42 U.S.C. § 1981’s Contract Clause: Racial Equality in Contractual Relationships

42 U.S.C. § 1981’s Contract Clause: Racial Equality in Contractual Relationships

November 20, 2023
42 U.S.C. § 1981’s Contract Clause: Racial Equality in
Contractual Relationships
Among federal statutes that address racial discrimination,
1981’s statutory text expressly protects “against impairment
42 U.S.C. § 1981’s contract clause uniquely focuses on
by nongovernmental discrimination and impairment under
guaranteeing a person’s equal right to make and enforce
color of State law.”
contracts without regard to race. More specifically,
§ 1981’s contract clause provides that “[a]ll persons within
General Background
the jurisdiction of the United States shall have the same
An outright refusal to contract with a person or party
right in every State and Territory to make and enforce
because of race is perhaps the plainest violation of § 1981’s
contracts . . . as is enjoyed by white citizens.”
contract clause. In its 1976 decision in Runyon v. McCrary,
for example, the Supreme Court addressed § 1981’s
This In Focus explains this provision’s history,
application to the refusal by nonsectarian private schools to
enforcement, and interpretation, and discusses examples of
contract with parents to provide educational services
its application to different contractual relationships. (This
because the children seeking enrollment were Black. When
summary does not address a related provision, 42 U.S.C. §
analyzing those claims, the Court described the refusals as
1982, concerning racial equality in property-related rights.)
“amount[ing] to a classic violation of § 1981.”
Historical Background
In the Civil Rights Act of 1991, Congress amended § 1981
Section 1981 was originally enacted as § 1 of the Civil
to further clarify and define the contracting conduct under
Rights Act of 1866, an immediately post-Civil War
its protection. Congress amended the law in response to the
legislative effort to ensure that newly freed slaves received
Supreme Court’s decision in Patterson v. McLean Credit
the same rights as other citizens. The Civil War ended in
Union, which construed § 1981 to exclude from its reach
April 1865; the Thirteenth Amendment, which abolished
certain contract-related racial discrimination that occurs
slavery in the United States, was ratified later that year. In
after a contract is formed. As amended, § 1981 now defines
April 1866, the Civil Rights Act of 1866 became law.
the right to make and enforce contracts to include “the
making, performance, modification, and termination of
Following ratification of the Fourteenth Amendment,
contracts, and the enjoyment of all benefits, privileges,
Congress reenacted the 1866 Act as part of the Enforcement
terms, and conditions of the contractual relationship.”
Act of 1870, including § 1 of the 1866 Act. The statute was
recodified in 1874, but its basic coverage did not change
Thus, § 1981’s scope is not limited to racial discrimination
until 1991. It is now codified at 42 U.S.C. § 1981.
in the formation of a contract. Racial discrimination in the
performance or termination of a contract, among other
Enacting basis
things, may violate § 1981’s contract clause. A termination-
The Supreme Court has interpreted § 1981 as enacted under
related claim, for example, might allege that a party
Congress’s authority to enforce the Thirteenth and
discriminatorily terminated a contract to sell property upon
Fourteenth Amendments to the Constitution. Laws
learning that the buyers were Black.
enforcing the Thirteenth Amendment concern, among other
things, eliminating “the badges and incidents” of American
In its 2008 decision in CBOCS West, Inc. v. Humphries, the
slavery, and may apply to private and state actors. Laws
Supreme Court interpreted § 1981 to also prohibit
enforcing the guarantees of Section 1 of the Fourteenth
retaliation for reporting a violation of a contract-related
Amendment, including equal protection of the laws, need
right under the statute.
not relate to slavery and may address discrimination based
on race as well as other characteristics such as sex. Such
Varied Contexts of § 1981 Claims
legislation, however, may only apply to state actors.
Contractual relationships play out in a range of settings and
industries. Such relationships may arise in relation to
Section 1981’s Contract Clause
employment, the provision of goods and services,
Section 1981(a) enumerates several rights, guaranteeing
financing, or business partnerships, for example. A federal
“[a]ll persons” the same right, for example, “to the full and
court’s analysis of a § 1981 claim can vary based on
equal benefit of all laws and proceedings for the security of
differences in context and the contractual relationship at
persons and property as is enjoyed by white citizens.”
issue.
Claims under § 1981, however, have largely arisen under its
contract clause—that is, statutory language providing for
Employment Contracts
“the same right . . . to make and enforce contracts” that
Many § 1981 claims concern discrimination arising out of
“white citizens” possess. This right to make and enforce
contractual employment relationships. These claims may
contracts applies to private and governmental actions; §
allege various forms of racial discrimination in the
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42 U.S.C. § 1981’s Contract Clause: Racial Equality in Contractual Relationships
workplace, such as a racially hostile work environment.
Intent and Causation
Such § 1981 claims may thus overlap to some degree with
Section 1981 does not expressly refer to an intent
claims brought under Title VII of the Civil Rights Act of
requirement or a causation standard. The Supreme Court
