as we have already stated, from the expressions of this court in regard to laws of this nature, as stated in Holden v. Hardy, 169 U. S. 366, 42 L. ed. 780, 18 Sup. Ct. Rep. 383, and Jacobson v. Massachusetts, 197 U. S. 11, 25 Sup. Ct. Rep. 358, 49 L. ed.——.

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          We think that there can be no fair doubt that the trade of a baker, in and of itself, is not an unhealthy one to that degree which would authorize the legislature to interfere with the right to labor, and with the right of free contract on the part of the individual, either as employer or employee In looking through statistics regarding all trades and occupations, it may be true that the trade of a baker does not appear to be as healthy as some other trades, and is also vastly more healthy than still others. To the common understanding the trade of a baker has never been regarded as an unhealthy one. Very likely physicians would not recommend the exercise of that or of any other trade as a remedy for ill health. Some occupations are more healthy than others, but we think there are none which might not come under the power of the legislature to supervise and control the hours of working therein, if the mere fact that the occupation is not absolutely and perfectly healthy is to confer that right upon the legislative department of the government. It might be safely affirmed that almost all occupations more or less affect the health. There must be more than the mere fact of the possible existence of some small amount of unhealthiness to warrant legislative interference with liberty. It is unfortunately true that labor, even in any department, may possibly carry with it the seeds of unhealthiness. But are we all, on that account, at the mercy of legislative majorities? A printer, a tinsmith, a locksmith, a carpenter, a cabinetmaker, a dry goods clerk, a bank's, a lawyer's, or a physician's clerk, or a clerk in almost any kind of business, would all come under the power of the legislature, on this assumption. No trade, no occupation, no mode of earning one's living, could escape this all-pervading power, and the acts of the legislature in limiting the hours of labor in all employments would be valid, although such limitation might seriously cripple the ability of the laborer to support himself and his family. In our large cities there are many buildings into which the sun penetrates for but a short time in each day, and these buildings are occupied by people carrying on the

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business of bankers, brokers, lawyers, real estate, and many other kinds of business, aided by many clerks, messengers, and other employees. Upon the assumption of the validity of this act under review, it is not possible to say that an act, prohibiting lawyers' or bank clerks, or others, from contracting to labor for their employers more than eight hours a day would be invalid. It might be said that it is unhealthy to work more than that number of hours in an apartment lighted by artificial light during the working hours of the day; that the occupation of the bank clerk, the lawyer's clerk, the realestate clerk, or the broker's clerk, in such offices is therefore unhealthy, and the legislature, in its paternal wisdom, must, therefore, have the right to legislate on the subject of, and to limit, the hours for such labor; and, if it exercises that power, and its validity be questioned, it is sufficient to say, it has reference to the public health; it has reference to the health of the employees condemned to labor day after day in buildings where the sun never shines; it is a health law, and therefore it is valid, and cannot be questioned by the courts.

          It is also urged, pursuing the same line of argument, that it is to the interest of the state that its population should be strong and robust, and therefore any legislation which may be said to tend to make people healthy must be valid as health laws, enacted under the police power. If this be a valid argument and a justification for this kind of legislation, it follows that the protection of the Federal Constitution from undue interference with liberty of person and freedom of contract is visionary, wherever the law is sought to be justified as a valid exercise of the police power. Scarcely any law but might find shelter under such assumptions, and conduct, properly so called, as well as contract, would come under the restrictive sway of the legislature. Not only the hours of employees, but the hours of employers, could be regulated, and doctors, lawyers, scientists, all professional men, as well as athletes and artisans, could be forbidden to fatigue their brains and bodies by prolonged hours of exercise, lest the fighting strength

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of the state be impaired. We mention these extreme cases because the contention is extreme. We do not believe in the soundness of the views which uphold this law. On the contrary, we think that such a law as this, although passed in the assumed exercise of the police power, and as relating to the public health, or the health of the employees named, is not within that power, and is invalid. The act is not, within any fair meaning of the term, a health law, but is an illegal interference with the rights of individuals, both employers and employees, to make contracts regarding labor upon such terms as they may think best, or which they may agree upon with the other parties to such contracts. Statutes of the nature of that under review, limiting the hours in which grown and intelligent men may labor to earn their living, are mere meddlesome interferences with the rights of the individual, and they are not asved from condemnation by the claim that they are passed in the exercise of the police power and upon the subject of the health of the individual whose rights are interfered with, unless there be some fair ground, reasonable in and of itself, to say that there is material danger to the public health, or to the health of the employees, if the hours of labor are not curtailed. If this be not clearly the case, the individuals whose rights are thus made the subject of legislative interference are under the protection of the Federal Constitution regarding their liberty of contract as well as of person; and the legislature of the state has no power to limit their right as proposed in this statute. All that it could properly do has been done by it with regard to the conduct of bakeries, as provided for in the other sections of the act, above set forth. These several sections provide for the inspection of the premises where the bakery is carried on, with regard to furnishing proper wash rooms and waterclosets, apart from the bake room, also with regard to providing proper drainage, plumbing, and painting; the sections, in addition, provide for the height of the ceiling, the cementing or tiling of floors, where necessary in the opinion of the factory inspector, and for other things of

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that nature; alterations are also provided for, and are to be made where necessary in the opinion of the inspector, in order to comply with the provisions of the statute. These various sections may be wise and valid regulations, and they certainly go to the full extent of providing for the cleanliness and the healthiness, so far as possible, of the quarters in which bakeries are to be conducted. Adding to all these requirements a prohibition to enter into any contract of labor in a bakery for more than a certain number of hours a week is, in our judgment, so wholly beside the matter of a proper, reasonable, and fair provision as to run counter to that liberty of person and of free contract provided for in the Federal Constitution.

          It was further urged on the argument that restricting the hours of labor in the case of bakers was valid because it tended to cleanliness on the part of the workers, as a man was more apt to be cleanly when not overworked, and if cleanly then his 'output' was also more likely to be so. What has already been said applies with equal force to this contention. We do not admit the reasoning to be sufficient to justify the claimed right of such interference. The state in that case would assume the position of a supervisor, or pater familias, over every act of the individual, and its right of governmental interference with his hours of labor, his hours of exercise, the character thereof, and the extent to which it shall be carried would be recognized and upheld. In our judgment it is not possible in fact to discover the connection between the number of hours a baker may work in the bakery and the healthful quality of the bread made by the workman. The connection, if any exist, is too shadowy and thin to build any argument for the interference of the legislature. If the man works ten hours a day it is all right, but if ten and a half or eleven his health is in danger and his bread may be unhealthy, and, therefore, he shall not be permitted to do it. This, we think, is unreasonable and entirely arbitrary. When assertions such as we have adverted to become necessary in order to give, if possible, a plausible foundation for the contention that the law is a 'health law,'

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it gives rise to at least a suspicion that there was some other motive dominating the legislature than the purpose to subserve the public health or welfare.

          This interference on the part of the legislatures of the several states with the ordinary trades and occupations of the people seems to be on the increase. In the supreme court of New York, in the case of People v. Beattie, appellate division, first department, decided in 1904 (96 App. Div. 383, 89 N. Y. Supp. 193), a statute regulating the trade of horseshoeing, and requiring the person practising such trade to be examined, and to obtain a certificate from a board of examiners and file the same with the clerk of the county wherein the person proposes to practise such trade, was held invalid, as an arbitrary interference with personal liberty and private property without due process of law. The attempt was made, unsuccessfully, to justify it as a health law.

          The same kind of a statute was held invalid (Re Aubry) by the supreme court of Washington in December, 1904. 78 Pac. 900. The court held that the act deprived citizens of their liberty and property without due process of law, and denied to them the equal protection of the laws. It also held that the trade of a horseshoer is not a subject of regulation under the police power of the state, as a business concerning and directly affecting the health, welfare, or comfort of its inhabitants; and that, therefore, a law which provided for the examination and registration of horseshoers in certain cities was unconstitutional, as an illegitimate exercise of the police power.

          The supreme court of Illinois, in Bessette v. People, 193 Ill. 334, 56 L. R. A. 558, 62 N. E. 215, also held that a law of the same nature, providing for the regulation and licensing of horseshoers, was unconstitutional as an illegal interference with the liberty of the individual in adopting and pursuing such calling as he may choose, subject only to the restraint necessary to secure the common welfare. See also Godcharles v. Wigeman, 113 Pa. 431, 437, 6 Atl. 354; Low v. Rees Printing Co. 41 Neb. 127, 145, 24 L. R. A. 702, 43 Am. St. Rep. 670, 59 N. W. 362. In

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these cases the courts upheld the right of free contract and the right to purchase and sell labor upon such terms as the parties may agree to.

          It is impossible for us to shut our eyes to the fact that many of the laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives. We are justified in saying so when, from the character of the law and the subject upon which it legislates, it is apparent that the public health or welfare bears but the most remote relation to the law. The purpose of a statute must be determined from the natural and legal effect of the language employed; and whether it is or is not repugnant to the Constitution of the United States must be determined from the natural effect of such statutes when put into operation, and not from their proclaimed purpose. Minnesota v. Barber, 136 U. S. 313, 34 L. ed. 455, 3 Inters. Com. Rep. 185, 10 Sup. Ct. Rep. 862; Brimmer v. Rebman, 138 U. S. 78, 34 L. ed. 862, 3 Inters. Com. Rep. 485, 11 Sup. Ct. Rep. 213. The court looks beyond the mere letter of the law in such cases. Yick Wo v. Hopkins, 118 U. S. 356, 30 L. ed. 220, 6 Sup. Ct. Rep. 1064.

          It is manifest to us that the limitation of the hours of labor as provided for in this section of the statute under which the indictment was found, and the plaintiff in error convicted, has no such direct relation to, and no such substantial effect upon, the health of the employee, as to justify us in regarding the section as really a health law. It seems to us that the real object and purpose were simply to regulate the hours of labor between the master and his employees (all being men, Sui juris), in a private business, not dangerous in any degree to morals, or in any real and substantial degree to the health of the employees. Under such circumstances the freedom of master and employee to contract with each other in relation to their employment, and in defining the same, cannot be prohibited or interfered with, without violating the Federal Constitution.

          The judgment of the Court of Appeals of New York, as well as that of the Supreme Court and of the County Court of Oneida County, must be reversed and the case remanded to

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the County Court for further proceedings not inconsistent with this opinion.

          Reversed.

           Mr. Justice Harlan (with whom Mr. Justice White and Mr. Justice Day concurred) dissenting:

          While this court has not attempted to mark the precise boundaries of what is called the police power of the state, the existence of the power has been uniformly recognized, equally by the Federal and State courts.

          All the cases agree that this power extends at least to the protection of the lives, the health, and the safety of the public against the injurious exercise by any citizen of his own rights.

          In Patterson v. Kentucky, 97 U. S. 501, 24 L. ed. 1115, after referring to the general principle that rights given by the Constitution cannot be impaired by state legislation of any kind, this court said: 'It [this court] has, nevertheless, with marked distinctness and uniformity, recognized the necessity, growing out of the fundamental conditions of civil society, of upholding state police regulations which were enacted in good faith, and had appropriate and direct connection with that protection to life, health, and property which each state owes to her citizens.' So in Barbier v. Connolly, 113 U. S. 27, 28 L. ed. 923, 5 Sup. Ct. Rep. 357: 'But neither the [14th] Amendment, —broad and comprehensive as it is,—nor any other amendment, was designed to interfere with the power of the state, sometimes termed its police power, to prescribe regulations to promote the health, peace, morals, education, and good order of the people.'

          Speaking generally, the state, in the exercise of its powers, may not unduly interfere with the right of the citizen to enter into contracts that may be necessary and essential in the enjoyment of the inherent rights belonging to everyone, among which rights is the right 'to be free in the enjoyment of all his faculties, to be free to use them in all lawful ways, to live and work where he will, to earn his livelihood by any lawful calling, to pursue any livelihood or avocation.' This was de-

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clared in Allgeyer v. Louisiana, 165 U. S. 578, 589, 41 L. ed. 832, 835, 17 Sup. Ct. Rep. 427, 431. But in the same case it was conceded that the right to contract in relation to persons and property, or to do business, within a state, may be 'regulated, and sometimes prohibited, when the contracts or business conflict with the policy of the state as contained in its statutes.' (p. 591, L. ed. p. 836, Sup. Ct. Rep. p. 432.)

          So, as said in Holden v. Hardy, 169 U. S. 366, 391, 42 L. ed. 780, 790, 18 Sup. Ct. Rep. 383, 388: 'This right of contract, however, is itself subject to certain limitations which the state may lawfully impose in the exercise of its police powers. While this power is inherent in all governments, it has doubtless been greatly expanded in its application during the past century, owing to an enormous increase in the number of occupations which are dangerous, or so far detrimental, to the health of employees as to demand special precautions for their well-being and protection, or the safety of adjacent property. While this court has held, notably in the cases Davidson v. New Orleans, 96 U. S. 97, 24 L. ed. 616, and Yick Wo. v. Hopkins, 118 U. S. 356, 30 L. ed. 220, 6 Sup. Ct. Rep. 1064, that the police power cannot be put forward as an excuse for oppressive and unjust legislation, it may be lawfully resorted to for the purpose of preserving the public health, safety, or morals, or the abatement of public nuisances; and a large discretion 'is necessarily vested in the legislature to determine, not only what the interests of the public required, but what measures are necessary for the protection of such interests.' Lawton v. Steele, 152 U. S. 133, 136, 38 L. ed. 385, 388, 14 Sup. Ct. Rep. 499, 501.' Referring to the limitations placed by the state upon the hours of workmen, the court in the same case said (p. 395, L. ed. p. 792, Sup. Ct. Rep. p. 389): 'These employments, when too long pursued, the legislature has judged to be detrimental to the health of the employees, and, so long as there are reasonable grounds for believing that this is so, its decision upon this subject cannot be reviewed by the Federal courts.'

          Subsequently, in Gundling v. Chicago, 177 U. S. 183, 188, 44 L. ed. 725, 728, 20 Sup. Ct. Rep. 633, 635, this court said: 'Regulations respecting the pursuit of a lawful trade or business are of very frequent occurrence in the various cities of the country, and what such regulations shall be and

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to what particular trade, business, or occupation they shall apply, are questions for the state to determine, and their determination comes within the proper exercise of the police power by the state, and, unless the regulations are so utterly unreasonable and extravagant in their nature and purpose that the property and personal rights of the citizen are unnecessarily, and in a manner wholly arbitrary, interfered with or destroyed without due process of law, they do not extend beyond the power of the state to pass, and they form no subject for Federal interference. As stated in Crowley v. Christensen, 137 U. S. 86, 34 L. ed. 620, 11 Sup. Ct. Rep. 13, 'the possession and enjoyment of all rights are subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, good order, and morals of the community."

          In St. Louis I. M. & S. R. Co. v. Paul, 173 U. S. 404, 409, 43 L. ed. 746, 748, 19 Sup. Ct. Rep. 419, and in Knoxville Iron Co. v. Harbison, 183 U. S. 13, 21, 22, 46 L. ed. 55, 61, 22 Sup. Ct. Rep. 1, it was distinctly adjudged that the right of contract was not 'absolute, but may be subjected to the restraints demanded by the safety and welfare of the state.' Those cases illustrate the extent to which the state may restrict or interfere with the exercise of the right of contracting.

