Omnia Commercial Co. v. United States
The Court ruled that when the government requisitioned a steel company's entire output during World War I and blocked it from honoring a private buyer's supply contract, the government took the steel but not the contract itself, so no compensation was owed to the buyer.
The decision draws a lasting line between property the government actually takes for public use and property whose value is merely destroyed as a side effect of otherwise lawful government action, with only the former requiring payment under the Constitution.
“Frustration and appropriation are esséntially different things.”
The Court's central distinction between a contract being ruined as a side effect and being taken by the government.
How it got here: The buyer sued the government in the Court of Claims for compensation; the government's demurrer was sustained and the case dismissed, so the buyer appealed to the Supreme Court.
The Case in Depth
What happened
A company held a valuable contract to buy steel plate below market price from a steel manufacturer. Before any steel was delivered, the federal government, during World War I, requisitioned the manufacturer's entire 1918 production and ordered it not to honor the private contract, threatening to seize the whole plant if it tried. The buyer never received the steel or the profits the contract would have produced.
The question before the Court
During World War I, the government ordered a steel company not to fulfill a private buyer's supply contract so it could take all the steel for itself — did that amount to the government taking the buyer's contract, requiring compensation?
Why it matters
The ruling meant that businesses whose contracts were disrupted by the government's sweeping wartime takeovers of factories, railroads, and shipyards had no constitutional claim for compensation, even though their contracts became worthless. It shaped how far the government's wartime and regulatory powers could reach into private bargains without triggering a duty to pay, a principle still used when government action indirectly wrecks the value of contracts.
What changes now
This is a final merits decision resolving the buyer's claim; the Court of Claims' dismissal of the case stands, and the buyer receives no compensation. The ruling settled, for future wartime and regulatory disputes, that the government does not have to pay everyone whose private contracts are frustrated when it lawfully requisitions goods, services, or facilities for public use.
What this does not decide
The decision does not hold that contracts can never be taken in the constitutional sense — it distinguishes cases where a condemnation law specifically seizes and pays for a contract or franchise. It also does not decide the authority of the particular officer who ordered the requisition, which the Court assumed without deciding.
Concurrences and dissents
How the Justices voted
Majority (1). Justice Sutherland (author).
How the Court got there
The legal reasoning, step by step
- The Court first confirmed that a contract can itself be property protected by the Fifth Amendment's requirement of just compensation, but noted that not every government action harming property counts as a constitutional 'taking' — some lawful government action can destroy or devalue property without any payment owed, such as destroying property to stop a fire's spread.
- The Court explained that a contract's core is not its subject matter (the steel) but the legal obligation between the parties to perform; taking the steel itself does not automatically mean the government has taken the separate right to enforce the contract.
- Applying that distinction, the Court found the government dealt only with the steel company when it requisitioned the steel, making the steel company liable under the requisition statute — not under the private contract — while the buyer's contract became impossible to perform through no fault of either private party.
- The Court treated this as a case of a contract being ended or 'frustrated' by lawful government action rather than appropriated for the government's own use, relying on English and American cases holding that requisitioning a contract's subject matter terminates the contract without making the government a substitute party to it.
- The Court distinguished cases where compensation was owed, noting those involved situations where the government's own condemnation law specifically seized the contract or franchise itself (as with a toll-collecting franchise integral to a lock and dam), which is different from indirectly frustrating a separate private contract.
Doctrinal impact
Cases affected by this decision
Distinguishes Monongahela Navigation Co. v. United States (148 U.S. 312)
Distinguished because that case involved a toll-collecting franchise that was an integral, taken part of the property itself.
Distinguishes Long Island Water Supply Co. v. Brooklyn (166 U.S. 685)
Distinguished because the condemnation law there expressly seized and paid for the contract, unlike this case.
Reaffirms Louisville & Nashville R. R. Co. v. Mottley (219 U.S. 467)
Relied on for the rule that a law destroying a contract's value is not a compensable taking.
Reaffirms Calhoun v. Massie (253 U.S. 170)
Relied on to show valid government restrictions can end a contract without requiring compensation.