1964, which addresses discrimination in the workplace. The
has interpreted § 1981 to require a showing of intentional
statutes differ in important ways, however. For example, §
discrimination. In addition, in its 2020 decision in Comcast
1981 applies to employers regardless of size, while Title
v. National Association of African American-Owned Media,
VII applies to employers with 15 or more employees.
the Court interpreted § 1981 to require that a plaintiff show
Additionally, while both § 1981 and Title VII apply to state
race was a “but for” cause of the contract-related injury—
actors, the Supreme Court has held that Title VII is the
that is, that the injury would not have occurred “but for” the
exclusive statutory remedy for job-related racial
plaintiff’s race.
discrimination by the federal government. The statutes also
have distinct remedies and enforcement schemes. For more
Private Right of Action
discussion of Title VII, see CRS Report R46534, The Civil
Section 1981 does not expressly create a private right of
Rights Act of 1964: An Overview, by Christine J. Back.
action or address remedies. Since its 1975 decision in
Johnson v. Railway Express Agency, Inc., however, the
Retail
Supreme Court has interpreted § 1981 to permit a private
Federal courts have also evaluated § 1981 claims brought in
suit for remedies such as “equitable and legal relief,
the consumer and retail contexts against commercial
including compensatory and, under certain circumstances,
businesses, including for racially discriminatory refusals to
punitive damages.”
contract and discrimination in performing contracted
services. Such claims might include, for example,
Relatedly, § 1981 does not contain a statute of limitations
allegations that a bank discriminatorily refused to engage in
for bringing a private suit. The Supreme Court has applied
a transaction based on a patron’s race; that a hotel
two methods for determining the timeliness of § 1981
discriminatorily refused to contract with a Black-owned
claims. If a claim arises under, or was made possible by, the
company to hold a function predominantly attended by
1991 amendments to § 1981, the Court has applied a four-
Black audience members based on race; or that a restaurant
year limitations period from another statute (28 U.S.C.
refused to serve patrons based on their Arab descent.
§ 1658). If the claim arises under § 1981 as it was before
the 1991 amendments, courts are to apply “the most
Financing and Property
appropriate or analogous state statute of limitations.”
Some § 1981 claims relate to financing and have alleged
discriminatory denials of contracts for loans or mortgages.
Suits Against State Actors: 42 U.S.C. § 1983
In one such case, a federal court of appeals evaluated a
Though the Supreme Court has interpreted § 1981 to permit
complaint alleging that a locality had discriminatorily
private suits for remedies, it has held that with respect to
refused to grant an economic development loan to a
suits to enforce § 1981 against state actors, another federal
minority-owned business based on race. The court in that
statute—42 U.S.C. § 1983—provides the exclusive federal
case identified the “key issue” as being whether the city
remedy. Under this precedent, to prevail on a claim alleging
applied more stringent loan conditions to minority-owned
a state actor violated § 1981, a plaintiff must bring suit
business than it did to nonminority-owned businesses.
under § 1983 and show that a contract-related violation was
“caused by a custom or policy within the meaning of” the
Section 1981 claims have also been raised in relation to
Court’s precedent construing § 1983.
contracts for property leases or sales. In one case, a federal
appellate court upheld a jury verdict finding that a property
Considerations for Congress
management company had terminated the plaintiff’s retail
Section 1981 applies to contracts and contract-related
lease and refused to offer a new lease for retail space based
conduct that arise in a range of specific contexts, yet its text
on her race and the race of her business clientele.
is phrased in general terms. In the absence of legislative
direction addressing circumstances and legal questions that
Racial Characteristics Under § 1981
have reached federal courts under § 1981, courts have
While Congress’s principal motivation in enacting § 1981
played a significant role in determining how § 1981 is
was to secure equal rights for Black citizens post-slavery,
interpreted, applied, and enforced. As it did with the 1991
the Supreme Court held in McDonald v. Santa Fe Trail
amendments, Congress may, consistent with constitutional
Transportation Company, a case involving a private
limitations, supersede judicial decisions interpreting § 1981
employer, that the provision permits claims brought by
or resolve or clarify debates over its scope, operation, and
White persons as well.
application. In any future amendments to § 1981, Congress
would likely need to consider the scope of its authority to
In Saint Francis College v. Al-Khazraji, the Court also
enforce the Thirteenth and Fourteenth Amendments. To the
interpreted § 1981 to prohibit intentional discrimination
extent that courts construe other statutes in light of § 1981,
based on “Arabian ancestry,” when such discrimination is
changes to § 1981 could have implications for how courts
not based “solely on the place or nation of his origin, or his
interpret other statutes as well.
religion.” Congress, the Court concluded, intended to
protect such “identifiable classes of persons.”
Christine J. Back, Legislative Attorney
IF12535

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42 U.S.C. § 1981’s Contract Clause: Racial Equality in Contractual Relationships

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