          The authorities on the same line are so numerous that further citations are unnecessary.

          I take it to be firmly established that what is called the liberty of contract may, within certain limits, be subjected to regulations designed and calculated to promote the general welfare, or to guard the public health, the public morals, or the public safety. 'The liberty secured by the Constitution of the United States to every person within its jurisdiction does not import.' this court has recently said, 'an absolute right in each person to be at all times and in all circumstances wholly freed from restraint. There are manifold restraints to which every person is necessarily subject for the common good.' Jacobson v. Massachusetts, 197 U. S. 11, 25 Sup. Ct. Rep. 358, 49 L. ed.

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          Granting, then, that there is a liberty of contract which cannot be violated even under the sanction of direct legislative enactment, but assuming, as according to settled law we may assume, that such liberty of contract is subject to such regulations as the state may reasonably prescribe for the common good and the well-being of society, what are the conditions under which the judiciary may declare such regulations to be in excess of legislative authority and void? Upon this point there is no room for dispute; for the rule is universal that a legislative enactment, Federal or state, is never to be disregarded or held invalid unless it be, beyond question, plainly and palpably in excess of legislative power. In Jacobson v. Massachusetts, 197 U. S. 11, 25 Sup. Ct. Rep. 358, 49 L. ed. ——, we said that the power of the courts to review legislative action in respect of a matter affecting the general welfare exists only 'when that which the legislature has done comes within the rule that, if a statute purporting to have been enacted to protect the public health, the public morals, or the public safety has no real or substantial relation to those objects, or is, beyond all question, a plain, palpable invasion of rights secured by the fundamental law,' citing Mugler v. Kansas, 123 U. S. 623, 661, 31 L. ed. 205, 210, 8 Sup. Ct. Rep. 273; Minnesota v. Barber, 136 U. S. 313, 320, 34 L. ed. 455, 458, 3 Inters. Com. Rep. 185, 10 Sup. Ct. Rep. 862; Atkin v. Kansas, 191 U. S. 207, 223, 48 L. ed. 148, 158, 24 Sup. Ct. Rep. 124. If there be doubt as to the validity of the statute, that doubt must therefore be resolved in favor of its validity, and the courts must keep their hands off, leaving the legislature to meet the responsibility for unwise legislation. If the end which the legislature seeks to accomplish be one to which its power extends, and if the means employed to that end, although not the wisest or best, are yet not plainly and palpably unauthorized by law, then the court cannot interfere. In other words, when the validity of a statute is questioned, the burden of proof, so to speak, is upon those who assert it to be unconstitutional. M'Culloch v. Maryland, 4 Wheat. 316, 421, 4 L. ed. 579, 605.

          Let these principles be applied to the present case. By the statute in question it is provided that 'no employee shall be required, or permitted, to work in a biscuit, bread, or cake

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bakery, or confectionery establishment, more than sixty hours in any one week, or more than ten hours in any one day, unless for the purpose of making a shorter work day on the last day of the week; nor more hours in any one week than will make an average of ten hours per day for the number of days during such week in which such employee shall work.'

          It is plain that this statute was enacted in order to protect the physical well-being of those who work in bakery and confectionery establishments. It may be that the statute had its origin, in part, in the belief that employers and employees in such establishments were not upon an equal footing, and that the necessities of the latter often compelled them to submit to such exactions as unduly taxed their strength. Be this as it may, the statute must be taken as expressing the belief of the people of New York that, as a general rule, and in the case of the average man, labor in excess of sixty hours during a week in such establishments may endanger the health of those who thus labor. Whether or not this be wise legislation it is not the province of the court to inquire. Under our systems of government the courts are not concerned with the wisdom or policy of legislation. So that, in determining the question of power to interfere with liberty of contract, the court may inquire whether the means devised by the state are germane to an end which may be lawfully accomplished and have a real or substantial relation to the protection of health, as involved in the daily work of the persons, male and female, engaged in bakery and confectionery establishments. But when this inquiry is entered upon I find it impossible, in view of common experience, to say that there is here no real or substantial relation between the means employed by the state and the end sought to be accomplished by its legislation. Mugler v. Kansas, 123 U. S. 623, 661, 31 L. ed. 205, 210, 8 Sup. Ct. Rep. 273. Nor can I say that the statute has no appropriate or direct connection with that protection to health which each state owes to her citizens (Patterson v. Kentucky, 97 U. S. 501, 24 L. ed. 1115); or that it is not promotive of the health of the employees in question (Holden v. Hardy, 169 U. S. 366, 391, 42 L. ed. 780, 790, 18 Sup. Ct. Rep. 383; Lawton v. Steele, 152 U. S. 133, 139, 38 L. ed. 385, 389, 14 Sup. Ct. Rep. 499);

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or that the regulation prescribed by the state is utterly unreasonable and extravagant or wholly arbitrary (Gundling v. Chicago, 177 U. S. 183, 188, 44 L. ed. 725, 728, 20 Sup. Ct. Rep. 633). Still less can I say that the statute is, beyond question, a plain, palpable invasion of rights secured by the fundamental law. Jacobson v. Massachusetts, 196 U. S. 11, ante, p. 358, 25 Sup. Ct. Rep. 358. Therefore I submit that this court will transcend its functions if it assumes to annul the statute of New York. It must be remembered that this statute does not apply to all kinds of business. It applies only to work in bakery and confectionery establishments, in which, as all know, the air constantly breathed by workmen is not as pure and healthful as that to be found in some other establishments or out of doors.

          Professor Hirt in his treatise on the 'Diseases of the Workers' has said: 'The labor of the bakers is among the hardest and most laborious imaginable, because it has to be performed under conditions injurious to the health of those engaged in it. It is hard, very hard, work, not only because it requires a great deal of physical exertion in an overheated workshop and during unreasonably long hours, but more so because of the erratic demands of the public, compelling the baker to perform the greater part of his work at night, thus depriving him of an opportunity to enjoy the necessary rest and sleep,—a fact which is highly injurious to his health.' Another writer says: 'The constant inhaling of flour dust causes inflammation of the lungs and of the bronchial tubes. The eyes also suffer through this dust, which is responsible for the many cases of running eyes among the bakers. The long hours of toil to which all bakers are subjected produce rheumatism, cramps, and swollen legs. The intense heat in the workshops induces the workers to resort to cooling drinks, which, together with their habit of exposing the greater part of their bodies to the change in the atmosphere, is another source of a number of diseases of various organs. Nearly all bakers are palefaced and of more delicate health than the workers of other crafts, which is chiefly due to their hard work and their irregular and unnatural mode of living, whereby the power of resistance against disease is

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greatly diminished. The average age of a baker is below that of other workmen; they seldom live over their fiftieth year, most of them dying between the ages of forty and fifty. During periods of epidemic diseases the bakers are generally the first to succumb to the disease, and the number swept away during such periods far exceeds the number of other crafts in comparison to the men employed in the respective industries. When, in 1720, the plague visited the city of Marseilles, France, every baker in the city succumbed to the epidemic, which caused considerable excitement in the neighboring cities and resulted in measures for the sanitary protection of the bakers.'

          In the Eighteenth Annual Report by the New York Bureau of Statistics of Labor it is stated that among the occupations involving exposure to conditions that interfere with nutrition is that of a baker. (p. 52.) In that Report it is also stated that, 'from a social point of view, production will be increased by any change in industrial organization which diminishes the number of idlers, paupers, and criminals. Shorter hours of work, by allowing higher standards of comfort and purer family life, promise to enhance the industrial efficiency of the wage-working class, improved health, longer life, more content and greater intelligence and inventiveness.' (p. 82.)

          Statistics show that the average daily working time among workingmen in different countries is, in Australia, eight hours; in Great Britain, nine; in the United States, nine and three-quarters; in Denmark, nine and three-quarters; in Norway, ten; Sweden, France, and Switzerland, ten and one-half; Germany, ten and one-quarter; Belgium, Italy, and Austria, eleven; and in Russia, twelve hours.

          We judicially know that the question of the number of hours during which a workman should continuously labor has been, for a long period, and is yet, a subject of serious consideration among civilized peoples, and by those having special knowledge of the laws of health. Suppose the statute prohibited labor in bakery and confectionery establishments in excess of eighteen hours each day. No one, I take it, could dispute the power of the state to enact such a statute. But the statute

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before us does not embrace extreme or exceptional cases. It may be said to occupy a middle ground in respect of the hours of labor. What is the true ground for the state to take between legitimate protection, by legislation, of the public health and liberty of contract is not a question easily solved, nor one in respect of which there is or can be absolute certainty. There are very few, if any, questions in political economy about which entire certainty may be predicated. One writer on relation of the state to labor has well said: 'The manner, occasion, and degree in which the state may interfere with the industrial freedom of its citizens is one of the most debatable and difficult questions of social science.' Jevons, 33.

          We also judicially know that the number of hours that should constitute a day's labor in particular occupations involving the physical strength and safety of workmen has been the subject of enactments by Congress and by nearly all of the states. Many, if not most, of those enactments fix eight hours as the proper basis of a day's labor.

          I do not stop to consider whether any particular view of this economic question presents the sounder theory. What the precise facts are it may be difficult to say. It is enough for the determination of this case, and it is enough for this court to know, that the question is one about which there is room for debate and for an honest difference of opinion. There are many reasons of a weighty, substantial character, based upon the experience of mankind, in support of the theory that, all things considered, more than ten hours' steady work each day, from week to week, in a bakery or confectionery establishment, may endanger the health and shorten the lives of the workmen, thereby diminishing their physical and mental capacity to serve the state and to provide for those dependent upon them.

          If such reasons exist that ought to be the end of this case, for the state is not amenable to the judiciary, in respect of its legislative enactments, unless such enactments are plainly, palpably, beyond all question, inconsistent with the Constitu-

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tion of the United States. We are not to presume that the state of New York has acted in bad faith. Nor can we assume that its legislature acted without due deliberation, or that it did not determine this question upon the fullest attainable information and for the common good. We cannot say that the state has acted without reason, nor ought we to proceed upon the theory that its action is a mere sham. Our duty, I submit, is to sustain the statute as not being in conflict with the Federal Constitution, for the reason—and such is an all-sufficient reason—it is not shown to be plainly and palpably inconsistent with that instrument. Let the state alone in the management of its purely domestic affairs, so long as it does not appear beyond all question that it has violated the Federal Constitution. This view necessarily results from the principle that the health and safety of the people of a state are primarily for the state to guard and protect.

          I take leave to say that the New York statute, in the particulars here involved, cannot be held to be in conflict with the 14th Amendment, without enlarging the scope of the amendment far beyond its original purpose, and without bringing under the supervision of this court matters which have been supposed to belong exclusively to the legislative departments of the several states when exerting their conceded power to guard the health and safety of their citizens by such regulations as they in their wisdom deem best. Health laws of every description constitute, said Chief Justice Marshall, a part of that mass of legislation which 'embraces everything within the territory of a state, not surrendered to the general government; all which can be most advantageously exercised by the states themselves.' Gibbons v. Ogden, 9 Wheat. 1, 203, 6 L. ed. 23, 71. A decision that the New York statute is void under the 14th Amendment will, in my opinion, involve consequences of a far-reaching and mischievous character; for such a decision would seriously cripple the inherent power of the states to care for the lives, health, and wellbeing of their citizens. Those are matters which can be best controlled by the states.

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The preservation of the just powers of the states is quite as vital as the preservation of the powers of the general government.

          When this court had before it the question of the constitutionality of a statute of Kansas making it a criminal offense for a contractor for public work to permit or require his employees to perform labor upon such work in excess of eight hours each day, it was contended that the statute was in derogation of the liberty both of employees and employer. It was further contended that the Kansas statute was mischievous in its tendencies. This court, while disposing of the question only as it affected public work, held that the Kansas statute was not void under the 14th Amendment. But it took occasion to say what may well be here repeated: 'The responsibility therefor rests upon legislators, not upon the courts. No evils arising from such legislation could be more far reaching than those that might come to our system of government if the judiciary, abandoning the sphere assigned to it by the fundamental law, should enter the domain of legislation, and upon grounds merely of justice or reason or wisdom annul statutes that had received the sanction of the people's representatives. We are reminded by counsel that it is the solemn duty of the courts in cases before them to guard the constitutional rights of the citizen against merely arbitrary power. That is unquestionably true. But it is equally true—indeed, the public interests imperatively demand—that legislative enactments should be recognized and enforced by the courts as embodying the will of the people, unless they are plainly and palpably beyond all question in violation of the fundamental law of the Constitution.' Atkin v. Kansas, 191 U. S. 207, 223, 48 L. ed. 148, 158, 24 Sup. Ct. Rep. 124, 128.

          The judgment, in my opinion, should be affirmed.

           Mr. Justice Holmes dissenting:

          I regret sincerely that I am unable to agree with the judg-

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ment in this case, and that I think it my duty to express my dissent.

          This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious, or if you like as tyrannical, as this, and which, equally with this, interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Postoffice, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not. The 14th Amendment does not enact Mr. Herbert Spencer's Social Statics. The other day we sustained the Massachusetts vaccination law. Jacobson v. Massachusetts, 197 U. S. 11, 25 Sup. Ct. Rep. 358, 49 L. ed. —United States and state statutes and decisions cutting down the liberty to contract by way of combination are familiar to this court. Northern Securities Co. v. United States, 193 U. S. 197, 48 L. ed. 679, 24 Sup. Ct. Rep. 436. Two years ago we upheld the prohibition of sales of stock on margins, or for future delivery, in the Constitution of California. Otis v. Parker, 187 U. S. 606, 47 L. ed. 323, 23 Sup. Ct. Rep. 168. The decision sustaining an eight-hour law for miners is still recent. Holden v. Hardy, 169 U. S. 366, 42 L. ed. 780, 18 Sup. Ct. Rep. 383. Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire.

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It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States.

          General propositions do not decide concrete cases. The decision will depend on a judgment or intuition more subtle than any articulate major premise. But I think that the proposition just stated, if it is accepted, will carry us far toward the end. Every opinion tends to become a law. I think that the word 'liberty,' in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law. It does not need research to show that no such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health. Men whom I certainly could not pronounce unreasonable would uphold it as a first instalment of a general regulation of the hours of work. Whether in the latter aspect it would be open to the charge of inequality I think it unnecessary to discuss.

