tracts thereafter-after the initial period, if indefinitely extendedmight at any moment be canceled by such mutual agreement.

It was likewise provided, upon notice and hearing, that the Interstate Commerce Commission itself, apparently-regardless of the consent of the carrier-could cancel the contract which had been indefinitely extended.

Now, as to the question of the rates applicable, the rate of compensation applicable-although there might be some uncertainty about the law-I believe it has been administered in this way: The original bid which had been accepted, when the contract was let, would govern the compensation during the initial period of the contract. When and if the contract was extended, the rate of compensation should thereafter be fixed by the Interstate Commerce Commission.

Consequently, from the time of the extension of the initial contract on, the matter as to compensation was under the regulation of the Commission; and apparently the only situation where a complete cancelation of the right to carry the mail could occur, except by mutual agreement, would be after notice and hearing, and after action by the Interstate Commerce Commission.

Now, the question raised has never been passed upon, of course, by a court as to what might furnish cause for cancelation.

We know only what the words of the statute provide, and I think that it was that point which the colonel mentioned.

Mr. ELLENBOGEN. Under this section, in your opinion, could the Department divide the mail, on the same route on which it is now being carried by an existing carrier, with another carrier?

Mr. WESTWOOD. Under the existing situation?

Mr. ELLENBOGEN. Yes.

Mr. WESTWOOD. I think that is possible.

Mr. ELLENBOGEN. You think that is possible?

Mr. WESTWOOD. Yes.

Mr. ELLENBOGEN. In other words, there is no constitutional question involved?

Mr. WESTWOOD. No; that seems to me not to follow.

If the Government were simply to deny completely to an existing carrier the privilege of mail carriage

Mr. ELLENBOGEN (interposing). Well, that has not been proposed. The proposal is made another carrier on that route be given the privilege. That would not affect the contractor's rights.

Mr. WESTWOOD. I doubt very much that that would raise a question, and the Colonel did not suggest that.

Mr. ELLENBOGEN. Yes; he did, as I understood it. Of course, there is no proposal to cancel those contracts. The first method has been considered-I would not want to say proposed-but, if they were given the privilege of carrying the mail

Mr. WESTWOOD. Well, I did not understand the Colonel to suggest that, if the first method were adopted, the first of the two methods that he outlined, that a constitutional question would arise. I think that what the colonel suggested was that, generally speaking, the reason for having a "grandfather" clause, not only with respect to mail, but also with respect to the carriage of other classes of traffic, has to do with constitutional considerations. In connection with

the regulation of motor busses, or any other industry, there is always a “grandfather" clause.

Now, generally speaking, the reason underlying a "grandfather" clause, I think, may well be described as a reason having some relation to consideration of constitutionality as well as to considerations of the economic good of the industry.

But I do not believe that the colonel suggested at all that the difference between the first method of carrying the mail and the second method of authorizing mail service was one which should be influenced by constitutional considerations.

Mr. ELLENBOGEN. Then, in your opinion, the Congress may choose any of the three methods proposed?

Mr. WESTWOOD. Yes, sir.

Mr. ELLENBOGEN. Without raising any legal question?

Mr. WESTWOOD. Oh, yes, sir; I think that is true.

Mr. MARTIN. Since you are discussing that question, I would like to ask one more question.

Mr. ELLENBOGEN. I believe that is contrary to what the colonel said.

Mr. WESTWOOD. I do not believe it is. I have never so advised him, and I do not believe that he said anything to the contrary.

Mr. ELLENBOGEN. I would like to know what he meant by the constitutional question.

Mr. GORRELL. I was attempting to refer to the question of the "grandfather" clause, and not the other method, because

Mr. ELLENBOGEN (interposing). What raises the constitutional question?

Mr. GORRELL. I thought, sir, that the language of the "grandfather" clause in transforming a system of contracts into a system of necessity and convenience, might raise the question.

Mr. ELLENBOGEN. And you positively state that it does not?
Mr. WESTWOOD. No.

Mr. ELLENBOGEN. I would like to ask if you withdraw that state

ment.

