In the famous Dartmouth College Case, Trustees of Dartmouth College v. Woodward, it was held after elaborate discussion pro and con that a charter granted to a corporation by the state was a contract between the state and the corporation which could not be impaired or taken away by subsequent legislation. The significance of this decision, which has been constantly recognized and followed, is that under the doctrine thus announced the state has no power to revoke the privileges granted in a corporate charter nor substantially impair their value. Thus if a charter granted to a corporation provides that the corporate property shall be exempt from taxation, or fixes the rate or method of its taxation, the legislature cannot by subsequent statute make different provisions as to the taxation of such corporate property. But it will not be presumed that the legislature intended in granting a corporate charter to limit its general legislative power, and only in cases in which specific provision has been made in the charter will the corporation be exempted from general legislative control.

Moreover, the privileges granted by a corporate charter are no more sacred than other property or contract rights, and in the exercise of its police power the legislature may make regulations in the interest of the public health and welfare applicable to the business which the corporation is authorized to conduct as fully as to the business of an individual, the general police power being one which the legislature itself cannot impair nor grant away. Therefore, it has been held that statutes prohibiting lotteries (Douglas v. Kentucky, and Stone v. Mississippi) or regulating the manufacture and sale of intoxicating liquors (Beer Company v. Massachusetts) are applicable to corporations already created by the state for the purpose of conducting a lottery business or the business of manufacturing and selling liquor.

Moreover, the property of the corporation, including its franchise, which is regarded as a part of its property, may be taken like other property for public use upon compensation being made, and therefore it is held that a corporation authorized to conduct a toll bridge or maintain a ferry and given the exclusive privilege of doing so within certain limits may have such right taken away from it for the public benefit in order to construct a free bridge or public ferry, just compensation being made to it for the privilege taken (Central Bridge Corporation v. City of Lowell).

But the exemption of corporate charters from legislative control has been thought to be against public interest, and in many states it is declared by constitutional or statutory provisions that all corporate charters are subject to repeal or modification by the legislature; and in such states charters granted after the enactment of such constitutional or statutory provisions are fully subject to legislative regulation (Pennsylvania College Cases). As to such charters, even conceding that they are contracts, the law authorizing their regulation or repeal, in existence at the time of the granting of the charter, constitutes a part of the contract, and the exercise of the power to revise or repeal is not an impairment of the obligation of the contract, but on the other hand is an exercise of a power expressly or impliedly reserved in the contract.

The doctrine that a corporate charter is a contract applies only to charters granted to private corporations. Public corporations, such as cities, school districts, and institutions created and controlled by the state in the exercise of its power to collect and expend money for public purposes, even though they may be created by charter, are not regarded as having any contract rights, and the charters or privileges granted to them may be taken away or modified or regulated as the legislature may see fit (East Hartford v. Hartford Bridge Co.).