^{'No person shall sleep in a room occupied as a bake room. Sleeping places for the persons employed in the bakery shall be separate from the rooms where flour or meal food products are manufactured or stored. If the sleeping places are on the same floor where such products are manufactured, stored, or sold, the factory inspector may inspect and order them put in a proper sanitary condition.}

^{'§ 114. Inspection of bakeries.—The factory inspector shall cause all bakeries to be inspected. If it be found upon such inspection that the bakeries so inspected are constructed and conducted in compliance with the provisions of this chapter, the factory inspector shall issue a certificate to the person owning or conducting such bakeries.}

^{'§ 115. Notice requiring alterations.—If, in the opinion of the factory inspector, alterations are required in or upon premises occupied and used as bakeries, in order to comply with the provisions of this article, a written notice shall be served by him upon the owner, agent, or lessee of such premises, either personally or by mail, requiring such alterations to be made within sixty days after such service, and such alterations shall be made accordingly.' [N. Y. Laws 1897, chap 415.]}

^{[Argument of Counsel from pages 47-50 intentionally omitted]}

[160] Robins, Zelle, Larson & Kaplan, Robert M. Wattson and David Evinger, Minneapolis, Dorsey, Windhorst, Hannaford, Whitney & Halladay, William J. Hempel, Philip M. Chen, and Stephen R. Duerr, Minneapolis, for plaintiff.

Faegre & Benson, Norman R. Carpenter, Robert L. Schnell, Jr., and Brian B. O'Neill, Minneapolis, for defendants.

Heard, considered and decided by the court en banc.

SCOTT, Justice.

This is a products liability case involving three questions certified to this court by the Federal District Court of Minnesota. The certified questions arise from a case involving the purchase by plaintiff, Superwood Corporation, of a hot plate press manufactured in 1954 by defendant, G. Siempelkamp. The press operated without problem from 1954 to 1975, when the cylinder on the hot plate press failed and could not be repaired. On March 12, 1979, three years after the cylinder failed, plaintiff brought this Federal District Court action based on negligence, strict products liability, breach of warranty, and breach of contract. Plaintiff sought $616,716 in damages because of alleged damage to the press and lost profits.

The federal court granted defendant's summary judgment motion on the contract and warranty claims.^[1] With regard to the strict liability and negligence claims, the federal court certified three questions of "uncertain" state law to this court:

CERTIFIED QUESTIONS

1. Is the manufacturer of defective equipment (a press) strictly^[2] liable in negligence to the user of the equipment damaged in its property and business by negligent product manufacture, inspection, or installation supervision?

2. Is the manufacturer of defective equipment (a press) strictly liable in tort to the user of the equipment damaged in its property and business by the product defect?

3. If question 1 or 2, or both, are answered affirmatively, are any or all of the following items of damages recoverable, if directly caused by negligence or defect?

a. Costs of replacement and transportation of a substantial component part of the product.

b. Clean-up labor, including payroll taxes and employee fringe benefits.

c. Repair, replacement, and other factory labor, including payroll taxes and employee fringe benefits.

d. Costs of inspection of the destroyed part and the replacement thereof.

e. Net sales value of production lost, less non-continuing expenses.

f. Increased costs of production from other facilities of plaintiff to supply goods to its Bemidji Nu-Ply plant customers to keep their goodwill.

To answer these questions we must determine whether economic losses arising out of [161] commercial transactions are recoverable under negligence and strict products liability theories.^[3] Defendant argues that when the Minnesota Legislature enacted the Uniform Commercial Code^[4] (U.C.C.) it created a comprehensive statutory scheme for dealing with the rights and duties of parties to commercial sales transactions. Defendant contends that to allow a tort action would circumvent the system of rights and remedies detailed by the legislature in the U.C.C.

Many courts have considered defendant's argument, the first of which was the New Jersey Supreme Court in Santor v. Karagheusian, 44 N.J. 52, 207 A.2d 305 (1965). In Santor, a commercial plaintiff purchased defective carpeting from a retailer. The New Jersey court held that the plaintiff could proceed against the manufacturer under either strict products liability or the U.C.C.'s warranty provisions. In so holding, the Santor court decided that the U.C.C. did not provide the exclusive set of remedies for cases arising out of commercial transactions.^[5]

Soon thereafter, the California Supreme Court considered the same issue in Seely v. White Motor Company, 63 Cal.2d 9, 45 Cal. Rptr. 17, 403 P.2d 145 (1965). The Seely court considered whether a plaintiff could, based on a strict products liability theory, recover the purchase price of a defective truck and the resulting loss of profits for lack of its normal use. In rejecting the Santor holding, Chief Justice Traynor, writing for the California court, recognized that the law of sales was designed to meet the needs of commercial transactions. The court refused to allow a form of recovery that would undermine the law of sales, and not reflect the understanding of the parties. Id. at 15, 45 Cal.Rptr. at 23-24, 403 P.2d at 151. The California court held that economic losses were not recoverable in an action based on strict products liability. In dicta the court also indicated that, even in actions based on negligence, economic losses were not actionable. Id. at 16, 45 Cal.Rptr. at 24, 403 P.2d at 151. The majority of jurisdictions that have considered this issue have followed the holding in Seely.^[6]

Although this is a case of first impression in Minnesota, this court has already demonstrated its approval of Seely in Farr v. [162] Armstrong Rubber, 288 Minn. 83, 179 N.W.2d 64 (1970). In Farr, this court stated:

Applying § 402A's concept of strict liability in tort will not result in absolute liability of the manufacturer, as Armstrong contends; nor will it supersede the Uniform Commercial Code concept of strict liability in implied warranty, as some commentators fear.

* * * * * *

The laws of warranty still meet the needs of commercial transactions and function well in a commercial setting. See, Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145. However, the Restatement theory of responsibility more adequately meets the public policy need to protect consumers from the inevitable risks of bodily harm created by mass production and complex marketing conditions. McCormack v. Hankscraft Co., Inc., supra.

Id. at 93-94, 179 N.W.2d at 70-71 (emphasis added).

The U.C.C. clarifies the rights and remedies of parties to commercial transactions. For example, there are specific provisions covering warranties, see Minn.Stat. § 336.2-314 (1980); warranty disclaimers, see Minn. Stat. § 336.2-316 (1980); liability limitations, see Minn.Stat. § 336.2-719 (1980); and notice provisions, see Minn.Stat. § 336.2-607 (1980). The recognition of tort actions in the instant case would create a theory of redress not envisioned by the legislature when it enacted the U.C.C. Furthermore, tort theories of recovery would be totally unrestrained by legislative liability limitations, warranty disclaimers and notice provisions. To allow tort liability in commercial transactions would totally emasculate these provisions of the U.C.C. Clearly, the legislature did not intend for tort law to circumvent the statutory scheme of the U.C.C.

In Cline v. Prowler Industries of Maryland, Inc., 418 A.2d 968 (Del.1980), the Supreme Court of Delaware held that, regarding sales transactions, the U.C.C. completely preempted the field of products liability. According to the Delaware court even an injured consumer purchaser would have to look to the U.C.C. for the sole source of remedies. We, however, do not agree that the U.C.C. was intended to preempt the entire area of products liability. Strict products liability developed in large part to fill gaps in the law of sales with respect to consumer purchasers. See Noel, Products Liability of Retailers and Manufacturers in Tennessee, 32 Tenn.L.Rev. 207 (1965); Prosser, The Assault Upon the Citadel (Strict Liability to the Consumer), 69 Yale L.J. 1099, 1124-34 (1960); Traynor, The Ways and Means of Defective Products and Strict Liability, 32 Tenn.L.Rev. 363 (1965). Limiting the application of strict products liability to consumers' actions or actions involving personal injury will allow the U.C.C. to satisfy the needs of the commercial sector and still protect the legitimate expectations of consumers.

For these reasons, we hold that economic losses that arise out of commercial transactions, except those involving personal injury or damage to other property, are not recoverable under the tort theories of negligence or strict products liability. We therefore answer certified questions 1 and 2 in the negative. Because of our resolution of the first two questions, we need not discuss the third certified question.

YETKA, Justice (concurring in part and dissenting in part).

I concur in that portion of the majority opinion that concludes that strict liability in tort cannot be asserted by a commercial plaintiff as a ground for recovery of purely economic injury.

I must dissent, however, to that portion of the majority opinion that concludes that the negligence of a manufacturer cannot be asserted by a commercial plaintiff as a ground for recovery of economic injury.

Actions based on negligence have long been recognized in commercial contexts in this state. See Nieman v. Channellene Oil & Mfg. Co., 112 Minn. 11, 127 N.W. 394 (1910) (retailer recovered damages from the [163] wholesaler for loss of business resulting from the sale of contaminated cooking oil); Ellis v. Lindmark, 177 Minn. 390, 225 N.W. 395 (1929) (recovery allowed for economic damages to plaintiffs' poultry business resulting from, inter alia, wholesaler's mislabeling of raw linseed oil as cod liver oil). The majority is, therefore, abrogating rights long recognized to exist in commercial plaintiffs.

There is no indication that the legislature intended to preempt negligence recovery when it enacted the Uniform Commercial Code (UCC). There are no references in the text or the comments of the UCC from which such preemption can be inferred. Moreover, Minn.Stat. § 336.1-102(3) (1980) provides that the general obligations of the UCC, such as "reasonableness" and "care," may not be disclaimed by agreement. This strongly suggests that the legislature had no interest in protecting negligent commercial parties.

Legislative enactments are not to be construed in derogation of well-established principles of common law unless the express language or the necessary implications of the particular statute require such construction. Fuller v. City of Mankato, 248 Minn. 342, 347, 80 N.W.2d 9, 12 (1956); Swogger v. Taylor, 243 Minn. 458, 465, 68 N.W.2d 376, 382 (1955). Because there is no clear indication of preemption in this case, I believe the action for negligently inflicted economic loss in commercial contexts survives the enactment of the UCC.

Further, there is no basis for the contention that negligence recovery for economic loss would "emasculate" the remedies provided through the UCC. Cf. Santor v. A. & M. Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965) (allowing implied warranty recovery).^[7] The remedies provided by the UCC merely supplement the negligence theory of recovery. UCC 2-318, Comment 2, indicates that the expansion of existing warranties to the buyer's household and guests should be "accomplish[ed] * * * without any derogation of any right or remedy resting on negligence." This is a significant indication that the UCC is not designed to exclude negligence from its scheme of remedies.

The continued recognition of negligence recovery for economic loss will not diminish the use or effectiveness of the Code remedies but merely provide an additional means of compelling production of quality manufactured goods. The majority's decision effectively restricts the ability of commercial purchasers to require the manufacturers to provide products that will not result in damage to property. The duty to which manufacturers can be held under negligence standards is not so onerous that this court must step in to relieve them of that duty.

Finally, under the majority opinion, distribution of defective products is only subject to a negligence action when the defect results in personal injury or damages to other property. It seems to me imprudent to permit manufacturers to sell negligently produced and potentially dangerous products and only to make them accountable when a person is harmed or other property is damaged. The better approach is to require accountability when any injury, economic or otherwise, occurs. Insistence on such accountability will provide a definite incentive to manufacture only quality products that ensure the safety of all consumers.

SHERAN, C. J., took no part in the consideration or decision of this case.

[1] The federal court dismissed the contract and warranty claims, finding that the statute of limitations had run on those claims.

[2] It is our assumption that the word "strictly," as used in the certified question by the federal court, was unintended, because strict liability and negligence are separate theories of recovery. The similarity of the first and second questions indicates that use of "strictly" in Question 1 was a clerical error.

[3]The basic theory behind strict products liability is embodied in the Restatement (Second) of Torts 402A (1965) as follows:

One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property, is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property * * *.

Strict products liability was adopted by this court in McCormack v. Hankscraft Co., 278 Minn. 322, 154 N.W.2d 488 (1967).

[4] The U.C.C. was enacted in this state on May 26, 1965. See Act of May 26, 1965, ch. 811, 1965 Minn. Laws 1290.

[5] The Santor court may have "stretched" to allow tort remedies in order to avoid privity requirements that would otherwise have prevented any action against remote sellers of defective products. See Steenson, The Anatomy of Products Liability in Minnesota: The Theories of Recovery, 6 Wm. Mitchell L.Rev. 1, 50 n. 207 (1980). This reason for allowing tort recovery does not exist in Minnesota, since the Minnesota Legislature has adopted the most liberal privity alternative of the U.C.C., see Minn.Stat. § 336.2-318 (1980), and because this court has consistently avoided privity limitations, see Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349, 358 (Minn.1978), noted in 5 Wm. Mitchell L.Rev. 241 (1979); Milbank Mutual Ins. Co. v. Proksch, 309 Minn. 106, 113, 244 N.W.2d 105, 109 (1976); McCormack v. Hankscraft Co., 278 Minn. 322, 339, 154 N.W.2d 488, 500-01 (1967); Beck v. Spindler, 256 Minn. 543, 562, 99 N.W.2d 670, 683 (1959); Schubert v. J. R. Clark Co., 49 Minn. 331, 340, 51 N.W. 1103, 1106 (1892).

[6] A number of jurisdictions have adopted the Seely position: Iowa Elec. Light & Power Co. v. Allis-Chalmers Mfg. Co., 360 F.Supp. 25, 27-33 (S.D.Iowa 1973); Miehle Co. v. Smith-Brooks Printing Co., 303 F.Supp. 501, 503 (D.Colo. 1969); Morrow v. New Moon Homes, Inc., 548 P.2d 279 (Alaska 1978); Beauchamp v. Wilson, 21 Ariz.App. 14, 515 P.2d 41 (1973); Long v. Jim Letts Oldsmobile, Inc., 135 Ga.App. 293, 217 S.E.2d 602 (1975); Clark v. International Harvester Co., 99 Idaho 326, 581 P.2d 784 (1978); Rhodes Pharmacal Co. v. Continental Can Co., 72 Ill.App.2d 362, 219 N.E.2d 726 (1966); Marcil v. John Deere Industrial Equipment Co., 9 Mass.App. 908, 403 N.E.2d 430 (Mass.App.1980); Hawkins Constr. Co. v. Matthews Co., Inc., 190 Neb. 546, 209 N.W.2d 643 (1973); Ford Motor Co. v. Lonon, 217 Tenn. 400, 398 S.W.2d 240 (Tenn.1966).

[7] In addition, see Cova v. Harley Davidson Motor Co., 26 Mich.App. 602, 609-11, 182 N.W.2d 800, 806-10 (1970); Russell v. Ford Motor Co., 281 Or. 587, 588-93, 575 P.2d 1383, 1384-86 (1978); Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 80-83 (Tex.1977); Berg v. General Motors Corp., 87 Wash.2d 584, 587-94, 555 P.2d 818, 819-23 (1976); City of La Crosse v. Schubert, Schroeder & Assocs., 72 Wis.2d 38, 43-45, 240 N.W.2d 124, 127-28 (1976).

ERROR to the district court for the Louisiana district.

The defendant in error filed his petition, or libel, in the court below, stating, that on the 18th day of February, 1815, he purchased of the plaintiffs in error one hundred and eleven hogsheads of tobacco, as appeared by the copy of a bill of parcels annexed, and that the same were delivered to him by the said Laidlaw & Co., and that he was in the lawful and quiet possession of the said tobacco, when, on the 20th day of the said month, the said Laidlaw & Co., by force, and of their own wrong, took possession of the same, and unlawfully withheld the same from the petitioner, notwithstanding he was at all times, and still was, ready to do and perform all things on his part stipulated to be done and performed in relation to said purchase, and had actually tendered to the said Laidlaw & Co. bills of exchange for the amount of the purchase money, agreeably to the said contract; to his damage, &c. Wherefore the petition prayed that the said Laidlaw & Co. might be cited to appear and answer to his plaint, and that judgment might be rendered against them for his damages, &c. And inasmuch as the petitioner did verily believe that the said one hundred and eleven hogsheads of tobacco would be removed, concealed, or disposed of by the [179] said Laidlaw & Co., he prayed that a writ of sequestration might issue, and that the same might be sequestered in the hands of the marshal, to abide the judgment of the court, and that the said one hundred and eleven hogsheads of tobacco might be finally adjudged to the petitioner, together with his damages, &c., and costs of suit, and that the petitioner might have such other and farther relief as to the court should seem meet, &c.