Mr. GORRELL. Well

Mr. WESTWOOD. I did not understand him to say that. I understood him to say the same thing as I said.

Mr. ELLENBOGEN. Then I do not understand either one of you. He said that Congress is free to choose any of the methods proposed.

Mr. WESTWOOD. That is perfectly true; Congress is free.

Mr. ELLENBOGEN. Where is the constitutional question raised?

I think that is important to the committee. If there are any rights to be violated, I want to know it.

Mr. WESTWOOD. May I answer the question, Mr. Congressman? Mr. ELLENBOGEN. Yes.

Mr. WESTWOOD. I think that the only constitutional question that would arise would be in this event: If the first method that the Colonel mentioned were to be adopted, without there being in the law any "grandfather" clause, then I think a very serious constitutional question might arise.

Mr. ELLENBOGEN. You do not mean a constitutional question; you mean a question of the violation of contract, which has nothing to do with the Constitution. Claims might arise by virtue of a breach of

contract. That is not constitutional. A contract might be violated without violating the Constitution. It is the violation of a contract. Mr. WESTWOOD. The Chief Justice, in his opinion in the Perry case, Perry v. U. S. (294 U. S. 330), dealing with the gold-clause cancelation, of course, seems to indicate that there might be a limitation upon the power of Congress; but may I say this, Mr. Congressman, that the Colonel is not here resting upon any constitutional grounds. He has been discussing

Mr. ELLENBOGEN (interposing). I want to know whether any of these methods violate existing contracts.

Mr. WESTWOOD. May I answer that specific question by saying that, in my judgment, the only constitutional question that may arise would be that which would come if there were no "grandfather” clause at all in the bill. That is all. I think that is all the Colonel meant to say.

Mr. ELLENBOGEN. Well, the first method has no such provision. Mr. WESTWOOD. If the first method were adopted, presumably there would also be a "grandfather" clause in the bill, just as there always is in all bills of this sort, where a new regulatory device is adopted.

Now, that "grandfather" clause would simply say that existing carriers should receive certificates automatically. That, indeed, is the provision as it appears in the original S. 2 introduced by Senator McCarran in the Senate.

That provision was also in the bill introduced in the Senate previously. Then it was further provided that additional carriers, or existing carriers with respect to new service, might apply for a new certificate or for an amendment to an existing certificate.

Now, if the first method, with respect to authorizing the carriage of mail, were to be adopted, or recommended by this committee, then there would be a provision saying that whenever a certificate were issued, whether by virtue of the "grandfather" clause or by virtue of the clause with respect to new applications, that certificate would automatically carry with it the authorization and the obligation to carry the mails.

Now, if that is done, I would not advise Colonel Gorrell that there was any constitutional question, and I do not believe that he would suggest that there would be. It is only in the event a "grandfather" clause were left out of the bill that there could be any possibility of a constitutional doubt.

Mr. ELLENBOGEN. I object to your use of the term "constitutional." The term you should use is "existing contracts."

Mr. WESTWOOD. Well, possibly.

Mr. ELLENBOGEN. "Violation of existing contract"; not “violation of the Constitution."

Mr. WESTWOOD. Possibly that may be a more accurate way of describing it, Mr. Congressman.

I used the term "constitutional" only because it was used in the Perry case dealing with the gold clause.

Mr. WADSWORTH. The sanctity of contracts rests upon the constitutional provision?

Mr. WESTWOOD. So the Chief Justice said in the Perry case.

Mr. ELLENBOGEN. Any person who violates a contract has to pay damages, and so does the Government.

Mr. WADSWORTH. The Government cannot be sued without its consent.

The CHAIRMAN. So far as the constitutional power is concerned, Congress has the power to violate the sanctity of a contract, has it not?

Mr. WESTWOOD. Well, I must confess that I have difficulty in answering constitutional questions with any degree of confidence, Mr. Chairman, but as I have read and tried to understand the Perry case dealing with the gold-clause question-and you may recall that in that case, in one of the several cases involved, there was the question of the Government's power to cancel its own contracts as distinguished from the question of the Government's power to alter the contractual obligations of other parties-I believe that the Chief Justice's language in the opinion dealing with that precise question indicated that the Government of the United States itself, having itself pledged its word as a sovereign, might not be able to breach the promise it had made without providing some reasonable alternative in the way of compensation or otherwise.

