In 1795, the Georgia legislature passed an act allowing the sale of large holdings in the Yazoo River country for $250,000 to four land companies, following the widespread bribery of most of the legislators. This land comprised most of present day Mississippi and Alabama.

The four companies, the Georgia, Mississippi, Upper Mississippi, and Tennessee companies, were betting that the treaty signed by Spain that year, accepting the current borders of Florida, would enhance the value of the land, making their bribery efforts worthwhile, and removing the threat of Spanish claims on the land.

They immediately began dividing the area into parcels and selling the lots. Within a year the corruption of the deal was discovered by investigators, and a newly elected legislature rescinded the act in 1796. The state then offered to refund the purchase price to the four companies, but the investors, lured by the newly increased value of the land, rejected payment, and pushed their claims.

In 1802, Georgia made a deal with the government of the United States, ceding all control of the land west of the Chattahoochee River to the federal government in return for $1,250,000. As part of the terms of this deal, the claimants remaining from the Yazoo deal were to receive either 5,000,000 acres of land, or the money received from the sale of this land. The claimants rejected this offer as well.

By now the Yazoo fraud was starting to become a thorn in the side of national political figures, and Congress obstinately denied any relief to the speculators.

In 1810, the U.S. Supreme Court, in Fletcher v. Peck, held that all claims were valid, as the Yazoo act of 1795 constituted a binding contract on the state of Georgia regardless of the corruption involved. This was the first court decision to declare a state legislative act unconstitutional. Stuck between a rock and a hard place, Congress was forced to negotiate, and the speculators were eventually awarded $4,000,000. Quite a profit.

Yaz"oo Fraud (?). (U. S. Hist.)

The grant by the State of Georgia, by Act of Jan. 7, 1795, of 35,000,000 acres of her western territory, for $500,000, to four companies known as the Yazoo Companies from the region granted; -- commonly so called, the act being known as the Yazoo Frauds Act, because of alleged corruption of the legislature, every member but one being a shareholder in one or more of the companies. The act granting the land was repealed in 1796 by a new legislature, and the repealing provision was incorporated in the State constitution in 1798. In 1802 the territory was ceded to the United States. The claims of the purchasers, whom Georgia had refused to compensate, were sustained by the United States Supreme Court, which (1810) declared the repealing act of 1796 unconstitutional. Congress in 1814 ordered the lands sold and appropriated $5,000,000 to pay the claims.


© Webster 1913.

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