The bill of parcels referred to in the petition was in the following words and figures, to wit:

'Mr. Organ Bo't of Peter Laidlaw & Co. 111 hhds. Tobacco, weighing 120,715 pounds n't. fr. $7,544.69.

'New-Orleans, 18th February, 1815.'

On the 21st of February, 1815, a citation to the said Laidlaw & Co. was issued, and a writ of sequestration, by order of the court, to the marshal, commanding him to sequester 111 hogsheads of tobacco in their possession, and the same so sequestered to take into his (the marshal's) possession, and safely keep, until the farther order of the court; which was duly executed by the marshal. And on the 2d of March, 1815, counsel having been heard in the case, it was ordered, that the petitioner enter into a bond or stipulation, with sufficient sureties in the sum of 1,000 dollars, to the said Laidlaw & Co., to indemnify them for the damages which they might sustain in consequence of prosecuting the writ of sequestration granted in the case.^a

[180] On the 22d of March, 1815, the plaintiffs in error filed their answer, stating that they had no property in the said tobacco claimed by the said petitioner or ownership whatever in the same, nor had they at any time previous to the bringing of said suit; but disclaimed all right, title, interest, and claim, to the said tobacco, the subject of the suit. And on the same day, Messrs. Boorman & Johnston filed their bill of interpleader or intervention, stating that the petitioner having brought his suit, and filed his petition, claiming of the said Laidlaw & Co. 111 hogsheads of tobacco, for which he had obtained a writ of sequestration, when, in truth, the said tobacco belonged to the said Boorman & Johnston, [181] and was not the property of the said Laidlaw & Co., and praying that they, the said Boorman & Johnston, might be admitted to defend their right, title, and claim, to the said tobacco, against the claim and pretensions of the petitioner, the justice of whose claim, under the sale as stated in his petition, was wholly denied, and that the said tobacco might be restored to them, &c.

On the 20th of April, 1815, the cause was tried by a jury, who returned the following verdict, to wit: 'The jury find for the plaintiff, for the tobacco named in the petition, without damages, payable as per contract.' Whereupon the court rendered judgment 'that the plaintiff recover of the said defendants the said 111 hogsheads of tobacco, mentioned in the plaintiff's petition, and sequestered in this suit, with his costs of suit to be taxed; and ordered, that the marshal deliver the said tobacco to the said plaintiff, and that he have execution for his costs aforesaid, upon the said plaintiff's depositing in this court his bills of exchange for the amount of the purchase money endorsed, &c., for the use of the defendants, agreeably to the verdict of the jury.'

On the 29th of April, 1815, the plaintiffs in error filed the following bill of exceptions, to wit: 'Be it remembered, that on the 20th day of April, in the year of our Lord, 1815, the above cause came on for trial before a jury duly sworn and empannelled, the said Peter Laidlaw & Co. having filed a disclaimer, and Boorman and Johnston of the city of New-York, having filed their claim. And now the said Hector [182] M. Organ having closed his testimony, the said claimants, by their counsel, offered Francis Girault, one of the above firm of Peter Laidlaw & Co., as their witness; whereupon the counsel for the plaintiff objected to his being sworn, on the ground of his incompetency. The claimants proved that Peter Laidlaw & Co., before named, were, at the date of the transaction which gave rise to the above suit, commission merchants, and were then known in the city of New-Orleans as such, and that it is invariably the course of trade in said city for commission merchants to make purchases and sales in their own names for the use of their employers; upon which the claimants again urged the propriety of suffering the said Francis Girault to be sworn, it appearing in evidence that the contract was made by Organ, the plaintiff, with said Girault, one of the said firm of Peter Laidlaw & Co. in their own name, and there being evidence that factors and commission merchants do business on their own account as well as for others, and there being no evidence that the plaintiff, at the time of the contract, had any knowledge of the existence of any other interest in the said tobacco, except that of the defendants, Peter Laidlaw & Co. The court sustained the objection, and rejected the said witness. To which decision of the court the counsel for the claimants aforesaid begged leave to except, and prayed that this bill of exceptions might be signed and allowed. And it appearing in evidence in the said cause, that on the night of the 18th of February, 1815, Messrs. Livingston, White, and Shepherd brought from the British fleet the news that a treaty of peace had been signed at Ghent by the American and British commissioners, contained in a letter from Lord Bathurst to the Lord Mayor of London, published in the British newspapers, and that Mr. White caused the same to be made public in a handbill on Sunday morning, 8 o'clock, the 19th of February, 1815, and that the brother of Mr. Shepherd, one of these gentlemen, and who was interested in one-third of the profits of the purchase set forth in said plaintiff's petition, had, on Sunday morning, the 19th of February, 1815, communicated said news to the plaintiff; that the said plaintiff, on receiving said news, called on Francis Girault, (with whom he had been bargaining for the tobacco mentioned in the petition, the evening previous,) said Francis Girault being one of the said house of trade of Peter Laidlaw & Co., soon after sunrise on the morning of Sunday, the 19th of February, 1815, before he had heard said news. Said Girault asked if there was any news which was calculated to enhance the price or value of the article about to be purchased; and that the said purchase was then and there made, and the bill of parcels annexed to the plaintiff's petition delivered to the plaintiff between 8 and 9 o'clock in the morning of that day; and that in consequence of said news the value of said article had risen from 30 to 50 per cent. There being no evidence that the plaintiff had asserted or suggested any thing to the said Girault, calculated to impose upon him with respect to said news, and to induce him to think or believe that it did not exist; and it appearing that the said Girault, when applied to, on the next day, Monday, the 20th of February, 1815, on behalf of the plaintiff, for an invoice of said tobacco, did not then object to the said sale, but promised to deliver the invoice to the said plaintiff in the course of the forenoon of that day; the court charged the jury to find for the plaintiff. Wherefore, that justice, by due course of law, may be done in this case, the counsel of said defendants, for them, and on their behalf, prays the court that this bill of exceptions be filed, allowed, and certified as the law directs.

(Signed,) DOMINICK A. HALL,

District Judge.

New-Orleans, this 3d day of May, 1815.'

On the 29th of April, 1815, a writ of error was allowed to this court, and on the 3d of May, 1815, the defendant in error deposited in the court below, for the use of the plaintiffs in error, the bills of exchange mentioned in the pleadings, according to the verdict of the jury and the judgment of the court thereon, which bills were thereupon taken out of court by the plaintiffs in error.

Feb. 20th.

Mr. C. J. Ingersoll, for the plaintiffs in error. 1. The first question is, whether the sale, under the circumstances of the case, was a valid sale; whether fraud, which vitiates every contract, must be proved by the communication of positive misinformation, or by withholding information when asked. Suppression of material circumstances within the knowledge of the vendee, and not accessible [185] to the vendor, is equivalent to fraud, and vitiates the contract.^b Pothier, in discussing this subject, adopts the distinction of the forum of conscience, and the forum of law; but he admits that fides est servanda.^c The parties treated on an unequal footing, as the one party [186] had received intelligence of the peace of Ghent, at the time of the contract, and the other had not. [187] This news was unexpected, even at Washington, much more at New-Orleans, the recent scene of the [188] most sanguinary operations of the war. In answer to the question, whether there was any news calculated [189] to enhance the price of the article, the vendee was silent. This reserve, when such a question was [190] asked, was equivalent to a false answer, and as much calculated to deceive as the communication of the most fabulous intelligence. Though the plaintiffs in error, after they heard the news of peace, still went on, in ignorance of their legal rights, to complete the contract, equity will protect them. [191] 2. Mr. Girault was improperly rejected as a witness, because he and his partner had disclaimed, and Messrs. Boorman & Johnston, the real owners of the tobacco, had intervened and taken the place of the original defendants. Girault was not obliged to disclose his character of agent, and, as such, he was an admissible witness.^d The tendency of the modern decisions to let objections go to the credibility, and not to the competency of witnesses, ought to be encouraged as an improvement in the jurisprudence on this subject. Besides, the proceedings are essentially in rem, according to the course of the civil law, and that consideration is conclusive as to the admissibility of the witness. 3. The court below had no right to charge the jury absolutely to find for the plaintiff. It was a mixed question of fact and law, which ought to have been left to the jury to decide. 4. There is error in the judgment of the court, in decreeing a deposit of the bills of exchange by the vendee for the tobacco, no such agreement being proved.

Mr. Key contra, 1. Though there be no testimony in the record to show a contract for payment in bills of exchange, still the court may infer that such was the contract from the petition of the plaintiff below, supported as it is by his oath, and uncontradicted, as to this fact, by the defendant's answer. [192] The decree was for a specific performance, and the vendors took the bills out of court. 2. The judge's charge was right, there being no evidence of fraud. The vendee's silence was not legal evidence of fraud, and, therefore, there was no conflict of testimony on this point: it was exclusively a question of law; the law was with the plaintiff; and, consequently, the court did right to instruct the jury to find for the plaintiff. 3. Mr. Girault was an inadmissible witness. He and his partners were general merchants as well as factors. They sold in their own names, and might call the article their own or the property of their principals, as it suited them. But they were parties to the suit, and the intervention of their principals did not abate the suit as to them.^e [193] On every ground, therefore, Mr. Girault was an inadmissible witness. 4. The only real question in the cause is, whether the sale was invalid because the vendee did not communicate information which he received precisely as the vendor might have got it had he been equally diligent or equally fortunate? And, surely, on this question there can be no doubt. Even if the vendor had been entitled to the disclosure, he waived it by not insisting on an answer to his question; and the silence of the vendee might as well have been interpreted into an affirmative as a negative answer. But, on principle, he was not bound to disclose. Even admitting that his conduct was unlawful, in foro conscientiae, does that prove that it was so in the civil forum? Human laws are imperfect in this respect, and the sphere of morality is more extensive than the limits of civil jurisdiction. The maxim of caveat emptor could never have crept into the law, if the province of ethics had been co-extensive with it. There was, in the present case, no circumvention or manoeuvre practised by the vendee, unless rising earlier in the morning, and obtaining by superior diligence and alertness that intelligence by which the price of commodities was regulated, be such. It is a romantic equality that is contended for on the other side. Parties never can be precisely equal in knowledge, either of facts or of the [194] inferences from such facts, and both must concur in order to satisfy the rule contended for. The absence of all authority in England and the United States, both great commercial countries, speaks volumes against the reasonableness and practicability of such a rule.

Mr. C. J. Ingersoll, in reply. Though the record may not show that any thing tending to mislead by positive assertion was said by the vendee, in answer to the question proposed by Mr. Girault, yet it is a case of manoeuvre; of mental reservation; of circumvention. The information was monopolized by the messengers from the British fleet, and not imparted to the public at large until it was too late for the vendor to save himself. The rule of law and of ethics is the same. It is not a romantic, but a practical and legal rule of equality and good faith that is proposed to be applied. The answer of Boorman & Johnston denies the whole of the petition, and consequently denies that payment was to be in bills of exchange; and their taking the bills out of court, ought not to prejudice them. There is nothing in the record to show that the vendors were general merchants, and they disclosed their principals when they came to plead. The judge undertook to decide from the testimony, that there was no fraud; in so doing he invaded the province of the jury; he should have left it to the jury, expressing his opinion merely.

Mr. Chief Justice MARSHALL delivered the opinion of the court.

The question in this case is, whether the intelligence of extrinsic circumstances, which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor? The court is of opinion that he was not bound to communicate it. It would be difficult to circumscribe the contrary doctrine within proper limits, where the means of intelligence are equally accessible to both parties. But at the same time, each party must take care not to say or do any thing tending to impose upon the other. The court thinks that the absolute instruction of the judge was erroneous, and that the question, whether any imposition was practised by the vendee upon the vendor ought to have been submitted to the jury. For these reasons the judgment must be reversed, and the cause remanded to the district court of Louisiana, with directions to award a venire facias de novo.

Venire de novo awarded.

[a] Sequestration, in the practice of the civil law, is a process to take judicial custody of the res or persona in controversv to abide the event of the suit. It may be applied to real or personal property, the right to which is litigated between the parties, or even to persons, as to a married woman, in a cause of divorce, in order to preserve her from ill treatment on the part of her husband, or to a minor in order to secure him from ill treatment by his parents. Clerke's Prax. Tit. 43. Pothier, de la Proc edure Civile, Partie I, Chap. 3. art. 2. § 1. Code Napoleon, Liv. 3. tit. 11., Des D ep ots et du S equestre, art. 1961. Digest of the Civil laws of Louisiana, 419. The sequestration may be demanded, either in the original petition, or in the progress of the cause at any time before it is set down for hearing by a petition from the party demanding it, with notice to the opposite party, on which the judge, after hearing counsel, pronounces his interlocutory sentence or decree. This sentence is to be provisionally executed notwithstanding an appeal. The sequestration is usually ordered, in possessory actions, where the preliminary proofs of the parties appear to be nearly balanced; where an inheritance consisting of personal effects of great value is in controversy; where there is ground to apprehend that the parties may resort to personal violence in contesting the enjoyment of the mesne profits; in actions of partition, where the property in litigation cannot be quietly enjoyed by the respective owners; and sometimes in cases where the suit is likely to be of long duration. Pothier, Ib. and § 2.

[b] 1 Comyn on Contr. 38. and the authorities there cited.

[c] Pothier, De Vente, Nos. 233 to 241. He considers this question under the four following heads. 1st. Whether good faith obliges the vendor, at least in foro conscientiae, not only to refrain from practising any deception, but also from using any mental reservation? 2d. What reservation binds the party in the civil forum, and to what obligations? 3d. Whether the vendor is bound, at least in foro conscientiae, not to conceal any circumstances, even extrinsic, which the vendee has an interest in knowing? 4th. Whether the vendor may, in foro conscientiae, sometimes sell at a price above the true value of the article. As Pothier's discussion throws great light on this subject, a translation of this part of his admirable treatise may not be unacceptable to the reader.

'ARTICLE I. 233. Although, in many transactions of civil society, the rules of good faith only require us to refrain from falsehood, and permit us to conceal from others that which they have an interest in knowing if we have an equal interest in concealing it from them; yet, in interested contracts, among which is the contract of sale, good faith not only forbids the assertion of falsehood, but also all reservation concerning that which the person with whom we contract has an interest in knowing, touching the thing which is the object of the contract.

'The reason is that equity and justice, in these contracts, consists in equality. It is evident that any reservation, by one of the contracting parties, concerning any circumstance which the other has an interest in knowing, touching the object of the contract, is fatal to this equality: for the moment the one acquires a knowledge of this object superior to the other, he has an advantage over the other in contracting; he knows better what he is doing than the other; and, consequently, equality is no longer found in the contract.