Justice Stone dissented from that view or at least indicated that that question need not have been passed upon.

Now, as in all constitutional questions, we get cases here and there and try to predict what the court might do in a given situation, and that is the only reason I suggested in discussing this matter that here might possibly be a constitutional doubt in the event a "grandfather" clause were not included; but I did not mean, and the colonel did not mean, that as between the three methods, three possible methods of determining who should be authorized to carry the mail, constitutional considerations are controlling.

Mr. REECE. Because you were going on the assumption if the first plan should be adopted, a "grandfather" clause should also be included.

Mr. WESTWOOD. That is right.

Mr. ELLENBOGEN. I am not certain that you have any contract, because one of the essential elements of a contract is the price. That is Hornbook law, that a contract which does not fix the price is not a contract.

Mr. WESTWOOD. Mr. Congressman, the provision of the law is that a fair and reasonable mail rate will be guaranteed in the event the contract is extended.

So that, once the extensions occurred, you then have something which seems rather more than a normal contract right. That is, you have on the one hand an indefinite obligation to carry the mails and on the other a right to the party-well, we will call him the mail contractor-to receive fair and reasonable compensation.

Now, that looks like a pretty substantial right.

Mr. MARTIN. Mr. Chairman

The CHAIRMAN. Mr. Martin.

Mr. MARTIN. Is not this the practical situation, that ultimately will develop, that with the "grandfather clause" in the act—and I may say I think it ought to be there-I feel that the carriers that have built up aviation and now have mail contracts should ipso facto be given certificates of necessity and convenience and their contracts continued.

But, if that is done, would not the first plan eventually come into the picture? At the same time that the "grandfather clause" was adopted, the giving of certificates to other carriers could also be adopted which would qualify them for the mail service, and then, when new fields were developed, new business came in, maybe some old carriers went out, and so forth, the first rule would come into play and the two could coexist.

What practical difficulty is there in the coexistence of the two rules, provided you give the existing carriers the priority involved in the "grandfather clause" and it is compulsory without any further qualification?

Mr. WESTWOOD. May I suggest two examples, or two situations, just for the purpose of considering the problems that your question raises?

Mr. MARTIN. Yes.

Mr. WESTWOOD. Let us assume first a situation where today there are two or more carriers between existing points. One of those carriers today is carrying the mail, is authorized to carry the mail. The other carrier is not authorized to carry the mail. Or, there may be more than one other carrier not authorized to carry the mail.

Now, that is one situation I want to speak about.

Another situation has to do with points where there is today no service, but where in the future it might well be that there might be two persons, two carriers, who would carry passengers. That was the example the colonel mentioned. And yet there might not be enough mail service to make it practicable, from an economical standpoint, to spread it over the two carriers.

Now, as to the first example, the situation where one carrier today carries the mail, but where there may be more than one carrier in operation between existing points: If the first method were adopted, the result would be that the carrier who today does not carry the mail, but carries passengers or property between those two points, would, under the "grandfather clause", automatically receive the authorization likewise to carry the mail.

So that immediately, the day after the bill is passed, in every section where today between existing points two or more carriers are in business, only one of which has the authority to carry the mail, on the day after the bill is passed, I say that that mail traffic would immediately be spread between the two or more carriers.

Mr. MARTIN. Would that be the case with the "grandfather" clause in the act?

Mr. WESTWOOD. I believe it would.

Mr. MARTIN. It is my understanding that it would be directly the contrary. I thought, under the "grandfather" clause, that the carrier who now has a mail contract would get a certificate ipso facto and the continuance of his mail contract.

Mr. WESTWOOD. Maybe we are not talking about the same thing. Maybe what the colonel has described as the second method is what you have in mind.

May I just, for a moment, review what the second method was as set out in this bill?

Mr. MARTIN. Yes.

Mr. WESTWOOD. The "grandfather" clause provides that existing carriers should receive a certificate. That certificate shall authorize