'In applying these principles to the contract of sale, it follows that the vendor is obliged to disclose every circumstance within his knowledge touching the thing which the vendee has an interest in knowing, and that he sins against that good faith which ought to reign in this contract, if he conceals any such circumstance from him.

'This is what Florentinus teaches in the law 43. § 2. Dig. De contr. empt. Dolum malum a se abesse proestare venditor debet, qui non tantum in eo est qui fallendi causd obscur e loquitur, sed etiam qui insidiose, obscure dissimulat.

'234. According to these principles the vendor is obliged not to conceal any of the defects of the article sold, which are within his knowledge, although these defects may not be such as fall within an implied warranty, but even such defects as the vendee would have no right to complain of, if the vendor who had not disclosed them was ignorant of their existence. Cum ex XII. tabulis, says Cicero, (Lib 3. de Off.) satis esset cautum ea praestare quae essent lingu a nuncuipata; a j urisconsultis, etiam reticencioe poena constituta, quidquid enim inest proedio vitii id statuerunt, si venditor sciret, nisi nominatim dictum esset, proestare oportere. The vendor, in this case, is held in id quanti (emptoris) intererit scisse. Dig. l. 4. De act. empt. and this r eservation may sometimes authorize a rescinding of the contract. 1. 11, § 5. Dig. de tit.

'235. This rule ought to be applied, although the vendor, who has concealed the defects in the thing sold, has not sold it for more than its value with these defects. The reason is that he who sells me a thing has no right to require that I should pay the highest price for it, unless I consent to buy it for that price; he has no right to require of me a higher price than that which I voluntarily give, and he ought not to practise any artifice to induce me to consent to buy it at a higher price than I should have been willing to give had I known the defects which he had maliciously concealed.

'236. Good faith obliges the vendor, not only not to conceal any of the intrinsic vices of the thing sold, but generally not to dissemble any circumstance concerning it which might induce the vendee not to buy, or not to buy at so high a price. For example, the vendee may have his action against the vendor if the latter has concealed the existence of a bad neighbourhood to a real estate sold by him, which might have prevented the vendee from purchasing had he known it: Si quis in vendendo proedio confinem celaverit, quem emptor si audisset, empturus non esset. Dig. L. 15. § 8. De contr. empt.

'237. These principles of the Roman jurisconsults, are more accurate and more conformable to justice than the decision of St. Thomas, which permits the vendor to conceal the vices of the thing sold, except in two cases, 1. If the vice be of a nature to cause the vendee some injury; and 2. If the vendor availed himself of his reservation in order to sell the thing at a higher price than it was worth. This decision appears to me to be unjust, since, as the vendor is perfectly at liberty to sell or not to sell, he ought to leave the vendee perfectly at liberty to buy or not to buy, even for a fair price, if that price does not suit the buyer: it is, therefore, unjust to lay a snare for this liberty which the vendee ought to enjoy, by concealing from him the vice of the thing, in order to induce him to buy that which he would not have been willing to buy for the price at which it is sold to him, had he known its defects.

'ARTICLE II. 238. Although it is with respect to the civil forum that the Roman jurisconsults have established the principles which we have stated, touching the obligation of the vendor not to conceal from the vendee any circumstance relative to the thing sold, and although they ought to be exactly followed, in foro conscientioe, yet they are little observed in our tribunals, and the vendee is not easily listened to who complains of the concealment of some vice in the thing sold, unless it be such a defect as falls within the doctrine of implied warranty. The interest of commerce not permitting parties to set aside their contracts with too much facility, they must impute it to their own fault in not having better informed themselves of the defects in the commodities they have purchased.

'239. There are, nevertheless, certain reservations touching the thing sold which have been thought worthy of the attention of the law, and which are obligatory on the vendor in the civil forum; as for instance, when the vendor knows that the thing which he sells does not belong to him, or that it does not irrevocably belong to him, or that it is subject to certain incumbrances, and conceals these facts from the vendee,' &c.

'ARTICLE III. 241. Cicero, in the third book of his Offices, has treated this question in the case of a corn-merchant, who being arrived at Rhodes, in a time of scarcity, before a great number of other vessels loaded with corn, exposes his own for sale: Cicero proposes the question whether this merchant is obliged to inform the buyers that there are a great number of other vessels on their voyage, and near the port? He states, upon this question, the sentiments of two stoic philosophers, Diogenes and Antipater; Diogenes thought that the merchant might lawfully withhold the knowledge which he had of the vessels on the point of arriving, and sell his corn at the current price: Antipater, his disciple, whose decision Cicero appears to adopt, thought, on the contrary, that this dissimulation was contrary to good faith. The reason on which he grounds this opinion is that the concord which ought to exist among men, the affection which we ought to bear to each other, cannot permit us to prefer our private interest to the interest of our neighbour, from whence it follows that, though we may conceal some things from prudence, we cannot conceal, for the sake of profit, facts which those with whom we contract have an interest in knowing. Hoc celandi genus, says he, non aperti, non simplicis, non ingenui; non justi, non viri boni: vertuti potius, obscuri, astuti, fallacis, malitiosi, callidi, veteratoris, vafri.

'This question only concerns the forum of conscience; for there can be no doubt that in the civil forum, the demand of a vendee cannot be listened to who complains that the vendor has not disclosed to him all the extrinsic circumstances relative to the thing sold, whatever interest the vendee might have in knowing them. The decision of Cicero is somewhat difficult to maintain even in the forum of conscience. The greater part of the writers on natural law have considered it as unreasonable.

'These writers are of opinion, that the good faith which ought to govern the contract of sale, only requires that the vendor should represent the thing sold as it is, without dissimulating its defects, and not to sell it above the price which it bears at the time of the contract; that he commits no injustice in selling it at this price, although he knows that the price must soon fall; that he is not obliged to disclose to the vendee a knowledge which he may have of the circumstances that may produce a depression of the price; the vendee having no more right to demand that the vendor should impart this knowledge than that he should give away his property; that if he should do it, it would be merely an act of benevolence, which we are not obliged to exercise except towards those who are in distress, which was not the case with the Rhodians, who were only in want of corn, but were not in want of money to buy it. The profit which the merchant makes in selling it for the price it is worth today, although he is conscious the price will fall to-morrow, is not iniquitous; it is a just recompense for his diligence in reaching the market first, and for the risk which he ran of losing upon his commodities if any accident had prevented his arriving so soon. It is no more forbidden to sell at the current price, without disclosing the circumstances which may cause it to fall, than it is to buy without communicating those which may cause it to rise. And Joseph was never accused of injustice for profiting of the knowledge which he alone had of the years of famine to buy the fifth part of the corn of the Egyptians without warning them of the years of famine that were to follow.

'Notwithstanding these roasons and authorities, I should have some difficulty, in the forum of conscience, in excusing the injustice of a profit which the vendor might derive from concealing a fact which would cause a fall in the price of the commodity, when that fall must be very considerable, and must certainly arrive in a very short period of time, such as that which the merchant knew of the near approach of a fleet to Rhodes laden with corn. In the contract of sale, as well as in other mutually beneficial contracts, equity requires that what the one party gives should be the equivalent of what he receives, and that neither party should wish to profit at the expense of the other. But in the case of the merchant, who, by dissembling the knowledge which he has of this fact, sells his corn at one hundred livres the cask, the market price of the day, can he, without illusion, persuade himself that the article which, in two days, will be worth no more than twenty livres, is the equivalent of one hundred livres which he receives? You will say that it is sufficient if at the time it be worth the price of one hundred livres for which he sells it. I answer, that a thing, which has a present and momentary value of one hundred livres, but which he certainly knows will be reduced in two days to the value of twenty, cannot be seriously regarded by him as truly the equivalent of the money which he receives, and which must always be worth one hundred. Does not his conduct imply, that he wishes, by his reservation, to profit and enrich himself at the expense of the buyers, to induce them to purchase a commodity by which he is certain they must lose in two days four fifths of the original cost?'

The merchant will smile at the rigid morality of this deservedly celebrated writer, who proceeds, in a fourth article, to consider whether the vendor may, in foro conscientia, sometimes sell at a price above the true value of the commodity. After laying down some general rules on this subject, he remarks, that 'they are not adopted in the civil forum, where a vendee is not ordinarily admitted to complain that he has purchased dearer than the true value, it being for the interest of commerce that parties should not be allowed to set aside their contracts with too much facility.' No. 242. In a subsequent part of his treatise he states what are the nature of the frauds that may be committed by the vendee, which he resolves into two classes. 1st. The first consists of any misrepresentation or circumvention which the vendee may employ in order to induce the vendor to sell, or to sell at a less price. 2d. Where the vendee conceals from the vendor the knowledge which he may have, touching the thing sold, and which the vendor may not possess. The former species of fraud, if sufficiently proved, he considers will invalidate the contract even in the civil forum. But the latter he deems only obligatory in foro conscientiae, both because unduly restricting the freedom of commerce, and because the vendor ought to know best the qualities of the articles he sells, and if he does not, it is his own fault. Nos. 294-298. In the fifth part, chap. 2., he considers the subject of the action which is given by the Code, l. 4. tit. 44. De rescind. vend., to the vendor for rescinding the contract on account of enormous lesion, or gross inadequacy of price, which, however, does not extend to merchandise, or other personal property, and, therefore, it is unnecessary to trouble the reader by extending this note to a greater length.

[d] Dixon v. Cooper, 3 Wils. 40. 1 Atk. 248. Benjamin v. Porteus, 2 H. Bl. 590. Mackay v. Rhinelander et al., 1 Johns. Cas. 408. Jones v. Hake, 2 Johns Cas. 60. Burlingame v. Dyer, Johns. Rep. 189.

[e] Intervention is a proceeding by which a third person petitions to be received as a party in a cause, either with the plaintiff or the defendant, and to prosecute the suit jointly with the party whose interests may be connected with his own. It may take place either before or after the cause is at issue, and set down for hearing; either in the court below, or upon appeal. But it cannot operate to retard the adjudication of the principal cause; which may either be determined separately, or the whole controversy may be decided by one and the same judgment. Clerke's Prax. tit. 38, 39. Pothier, De la Proc edure Civile, Partie 1, chap. 2, art. 3. § 3. Code de Proc edure Civile, Partie 1. Liv. 2. tit. 16. De l'Intervention, art. 339, 340. It may take place where the goods of one person are attached as the property or for the debt of another. Clerke's Prax. Ib. In actions of warranty, Pothier, Ib. Partie 1. chap. 2. art. 2. § 2. Code de Proc edure Civile, 1ere Partie Liv. 2. tit. 9. Des Exceptions Dilatoires, art. 183. So also in a suit for separation of property between husband and wife, the creditors of the husband may intervene for the preservation of their rights. Ib. 2 Partie. Liv. 1. tit. 8. Des Separations de Biens, art. 871.

Interest in the subject matter of the suit is a fatal objection to the competency of a witness by the civil law; (Pothier, Id. Partie 2. chap. 3.art. 4. § 3.;) but according to the above authorities, Mr. Girault appears to have been an inadmissible witness, because still a party to the cause notwithstanding the intervention of his principals.

193 Cal.Rptr. 130

145 Cal.App.3d 261

Dorris Joni REED, Plaintiff and Appellant,
v.
Robert J. KING et al., Defendants and Respondents.

Civ. 21937.

Court of Appeal, Third District, California.

June 21, 1983.
Hearing Denied Oct. 6, 1983.

[145 Cal.App.3d 263] McKernan & Lanam and Stephen E. Benson, Chico, for plaintiff and appellant.

Price, Burnes, Price, Davis & Brown, Philip B. Price, Chico, and Mary Marsh Linde for defendants and respondents.

BLEASE, Associate Justice.

In the sale of a house, must the seller disclose it was the site of a multiple murder? Dorris Reed purchased a house from Robert King. Neither King nor his real estate agents (the other named defendants) told Reed that a woman and her four children were murdered there ten years earlier. However, it seems "truth will come to light; murder cannot be hid long." (Shakespeare, Merchant of Venice, Act II, Scene II.) Reed learned of the gruesome episode from a neighbor after the sale. She sues seeking rescission and damages. King and the real estate agent defendants successfully demurred to her first [145 Cal.App.3d 264] amended complaint for failure to state a cause of action. Reed appeals the ensuing judgment of dismissal. We will reverse the judgment.

FACTS

We take all issuable facts pled in Reed's complaint as true. (See 3 Witkin, Cal.Procedure [193 Cal.Rptr. 131] (2d ed. 1971) Pleading, § 800.) King and his real estate agent knew about the murders and knew the event materially affected the market value of the house when they listed it for sale. They represented to Reed the premises were in good condition and fit for an "elderly lady" living alone. They did not disclose the fact of the murders. At some point King asked a neighbor not to inform Reed of that event. Nonetheless, after Reed moved in neighbors informed her no one was interested in purchasing the house because of the stigma. Reed paid $76,000, but the house is only worth $65,000 because of its past.

The trial court sustained the demurrers to the complaint on the ground it did not state a cause of action. The court concluded a cause of action could only be stated "if the subject property, by reason of the prior circumstances, were presently the object of community notoriety ...." (Original italics.) Reed declined the offer of leave to amend.

Discussion

Does Reed's pleading state a cause of action? Concealed within this question is the nettlesome problem of the duty of disclosure of blemishes on real property which are not physical defects or legal impairments to use.

Reed seeks to state a cause of action sounding in contract, i.e. rescission, or in tort, i.e. deceit. In either event her allegations must reveal a fraud. (See Civ.Code, §§ 1571-1573, 1689, 1709-1710.) "The elements of actual fraud, whether as the basis of the remedy in contract or tort, may be stated as follows: There must be (1) a false representation or concealment of a material fact (or, in some cases, an opinion) susceptible of knowledge, (2) made with knowledge of its falsity or without sufficient knowledge on the subject to warrant a representation, (3) with the intent to induce the person to whom it is made to act upon it; and such person must (4) act in reliance upon the representation (5) to his damage."^[1] (Original italics.) (1 Witkin, Summary of California Law (8th ed. 1973) Contracts, § 315.)

The trial court perceived the defect in Reed's complaint to be a failure to allege concealment of a material fact. "Concealment" and "material" are [145 Cal.App.3d 265] legal conclusions concerning the effect of the issuable facts pled. As appears, the analytic pathways to these conclusions are intertwined.

Concealment is a term of art which includes mere non-disclosure when a party has a duty to disclose. (See e.g. Lingsch v. Savage (1963) 213 Cal.App.2d 729, 738, 29 Cal.Rptr. 201; Rest.2d Contracts, § 161; Rest.2d Torts, § 551; Rest.Restitution, § 8, esp. com. b.) Reed's complaint reveals only non-disclosure despite the allegation King asked a neighbor to hold his peace. There is no allegation the attempt at suppression was a cause in fact of Reed's ignorance.^[2] (See Rest.2d Contracts, §§ 160, 162-164; Rest.2d Torts, § 550; Rest.Restitution, § 9.) Accordingly, the critical question is: does the seller have duty to disclose here? Resolution of this question depends on the materiality of the fact of the murders.

In general, a seller of real property has a duty to disclose: "where the seller knows of facts materially affecting the value or desirability of the property which are [193 Cal.Rptr. 132] known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer.^[3] [Emphasis added; Citations omitted.]" (Lingsch v. Savage, supra, 213 Cal.App.2d at p. 735, 29 Cal.Rptr. 201.) This broad statement of duty has led one commentator to conclude: "The ancient maxin caveat emptor ('let the buyer beware.') has little or no application to California real estate transactions." (1 Miller and Starr, Current Law of Cal.Real Estate (rev. ed. 1975) § 1:80.)

Whether information "is of sufficient materiality to affect the value or desirability of the property ... depends on the facts of the particular case." (Lingsch, supra, 213 Cal.App.2d at p. 737, 29 Cal.Rptr. 201.) Materiality "is a question of law, and is part of the concept of right to rely or justifiable reliance." (3 Witkin, Cal.Procedure (2d ed. 1971) Pleading, § 578, p. 2217.) Accordingly,[145 Cal.App.3d 266] the term is essentially a label affixed to a normative conclusion.^[4] Three considerations bear on this legal conclusion: the gravity of the harm inflicted by non-disclosure; the fairness of imposing a duty of discovery on the buyer as an alternative to compelling disclosure, and its impact on the stability of contracts if rescission is permitted.

Numerous cases have found non-disclosure of physical defects and legal impediments to use of real property are material. (See 1 Miller and Starr, supra, § 181.)^[5] However, to our knowledge, no prior real estate sale case has faced an issue of non-disclosure of the kind presented here. (Compare Earl v. Saks & Co., supra; Kuhn v. Gottfried (1951) 103 Cal.App.2d 80, 85-86, 229 P.2d 137.) Should this variety of ill-repute be required to be disclosed? Is this a circumstance where "non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing [?]" (Rest.2d Contracts, § 161, subd. (b).)

The paramount argument against an affirmative conclusion is it permits the camel's nose of unrestrained irrationality admission to the tent. If such an "irrational" consideration is permitted as a basis of rescission the stability of all conveyances will be seriously undermined. Any fact that might disquiet the enjoyment of some segment of the buying public may be seized upon by a disgruntled purchaser to void a bargain.^[6] In our view, keeping [145 Cal.App.3d 267] this genie [193 Cal.Rptr. 133] in the bottle is not as difficult a task as these arguments assume. We do not view a decision allowing Reed to survive a demurrer in these unusual circumstances as endorsing the materiality of facts predicating peripheral, insubstantial, or fancied harms.

The murder of innocents is highly unusual in its potential for so disturbing buyers they may be unable to reside in a home where it has occurred. This fact may foreseeably deprive a buyer of the intended use of the purchase. Murder is not such a common occurrence that buyers should be charged with anticipating and discovering this disquieting possibility. Accordingly, the fact is not one for which a duty of inquiry and discovery can sensibly be imposed upon the buyer.

Reed alleges the fact of the murders has a quantifiable effect on the market value of the premises.^[7] We cannot say this allegation is inherently wrong and, in the pleading posture of the case, we assume it to be true. If information known or accessible only to the seller has a significant and measureable effect on market value and, as is alleged here, the seller is aware of this effect, we see no principled basis for making the duty to disclose turn upon the character of the information. Physical usefulness is not and never has been the sole criterion of valuation. Stamp collections and gold speculation would be insane activities if utilitarian considerations were the sole measure of value. (See also Civ.Code, § 3355 [deprivation of property of peculiar value to owner]; Annot. (1950) 12 A.L.R.2d 902 [measure of damages for conversion or loss of, or damage to, personal property having no market value].)

Reputation and history can have a significant effect on the value of realty. "George Washington slept here" is worth something, however physically inconsequential that consideration may be. Ill-repute or "bad will" conversely may depress the value of property. Failure to disclose such a negative fact where it will have a forseeably depressing effect on income expected to be generated by a business is tortious. (See Rest.2d Torts, § 551, illus. 11.) Some cases have held that unreasonable fears of the potential buying public that a gas or oil pipeline may rupture may depress the market value of land and entitle the owner to incremental compensation in eminent domain. (See Annot., Eminent Domain: Elements and measure of compensation for oil or gas pipeline through private property (1954) 38 A.L.R.2d 788, 801-804.)

[145 Cal.App.3d 268] Whether Reed will be able to prove her allegation the decade-old multiple murder has a significant effect on market value we cannot determine.^[8] If she is able to do so by competent evidence she is entitled to a favorable ruling on the issues of materiality and duty to disclose.^[9] Her demonstration [193 Cal.Rptr. 134] of objective tangible harm would still the concern that permitting her to go forward will open the floodgates to rescission on subjective and idiosyncratic grounds.

A more troublesome question would arise if a buyer in similar circumstances were unable to plead or establish a significant and quantifiable effect on market value. However, this question is not presented in the posture of this case. Reed has not alleged the fact of the murders has rendered the premises useless to her as a residence. As currently pled, the gravamen of her case is pecuniary harm. We decline to speculate on the abstract alternative.

The judgment is reversed.

EVANS, Acting P.J., and CARR, J., concur.

Hearing denied; RICHARDSON, J., dissenting.

[1] Proof of damage, i.e. specific pecuniary loss, is not essential to obtain rescission alone. (See 1 Witkin, op. cit. supra, §§ 324-325; see also Earl v. Saks & Co. (1951) 36 Cal.2d 602, 226 P.2d 340.)

[2] Reed elsewhere in the complaint asserts defendants "actively concealed" the fact of the murders and this in part misled her. However, no connection is made or apparent between the legal conclusion of active concealment and any issuable fact pled by Reed. Accordingly, the assertion is insufficient. (See Bacon v. Soule (1912) 19 Cal.App. 428, 438, 126 P. 384.) Similarly we do not view the statement the house was fit for Reed to inhabit as transmuting her case from one of non-disclosure to one of false representation. To view the representation as patently false is to find "elderly ladies" uniformly susceptible to squeamishness. We decline to indulge this stereotypical assumption. To view the representation as misleading because it conflicts with a duty to disclose is to beg that question.

[3] The real estate agent or broker representing the seller is under the same duty of disclosure. (Lingsch v. Savage, supra, 213 Cal.App.2d at p. 736, 29 Cal.Rptr. 201.)

[4] This often subsumes a policy analysis of the effect of permitting rescission on the stability of contracts. (See fn. 6, ante.) "In the case law of fraud, the word 'material' has become a sort of talisman. It is suggested that it has no meaning when undefined other than to the user since the word actually means no more than that the fraud is the sort which will justify rescission or damages in deceit. However, courts continue to use materiality as a test without explanatory reference to the varying standards of reliance, damage, etc. they are following." (Note, Rescission: Fraud as Ground: Contracts (1951) 39 Cal.L.Rev. 309, 310-311, fn. 4.)

[5] For example, the following have been held of sufficient materiality to require disclosure: the home sold was constructed on filled land (Burkett v. J.A. Thompson & Son (1957) 150 Cal.App.2d 523, 526, 310 P.2d 56); improvements were added without a building permit and in violation of zoning regulations (Barder v. McClung (1949) 93 Cal.App.2d 692, 697, 209 P.2d 808) or in violation of building codes (Curran v. Heslop (1953) 115 Cal.App.2d 476, 480-481, 252 P.2d 378); the structure was condemned (Katz v. Department of Real Estate (1979) 96 Cal.App.3d 895, 900, 158 Cal.Rptr. 766); the structure was termite-infested (Godfrey v. Steinpress (1982) 128 Cal.App.3d 154, 180 Cal.Rptr. 95); there was water infiltration in the soil (Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171, 187-188, 183 Cal.Rptr. 881); the correct amount of net income a piece of property would yield (Ford v. Cournale (1973) 36 Cal.App.3d 172, 179-180, 111 Cal.Rptr. 334.)

[6] Concern for the effects of an overly indulgent rescission policy on the stability of bargains is not new. Our Supreme Court early on quoted with approval the sentiment: "The power to cancel a contract is a most extraordinary power. It is one which should be exercised with great caution,--nay, I may say, with great reluctance,--unless in a clear case. A too free use of this power would render all business uncertain, and, as has been said, make the length of a chancellor's foot the measure of individual rights. The greatest liberty of making contracts is essential to the business interests of the country. In general, the parties must look out for themselves." (Colton v. Stanford (1890) 82 Cal. 351, 398, 23 P. 16.)

[7] See Evidence Code section 810 et seq. We note the traditional formulation of market value assumes a buyer "with knowledge of all the uses and purposes to which [the realty] is adapted." (See e.g. South Bay Irr. Dist. v. California-American Water Co. (1976) 61 Cal.App.3d 944, 961 and 970, 133 Cal.Rptr. 166.)

[8] "[I]n determining what factors would motivate [buyers and sellers] in reaching an agreement as to price, and in weighing the effect of their motivation, [the trier of fact] may rely upon the opinion of experts in the field and also upon its knowledge and experience shared in common with people in general." (South Bay Irr. Dist., supra, 61 Cal.App.3d at p. 970, 133 Cal.Rptr. 166; see also 3 Wigmore, Evidence (Chadbourn rev. ed. 1970) § 711 et seq.)

[9] The ruling of the trial court requiring the additional element of notoriety, i.e. widespread public knowledge, is unpersuasive. Lack of notoriety may facilitate resale to yet another unsuspecting buyer at the "market price" of a house with no ill-repute. However, it appears the buyer will learn of the possibly unsettling history of the house soon after moving in. Those who suffer no discomfort from the specter of residing in such quarters per se, will nonetheless be discomforted by the prospect they have bought a house that may be difficult to sell to less hardy souls. Non-disclosure must be evaluated as fair or unfair regardless of the ease with which a buyer may escape this discomfort by foisting it upon another.

Mattahiah Eytan, pro se.

Ella Eytan, pro se.

No appearance was entered for appellee.

Before FICKLING^[1] and KERN, Associate Judges, and REILLY, Chief Judge, Retired.

REILLY, Chief Judge, Retired:

This is an appeal from a judgment in the Small Claims Court^[2] dismissing an action to recover $157.50 — the total sales price of three paintings paid to a Georgetown retailer of antiques and miscellaneous second-hand furniture by appellants (a married couple). Their basic contention was that they had bought these paintings because the vendor had represented them to be the original productions of some 19th Century artist (or artists), notwithstanding the fact [880] that these were merely copies (as the purchasers subsequently discovered) processed and placed in frames to convey the impression of age.

When this case was reached on the calendar, the trial judge, in compliance with Small Claims Rule 12(a), sought to elicit from the parties the information bearing on the case and attempted to obtain a pretrial settlement. The principal claimant, the husband, told the court that he and his wife had come to the defendant's shop to purchase some antique paintings, where they inspected and touched several canvases. They selected three because the brittleness of the material, cracks in the paint, discoloration, grease stains on the back, and punctures in the frame, he asserted, led them to believe these particular items were old. The proprietor of the shop, conceding that these paintings were not genuine originals but recent reproductions, nevertheless insisted that they were worth considerably more than the purchasers had paid, saying that he had agreed to cut his prices in order to effectuate the sale. At the court's suggestion, he offered the claimants $50 in settlement. This offer was rejected, and the parties were instructed to return that afternoon for trial.^[3]

When court reconvened, the trial judge said that in his opinion the complainants had no cause of action. At the request of the principal claimant, however, the court permitted him to make a statement of the facts and to present argument.

In his presentation, this appellant repeated much of what he had said in the conciliation proceedings, conceded that the vendor had made no express representation that the paintings were either originals or ancient, but contended that because he and his wife had, in the course of their inspection, displayed such interest in indicia of age, it became the legal duty of the dealer to disclose the true facts before the sale was completed. The only new fact he adduced was that the dealer did make a comment on one of the paintings — a plantation scene in which a group of white men in costumes of a past century were depicted with a black man in one corner of the canvas. The dealer remarked that paintings with black men in them were unusual in the 19th Century.^[4] Plaintiff then argued that defendant was guilty of a breach of implied or express warranty. The court disagreed.

The trial judge found "no controverted issues of material fact."^[5] Based on a "general knowledge of the economics of the locality," the trial judge concluded that the average price paid for each of the three paintings — approximately $50 — was ". . a sufficiently small amount to put any purchaser on notice that he was not buying a legitimate antique original work of art" and summarily dismissed the complaint.^[6]

In the brief accompanying the application for allowance of appeal, appellants contended that the court erred in (1) ruling that the failure of a seller to disclose a material fact does not amount to a misrepresentation, (2) ruling that the doctrine of implied warranty of fitness has no application to secondhand goods, (3) relying upon its own knowledge and expertise in American art history to reach the conclusion that the purchasers should have known that the paintings were not old, but were reproductions, and (4) basing its judgment solely upon something said in the course of conciliation.

As abstract propositions of law, some of these contentions are not devoid of merit. This court has recognized that in certain circumstances, concealment of a "material fact is as fraudulent as a positive direct misrepresentation." Andolsun v. Berlitz Schools of Languages of America, Inc., D.C. App., 196 A.2d 926, 927 (1964). Moreover, [881] D.C.Code 1973, § 28:2-315 makes no distinction between new and used goods in its discussion of implied warranties of fitness for a particular purpose. This section was enacted as a part of the Uniform Commercial Code, and courts have adopted the view that secondhand goods are within its coverage. See Green v. Northeast Motor Co., D.C.Mun.App., 166 A.2d 923 (1961); Overland Bond and Investment Corp. v. Howard, 9 Ill.App.3d 348, 292 N.E.2d 168 (1972).

An examination of the proceedings — transcribed after appeal was allowed — reveals, however, that none of these issues is really raised by the record and that the judgment of the court does not rest upon any of the rulings attributed to it by appellants. What the court did hold was that a purchaser who bought artificially aged copies of primitive paintings for the low unit prices upon which he and the dealer ultimately agreed, could not credibly assign as fraud the fact that the articles purchased turned out not to be vastly more valuable — as, of course, original paintings would have been. Under the circumstances — the customer not having inquired as to whether the canvases were originals — we perceive no duty upon the part of the vendor to inform him of the obvious. If a customer went into a jewelry store and bought for $50 an item which looked like a diamond pendant set with pearls, it would plainly not be incumbent upon the sales clerk to warn the customer that what he had selected was a piece of costume jewelry with synthetic gems.

In taking this view of the matter, the record does not reflect that the trial judge^[7] relied upon — or took judicial notice of his own knowledge of the history of American art — although in the course of oral argument, appellant accused him of doing so. The trial judge disclaimed this approach and his written findings make clear that this was not a factor.

Although appellants strongly urge that they were aggrieved because the court entered judgment against them before any testimony was taken and thereby prevented their calling witnesses, it is fundamental that a court may direct a verdict where the opening statement of plaintiff reveals that no cause of action exists. Cook v. Safeway Stores, Inc., D.C.App., 354 A.2d 507 (1976) and cases cited at 508. Plainly, this principle also applies to jury-waived cases, including trials in the Small Claims Branch. Appellants argue, however, that it was improper for the court to decide the case simply upon something said in the conciliation proceedings. Presumably they are adverting to the familiar rule of evidence which excludes testimony of concessions made in settlement conferences.

It is not altogether clear that proceedings under Rule 12(a) fall into this category, for this rule requires the court to inquire into the nature of the claims and defenses — thereby implying that if there are no substantial issues of fact to support a valid claim, the court may take appropriate action even though Rule 12(b) provides for a trial when the parties fail to settle the controversy. But we need not decide this question here. Although the court expressed its view of the matter when the parties reconvened for trial, it did not enter formal judgment until it had heard the principal appellant's opening statement and orally pointed out what it deemed to be the fatal flaws in the described claim. It then granted summary judgment.

It is immaterial that the defendant did not formally move for summary judgment, but rather was awarded judgment by the court sua sponte. In the Small Claims Branch, informal procedures govern and the relevant inquiry is whether "substantial justice" has been achieved. Interstate Bankers Corp. v. Kennedy, D.C.Mun.App., 33 A.2d 165, 166 (1943).

Affirmed.

[1] Associate Judge Fickling participated at argument and in the post-argument conference prior to his death on March 6, 1977.

[2] Now a branch of the Superior Court. Plaintiffs in the action filed an application for allowance of appeal, which was granted. D.C.Code 1973, § 11-721.

[3] All parties were present and not represented by counsel.

[4] The claimant contends that this comment was tantamount to warranting that the painting was done in the 19th Century, but the trial judge noted that the vendor's observation seemed to be a caveat rather than a representation.

[5] Certification of Trial Court at 1, Oct. 28, 1975.

[6] Id. at 2.

[7] The trial judge, Hon. Edward A. Beard, was the moving force in the creation of the Superior Court Art Trust, a collection which includes some excellent examples of American art.

Knollmiller, Herrick, Brown & Arenofsky by Thomas N. Swift, Tempe, for Warren and Gloria Hill.

Johnson & Shelley by Bryn R. Johnson, Mesa, for Ora and Barbara Jones.

OPINION

MEYERSON, Judge.

Must the seller of a residence disclose to the buyer facts pertaining to past termite infestation? This is the primary question presented in this appeal. Plaintiffs Warren G. Hill and Gloria R. Hill (buyers) filed suit to rescind an agreement to purchase a residence. Buyers alleged that Ora G. Jones and Barbara R. Jones (sellers) had made misrepresentations concerning termite damage in the residence and had failed to disclose to them the existence of the damage and history of termite infestation in the residence. The trial court dismissed the claim for misrepresentation based upon a so-called integration clause in the parties' agreement.

Sellers then sought summary judgment on the "concealment" claim arguing that [82] they had no duty to disclose information pertaining to termite infestation and that even if they did, the record failed to show all of the elements necessary for fraudulent concealment. The trial court granted summary judgment, finding that there was "no genuinely disputed issue of material fact and that the law favors the ... defendants." The trial court awarded sellers $1,000.00 in attorney's fees. Buyers have appealed from the judgment and sellers have cross-appealed from the trial court's ruling on attorney's fees.

I. FACTS

In 1982, buyers entered into an agreement to purchase sellers' residence for $72,000. The agreement was entered after buyers made several visits to the home. The purchase agreement provided that sellers were to pay for and place in escrow a termite inspection report stating that the property was free from evidence of termite infestation. Escrow was scheduled to close two months later.

One of the central features of the house is a parquet teak floor covering the sunken living room, the dining room, the entryway and portions of the halls. On a subsequent visit to the house, and when sellers were present, buyers noticed a small "ripple" in the wood floor on the step leading up to the dining room from the sunken living room. Mr. Hill asked if the ripple could be termite damage. Mrs. Jones answered that it was water damage. A few years previously, a broken water heater in the house had in fact caused water damage in the area of the dining room and steps which necessitated that some repairs be made to the floor. No further discussion on the subject, however, took place between the parties at that time or afterwards.

Mr. Hill, through his job as maintenance supervisor at a school district, had seen similar "ripples" in wood which had turned out to be termite damage. Mr. Hill was not totally satisfied with Mrs. Jones's explanation, but he felt that the termite inspection report would reveal whether the ripple was due to termites or some other cause.

The termite inspection report stated that there was no visible evidence of infestation. The report failed to note the existence of physical damage or evidence of previous treatment. The realtor notified the parties that the property had passed the termite inspection. Apparently, neither party actually saw the report prior to close of escrow.

After moving into the house, buyers found a pamphlet left in one of the drawers entitled "Termites, the Silent Saboteurs." They learned from a neighbor that the house had some termite infestation in the past. Shortly after the close of escrow, Mrs. Hill noticed that the wood on the steps leading down to the sunken living room was crumbling. She called an exterminator who confirmed the existence of termite damage to the floor and steps and to wood columns in the house. The estimated cost of repairing the wood floor alone was approximately $5,000.

Through discovery after their lawsuit was filed, buyers learned the following. When sellers purchased the residence in 1974, they received two termite guarantees that had been given to the previous owner by Truly Nolen, as well as a diagram showing termite treatment at the residence that had taken place in 1963. The guarantees provided for semi-annual inspections and annual termite booster treatments. The accompanying diagram stated that the existing damage had not been repaired. The second guarantee, dated 1965, reinstated the earlier contract for inspection and treatment. Mr. Jones admitted that he read the guarantees when he received them. Sellers renewed the guarantees when they purchased the residence in 1974. They also paid the annual fee each year until they sold the home.

On two occasions during sellers' ownership of the house but while they were at their other residence in Minnesota, a neighbor noticed "streamers" evidencing live termites in the wood tile floor near the entryway. On both occasions, Truly Nolen gave a booster treatment for termites. On the [83] second incident, Truly Nolen drilled through one of the wood tiles to treat for termites. The neighbor showed Mr. Jones the area where the damage and treatment had occurred. Sellers had also seen termites on the back fence and had replaced and treated portions of the fence.

Sellers did not mention any of this information to buyers prior to close of escrow. They did not mention the past termite infestation and treatment to the realtor or to the termite inspector. There was evidence of holes on the patio that had been drilled years previously to treat for termites. The inspector returned to the residence to determine why he had not found evidence of prior treatment and termite damage. He indicated that he had not seen the holes in the patio because of boxes stacked there. It is unclear whether the boxes had been placed there by buyers or sellers. He had not found the damage inside the house because a large plant, which buyers had purchased from sellers, covered the area. After investigating the second time, the inspector found the damage and evidence of past treatment. He acknowledged that this information should have appeared in the report. He complained, however, that he should have been told of any history of termite infestation and treatment before he performed his inspection and that it was customary for the inspector to be given such information.

Other evidence presented to the trial court was that during their numerous visits to the residence before close of escrow, buyers had unrestricted access to view and inspect the entire house. Both Mr. and Mrs. Hill had seen termite damage and were therefore familiar with what it might look like. Mr. Hill had seen termite damage on the fence at this property. Mrs. Hill had noticed the holes on the patio but claimed not to realize at the time what they were for. Buyers asked no questions about termites except when they asked if the "ripple" on the stairs was termite damage. Mrs. Hill admitted she was not "trying" to find problems with the house because she really wanted it.

II. CONTRACT INTEGRATION CLAUSE

We first turn to the trial court's ruling that the agreement of the parties did not give buyers the right to rely on the statement made by Mrs. Jones that the "ripple" in the floor was water damage. We find this ruling to be in error. The contract provision upon which the trial court based its ruling reads as follows:

That the Purchaser has investigated the said premises, and the Broker and the Seller are hereby released from all responsibility regarding the valuation thereof, and neither Purchaser, Seller, nor Broker shall be bound by any understanding, agreement, promise, representation or stipulation expressed or implied, not specified herein.

In Lufty v. R.D. Roper & Sons Motor Co., 57 Ariz. 495, 506, 115 P.2d 161, 166 (1941), the Arizona Supreme Court considered a similar clause in an agreement and concluded that "any provision in a contract making it possible for a party thereto to free himself from the consequences of his own fraud in procuring its execution is invalid and necessarily constitutes no defense." The court went on to hold that "parol evidence is always admissible to show fraud, and this is true, even though it has the effect of varying the terms of a writing between the parties." 57 Ariz. at 506-507, 115 P.2d at 166; Barnes v. Lopez, 25 Ariz. App. 477, 480, 544 P.2d 694, 697 (1976). In this case, the claimed misrepresentation occurred after the parties executed the contract.^[1] Assuming, for the purposes of this decision, that the integration clause would extend to statements made subsequent to the execution of the contract, the clause could not shield sellers from liability should buyers be able to prove fraud.

III. DUTY TO DISCLOSE

The principal legal question presented in this appeal is whether a seller has a [84] duty to disclose to the buyer the existence of termite damage in a residential dwelling known to the seller, but not to the buyer, which materially affects the value of the property. For the reasons stated herein, we hold that such a duty exists.

This is not the place to trace the history of the doctrine of caveat emptor. Suffice it to say that its vitality has waned during the latter half of the 20th century. E.g., Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984) (implied warranty of workmanship and habitability extends to subsequent buyers of homes); see generally Quashnock v. Frost, 299 Pa.Super. 9, 445 A.2d 121 (1982); Ollerman v. O'Rourke Co., 94 Wis.2d 17, 288 N.W.2d 95 (1980). The modern view is that a vendor has an affirmative duty to disclose material facts where:

1. Disclosure is necessary to prevent a previous assertion from being a misrepresentation or from being fraudulent or material;

2. Disclosure would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if nondisclosure amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing;

3. Disclosure would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part;

4. The other person is entitled to know the fact because of a relationship of trust and confidence between them.

Restatement (Second) of Contracts § 161 (1981) (Restatement); see Restatement (Second) of Torts § 551 (1977).

Arizona courts have long recognized that under certain circumstances there may be a "duty to speak." Van Buren v. Pima Community College Dist. Bd., 113 Ariz. 85, 87, 546 P.2d 821, 823 (1976); Batty v. Arizona State Dental Bd., 57 Ariz. 239, 254, 112 P.2d 870, 877 (1941). As the supreme court noted in the context of a confidential relationship, "[s]uppression of a material fact which a party is bound in good faith to disclose is equivalent to a false representation." Leigh v. Loyd, 74 Ariz. 84, 87, 244 P.2d 356, 358 (1952); National Housing Indus. Inc. v. E.L. Jones Dev. Co., 118 Ariz. 374, 379, 576 P.2d 1374, 1379 (1978).

Thus, the important question we must answer is whether under the facts of this case, buyers should have been permitted to present to the jury their claim that sellers were under a duty to disclose their (sellers') knowledge of termite infestation in the residence. This broader question involves two inquiries. First, must a seller of residential property advise the buyer of material facts within his knowledge pertaining to the value of the property? Second, may termite damage and the existence of past infestation constitute such material facts?

The doctrine imposing a duty to disclose is akin to the well-established contractual rules pertaining to relief from contracts based upon mistake. Although the law of contracts supports the finality of transactions, over the years courts have recognized that under certain limited circumstances it is unjust to strictly enforce the policy favoring finality. Thus, for example, even a unilaterial mistake of one party to a transaction may justify rescission. Restatement § 153.

There is also a judicial policy promoting honesty and fair dealing in business relationships. This policy is expressed in the law of fraudulent and negligent misrepresentations. Where a misrepresentation is fraudulent or where a negligent misrepresentation is one of material fact, the policy of finality rightly gives way to the policy of promoting honest dealings between the parties. See Restatement § 164(1).

Under certain circumstances nondisclosure of a fact known to one party may be equivalent to the assertion that the fact does not exist. For example "[w]hen one conveys a false impression by the disclosure of some facts and the concealment of others, such concealment is in effect a false representation that what is disclosed is the [85] whole truth." State v. Coddington, 135 Ariz. 480, 481, 662 P.2d 155, 156 (App. 1983). Thus, nondisclosure may be equated with and given the same legal effect as fraud and misrepresentation. One category of cases where this has been done involves the area of nondisclosure of material facts affecting the value of property, known to the seller but not reasonably capable of being known to the buyer.

Courts have formulated this "duty to disclose" in slightly different ways. For example, the Florida Supreme Court recently declared that "where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer." Johnson v. Davis, 480 So.2d 625, 629 (Fla. 1985) (defective roof in three-year old home). In California, the rule has been stated this way:

[W]here the seller knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer.

Lingsch v. Savage, 213 Cal. App.2d 729, 735, 29 Cal. Rptr. 201, 204 (1963); contra Ray v. Montgomery, 399 So.2d 230 (Ala. 1980); see generally W. Prosser & W. Keeton, The Law of Torts § 106 (5th ed. 1984).^[2] We find that the Florida formulation of the disclosure rule properly balances the legitimate interests of the parties in a transaction for the sale of a private residence and accordingly adopt it for such cases.

As can be seen, the rule requiring disclosure is invoked in the case of material facts.^[3] Thus, we are led to the second inquiry — whether the existence of termite damage in a residential dwelling is the type of material fact which gives rise to the duty to disclose. The existence of termite damage and past termite infestation has been considered by other courts to be sufficiently material to warrant disclosure. See generally Annot., 22 A.L.R.3d 972 (1968).

In Lynn v. Taylor, 7 Kan. App.2d 369, 642 P.2d 131 (1982), the purchaser of a termite-damaged residence brought suit against the seller and realtor for fraud and against the termite inspector for negligence. An initial termite report found evidence of prior termite infestation and recommended treatment. A second report indicated that the house was termite free. The first report was not given to the buyer. The seller contended that because treatment would not have repaired the existing damage, the first report was not material. The buyer testified that he would not have purchased the house had he known of the first report. Under these circumstances, the court concluded that the facts contained in the first report were material. See Hunt v. Walker, 483 S.W.2d 732 (Tenn. App. 1971) (severe damage to the residence by past termite infestation); Mercer v. Woodard, 166 Ga. App. 119, 123, 303 S.E.2d 475, 481-82 (1983) (duty of disclosure extends to fact of past termite damage).

Although sellers have attempted to draw a distinction between live termites^[4] and past infestation, the concept of materiality is an elastic one which is not limited by the termites' health. "A matter is material if it is one to which a reasonable person would attach importance in determining his choice of action in the transaction in question." [86] Lynn v. Taylor, 7 Kan. App.2d at 371, 642 P.2d at 134-35. For example, termite damage substantially affecting the structural soundness of the residence may be material even if there is no evidence of present infestation. Unless reasonable minds could not differ, materiality is a factual matter which must be determined by the trier of fact. The termite damage in this case may or may not be material. Accordingly, we conclude that buyers should be allowed to present their case to a jury.

Sellers argue that even assuming the existence of a duty to disclose, summary judgment was proper because the record shows that their "silence ... did not induce or influence" the buyers. This is so, sellers contend, because Mr. Hill stated in his deposition that he intended to rely on the termite inspection report. But this argument begs the question. If sellers were fully aware of the extent of termite damage and if such information had been disclosed to buyers, a jury could accept Mr. Hill's testimony that had he known of the termite damage he would not have purchased the house.

Sellers further contend that buyers were put on notice of the possible existence of termite infestation and were therefore "chargeable with the knowledge which [an] inquiry, if made, would have revealed." Godfrey v. Navratil, 3 Ariz. App. 47, 51, 411 P.2d 470 (1966) (quoting Luke v. Smith, 13 Ariz. 155, 162, 108 P. 494, 496 (1910)). It is also true that "a party may ... reasonably expect the other to take normal steps to inform himself and to draw his own conclusions." Restatement § 161 comment d. Under the facts of this case, the question of buyers' knowledge of the termite problem (or their diligence in attempting to inform themselves about the termite problem) should be left to the jury.^[5]

By virtue of our holding, sellers' crossappeal is moot. Reversed and remanded.

CONTRERAS, P.J., and YALE McFATE, J. (Retired), concur.

Note: The Honorable Yale McFate, a retired judge of the Court of Appeals, was authorized to participate in the disposition of this matter by the Chief Justice of the Arizona Supreme Court pursuant to Ariz. Const. art. VI, § 20.

[1] Buyers' fraud theory is apparently based on the premise that they were not bound under the contract until a satisfactory termite inspection report was submitted.

[2] There are variations on this same theme. For example, Pennsylvania has limited the obligation of disclosure to cases of dangerous defects. Glanski v. Ervine, 269 Pa.Super. 182, 191, 409 A.2d 425, 430 (1979).

[3] Arizona has recognized that a duty to disclose may arise where the buyer makes an inquiry of the seller, regardless of whether or not the fact is material. Universal Inv. Co. v. Sahara Motor Inn, Inc., 127 Ariz. 213, 215, 619 P.2d 485, 487 (1980). The inquiry by buyers whether the ripple was termite damage imposed a duty upon sellers to disclose what information they knew concerning the existence of termite infestation in the residence.

[4] Sellers acknowledge that a duty of disclosure would exist if live termites were present. Obde v. Schlemeyer, 56 Wash.2d 449, 353 P.2d 672 (1960).

[5] Sellers also contend that they had no knowledge of any existing termite damage in the house. An extended discussion of the facts on this point is unnecessary. Simply stated, the facts are in conflict on this issue.

Present: QUA, C.J., LUMMUS, RONAN, WILLIAMS, & COUNIHAN, JJ.

[367] Joseph B. Abrams, (Leo Gordon with him,) for the defendants.

Benjamin Goldman, (Arthur Ellison with him,) for the plaintiff.

RONAN, J.

This is an action of tort for deceit brought against two defendants, Hanover-Elm Building Corporation and one Gordon, who, it is alleged, became in November, 1946, the owners of a building a portion of which was then occupied by the plaintiff under a lease from a former owner in which the rent was reserved at a rate of $4,500 and which would expire on March 1, 1947. It is also alleged that the defendants falsely represented to the plaintiff, with the intent that he should rely thereon, that they had a bona fide offer from one Levine for the leasing of the premises at the rate of $10,000 a year; that unless the plaintiff entered into a new lease at said rental for a term of twelve years they would evict the plaintiff on March 1, 1947; and that the plaintiff relied upon such misrepresentations and entered into such a lease with the corporate defendant, all to his damage. The declaration was held good when the case was here before. Kabatchnick v. Hanover-Elm Building Corp. 328 Mass. 341. The jury found against both defendants, and the case is here on various exceptions by the defendants. The plaintiff has also filed a bill of exceptions based upon the refusal of the judge, in allowing the bill of exceptions of the defendants, to include therein a certain paragraph that the plaintiff desired to have inserted.

During the empanelling of the jury, counsel for the defendants exercised two peremptory challenges which he stated were made in behalf of the individual defendant. He then attempted to claim two more such challenges in behalf of the corporate defendant. The defendants contended that the action was one against a principal and an agent. The plaintiff stated that the declaration set forth a joint action. The judge ruled that the cause of action alleged in the declaration was a joint action "impressed in a single count," and that such challenges should be made in behalf of the defendants collectively, and ruled that the [368] defendants had exhausted their challenges. He allowed the first two challenges and, subject to exception, denied the right of the defendants to make more than two challenges in all.

The right to make a peremptory challenge did not exist at common law but is of statutory origin which in this Commonwealth arose out of St. 1862, c. 84, which provided that "either party in a civil cause, and the defendant in a criminal cause, shall, before the trial commences, be entitled to challenge peremptorily two of the jurors from the panel called to try the cause." Soon after its enactment, the interpretation of this statute came before the court in Stone v. Segur, 11 Allen, 568, which was an action for assault and battery against eleven defendants, each of whom claimed the right to two peremptory challenges. It was said that the words "either party" meant those on one side of a case, whether they be one or more persons, that those who unite in perpetrating a wrong upon another are in legal contemplation but one party, and that it was in this sense that the word "party" was used in the statute. It was accordingly held that the defendants together were entitled to only two peremptory challenges. The statute which has remained substantially unchanged in so far as it pertains to civil cases appears in G.L. (Ter. Ed.) c. 234, § 29, as amended by St. 1945, c. 428, § 2. It has been strictly construed. The right to more than two such challenges was denied in Matthews v. New York Central & Hudson River Railroad, 231 Mass. 10, where two trustees brought an action of tort to recover for damage to their real estate because of the improper operation of the railroad. They were coowners and constituted but a single party within the meaning of the statute.

One who has sustained an injury in person or damage to his property by a wrong committed in which several persons have actively participated may bring an action against one or more of them, although of course he can have but one satisfaction of the judgments which he may recover. Corey v. Havener, 182 Mass. 250. Donnelly v. Larkin, 327 Mass. 287.

[369] It has long been established in this Commonwealth that a principal or master who has not actively engaged with his agent or servant in committing a wrong, where liability is attempted to be imposed upon him because the wrong was committed by the agent or servant while acting within the scope of his employment, is not a joint tortfeasor with the offending agent or servant and cannot be joined in an action with the latter, Parsons v. Winchell, 5 Cush. 592, Mulchey v. Methodist Religious Society, 125 Mass. 487, Feneff v. Boston & Maine Railroad, 196 Mass. 575, 581; and if the principal or master is compelled to pay a judgment because of the wrongful act of the agent or servant, he can compel the latter to indemnify him. Barry v. Keeler, 322 Mass. 114, 128. Restatement: Restitution, § 96. See Karcher v. Burbank, 303 Mass. 303; Restatement: Agency, § 401.

But the plaintiff contends that by virtue of G.L. (Ter. Ed.) c. 231, § 4A, inserted by St. 1943, c. 350, § 1, as amended by St. 1947, c. 408, § 1, two or more persons may be joined in one action as defendants if there is asserted against them jointly or severally any right to recover in respect of or rising out of the same matter or transaction. This statute is one of procedure and permits the joining in a single action of wrongdoers, even acting independently of each other, who have contributed to cause the injury or damage of which the plaintiff complains. This remedial statute has been frequently employed. Thorneal v. Cape Pond Ice Co. 321 Mass. 528. Repucci v. Exchange Realty Co. 321 Mass. 571. Nunan v. Dudley Properties, Inc. 325 Mass. 551. Koleshinski v. David, 328 Mass. 276. It changes the former rule and now permits the joining of the principal and the agent in a single action even where the principal or master did not participate in the wrongful act of the agent or servant. Collins v. Croteau, 322 Mass. 291, 296. The statute, however, does not change the substantive law. It does not convert the several liability of the principal or master into a joint tort liability with the agent or servant. It certainly did not justify dealing with them as joint tortfeasors. In [370] the next place, the question of the number of peremptory challenges that should be allowed arises at the opening of the trial. A judge has little, at that stage of the trial, other than the pleadings upon which to determine whether the relations of the respective litigants to each other and to the cause of action are such that under the statute, G.L. (Ter. Ed.) c. 234, § 29, any of them is entitled to two such challenges, or whether all together they comprise one party plaintiff or defendant as the case may be. It is, however, to be noted in this case that a pre-trial report, which we assume was in the papers before the judge and which shaped and limited the issues which were to be tried, stated that the defendant Gordon was the president and treasurer of the corporate defendant and was authorized to negotiate for the lease in its behalf. This was persuasive evidence that the action was to be tried on the theory that Gordon was acting within the scope of his employment as agent of the corporate defendant. That report seems to have been overlooked although the defendants' counsel directed the judge's attention to the fact that the action was against a principal and an agent. We think a separate cause of action against the principal could be joined with a cause of action arising out of the wrong committed by its agent within the scope of his employment, but we do not think that putting them in a single count changed the nature of the cause of action against each of them or deprived them of two peremptory challenges to which each was entitled under the statute.^[1]

The right to exercise peremptory challenges gives a litigant a limited opportunity of choice and allows him to have a juror withdrawn who in his opinion, because of bias, prejudice, or some other personal characteristic, is not inclined to look with favor upon him or upon the nature of the controversy, where he lacks sufficient grounds to support a challenge for cause. The right is a valuable one, and where, as [371] here, a party is deprived of its exercise he has a just cause of complaint. Sackett v. Ruder, 152 Mass. 397, 400-402. Searle v. Roman Catholic Bishop of Springfield, 203 Mass. 493, 499-500.

There was evidence that, during the negotiations for the lease, the plaintiff, in order to satisfy Gordon that he would be able to pay the increased rent, stated to Gordon that his gross sales amounted to $300,000 to $350,000 a year and that he made a "terrific profit" upon some of the sales of his merchandise. The judge subject to the exception of the defendants refused to permit them to inquire of the plaintiff with respect to his gross business and profits. The defendants contended that the evidence was competent upon the issues of liability and the value of the lease.

One of the issues of liability was what influence, if any, the alleged misstatements of Gordon had upon the plaintiff. We think it was open to the defendants to show that the amount of business and profits which the plaintiff had made during his occupancy of the premises was the real inducement for executing the new lease and not reliance, as the plaintiff contended, upon the alleged misrepresentations. In order to recover it was not necessary for the plaintiff to prove that he relied solely upon the misrepresentations. It was enough if he could prove that they were one of the principal grounds that caused him to execute the new lease or, in other words, that he would not have executed the lease if the false statements had not been made. What it was that actuated him to do so was a question of fact. The evidence was competent as tending to show on what the plaintiff relied. National Shawmut Bank v. Johnson, 317 Mass. 485, 490. Golding v. 108 Longwood Avenue, Inc. 325 Mass. 465, 468.

The evidence was not competent on the value of the lease which was the other ground upon which it was offered. Doubtless, where the plaintiff in an action of deceit was induced to purchase property by statements of the vendor that the profits were a certain amount, he may show that the profits were less than represented in order to prove the [372] falsity of the representations and to prove his damages by using the profits as represented as evidence to compute the value of the property if the statements were true and by using the evidence of actual profits to compute the actual value of the property. Powers v. Rittenberg, 270 Mass. 221, 223-224. Forman v. Hamilburg, 300 Mass. 138, 140-141. In the instant case, the defendants made no misrepresentations concerning profits. Here the evidence was offered to prove the value of the lease. The value of a leasehold used for the conduct of business depends upon so many factors that the amount of gross receipts or of net profits alone would not furnish an adequate criterion for the determination of its value. In the case at bar, evidence of profits to prove the value of the lease had such little persuasive effect that the judge in his discretion properly excluded it. Nelson Theatre Co. v. Nelson, 216 Mass. 30, 36. Revere v. Revere Construction Co. 285 Mass. 243, 248-250. Ferrick v. Barry, 320 Mass. 217, 227. Amory v. Commonwealth, 321 Mass. 240, 258. The case is distinguishable from those where evidence as to loss of profits, when shown with a reasonable degree of certainty to have been within the contemplation of the parties in making the lease, has been admitted where the lessor has broken the lease by refusing to grant a renewal or to prevent competition with the lessee's business. Neal v. Jefferson, 212 Mass. 517. Sheff v. Candy Box Inc. 274 Mass. 402. Parker v. Levin, 285 Mass. 125.

The defendants' motions for directed verdicts in so far as they related to the merits were properly denied for all the essential elements of an action for deceit were proved, Alpine v. Friend Bros. Inc. 244 Mass. 164, 167; Piper v. Childs, 290 Mass. 560, 562, even though there were some variations in testimony as to the exact terms of the representation made by Gordon. It was enough that the jury could find that they could have been fairly understood as alleged. See Adams v. Collins, 196 Mass. 422, 430; Sheffer v. Rudnick, 291 Mass. 205, 209; Downey v. Finucane, 205 N.Y. 251. These motions were also based upon the pleadings. The declaration alleged that the defendants were co-owners. [373] The few isolated places in the testimony where Gordon appears to have said that he was the new owner, in the teeth of all the rest of the evidence relating to ownership of the demised premises, the truth of which can hardly be challenged, to the effect that the corporate defendant had purchased the property, that Gordon was an officer of the corporation and managed its affairs, that he held a second mortgage from the corporation, that the plaintiff and the corporation alone mutually released each other under the existing lease before the present lease was executed, and that the only parties to the present lease were the plaintiff and the corporate defendant, were at most no more than a mere scintilla of evidence which fell far short of warranting a finding that Gordon was a coowner with the corporation. It was said in Buswell v. Fuller, 156 Mass. 309, 312-313, quoting from Hillyer v. Dickinson, 154 Mass. 502, 503-504, "The view no longer prevails that a party who has the burden of proof can retain a verdict in his favor by pointing to a mere scintilla of evidence, when, on an examination of the whole case, the court can find no substantial evidence to support it." Rainger v. Boston Mutual Life Association, 167 Mass. 109, 110. Farnham v. Lenox Motor Car Co. 229 Mass. 478, 484. Hartmann v. Boston Herald-Traveler Corp. 323 Mass. 56, 59-60. There was a variance between the declaration and the proof.

There is nothing here that would warrant us in now dealing with Gordon as the sole defendant, as the plaintiff now offers to do, by discontinuing against the corporation, as was done in Mulchey v. Methodist Religious Society, 125 Mass. 487, where after a full trial found free from error except in joining the principal and the agents, the plaintiff was permitted to discontinue against the agents.

Where a verdict has been directed on the ground of variance and where the plaintiff has failed to make out a case, the plaintiff's exceptions have been overruled. Glynn v. Blomerth, 312 Mass. 299. In other cases where the plaintiff has made out a meritorious case but different from the one alleged and where the motion has been based on a variance, [374] we have given the plaintiff an opportunity to apply in the trial court to amend the pleadings to conform to the proof. Coburn v. Moore, 320 Mass. 116, 123-124. We have at times simply sustained the defendant's exceptions where the plaintiff has made out a case but not the case alleged. Richards v. New York, New Haven & Hartford Railroad, 328 Mass. 204. We think the last course is the proper one to adopt here.

The plaintiff's exception is to the refusal of the judge, in allowing the defendants' substitute bill of exceptions, to include therein a certain paragraph as requested by the plaintiff. If we assume, without deciding, that an exception is the proper remedy, the exception must be overruled since in any event the defendants' exceptions must be sustained; consequently the plaintiff was not harmed.

We have considered all matters which are likely to arise at the new trial.

Plaintiff's exceptions overruled.

Defendants' exceptions sustained.

[1] Both principals and agents are considered as one party under statutes regulating the number of peremptory challenges in jurisdictions where the principals and agents are deemed to be joint tortfeasors. See 136 A.L.R. 417.