Really? Invisible Contracts?
(updated Sept. 24, 2009)

Back in the mid-80s, an author named “George Mercier” wrote a long treatise he described as a letter that explained his arguments about the federal income tax. This “book” obtained a wide circulation back then, but within a few years, it died down after the “Mercier legal theory” was championed by the Pilot Connection Society, an organization created and operated by Phil Marsh, and went down in flames. But, this work is again being popularized by “newbies” in the freedom movement and I have concluded that I need to provide my view of this argument, which in essence is that this “legal argument” has no substance. Let me explain some of the gross flaws of this argument.

For centuries, philosophers have written about various forms of governments, and some of these like Thomas Hobbes and John Locke wrote about the “Social Contract Theory”; Locke had an impact on the founders of our country. A short explanation of this theory may be found on the Net here. From reading Mercier’s Invisible Contracts, it appears to me that he attempted to connect the Social Contract Theory to modern American law. However, American law is not exclusively contract based, yet this is the precise contention asserted by Mercier.   
I know little about Mercier, and I have never met anyone who knew him. For all that is known about him, “George Mercier” may be somebody’s nom de guerre. But from reading his work, I have concluded that he probably lived in New York. From the fact that he quoted very extensively from the works of Mormon Church leaders, I have concluded that he was a Mormon. But then again, he was a self confessed pot-grower:

    "For example, among other things, I am a Marijuana Grower [I am quite interested in Horticulture]."

Have you ever met a pot-growing Mormon?

Mercier’s legal theory is that, here in America, the relationship between citizens and government (Mercier’s “King”) is entirely commercial and based on implied or invisible contracts. I could be wrong, but I have concluded that Mercier first wrote some treatise of his legal argument that was purely theoretical. Once this was done, he simply added a substantial amount of other apparently relevant (to him at least) legal and other materials. It is only this other material that provides any shred of legal support for his argument.

I do not want to be perceived as condemning everything he writes about and there is much in Invisible Contracts with which I am in agreement. His work is easy to read, is entertaining and interesting; he chocks his work with lots of stories about the Rockefellers and other elites in our society and across the world. He condemns the tyranny of present-day American government, and such writing is popular, both with me and other Americans.  But, all of that is irrelevant regarding his fundamental legal argument.

Let me address his contention that “everything is commercial” in reference to the “King”, government. It is a well established legal principle that any American government engaged in commercial endeavors is subject to the same rules of commerce as are private individuals.  For example, in Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840 (1934), the Supreme Court stated: “When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.” See also Franconia Associates v. United States, 536 U.S. 129, 141, 122 S.Ct. 1993 (2002); and United States v. Seaboard Air Line Ry. Co., 22 F.2d 113, 115 (4th Cir. 1927)(“And the rule is well settled that, when the 'government * * * comes down from its position of sovereignty, and enters the domain of commerce, it submits itself to the same laws that govern individuals there.'"), among many others. Presuming that our relationship with Uncle Sam is commercial, what are these contract rules that apply to this commercial government, Mercier’s King?

The "statute of frauds" originates from the common law and every state today has a general "statute of frauds," if not several. Generally, statutes of frauds require that certain contracts are only valid if evidenced by a written contract. Typically, contracts for the sale of land, contracts for the sale of goods over 500 bux, all other contracts in excess of 5000 bux, agreements to answer for the debts of others, contracts that have a life in excess of one year, etc., must be memorialized by a written contract. Two such Alabama laws appear below:

§ 7-2-201. Formal requirements; statute of frauds.
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

§ 8-9-2. Certain agreements void unless in writing.
In the following cases, every agreement is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith or some other person by him thereunto lawfully authorized in writing:
(1) Every agreement which, by its terms, is not to be performed within one year from the making thereof;
(2) Every special promise by an executor or administrator to answer damages out of his own estate;
(3) Every special promise to answer for the debt, default or miscarriage of another;
(4) Every agreement, promise or undertaking made upon consideration of marriage, except mutual promises to marry;
(5) Every contract for the sale of lands, tenements or hereditaments, or of any interest therein, except leases for a term not longer than one year, unless the purchase money, or a portion thereof is paid and the purchaser is put in possession of the land by the seller;
(6) Every agreement, contract or promise to make a will or to devise or bequeath any real or personal property or right, title or interest therein;
(7) Every agreement or commitment to lend money, delay or forebear repayment thereof or to modify the provisions of such an agreement or commitment except for consumer loans with a principal amount financed less than $25,000;
(8) Notwithstanding Section 7-8-113, every agreement for the sale or purchase of securities other than through the facilities of a national stock exchange or of the over-the-counter securities market.

With the statute of frauds in mind, look at your birth certificate, driver’s license and SSN card. What promises to pay appear on any of these documents? Did you sign any of these documents promising to pay anything? Can King government sue you for breach of contract based on your birth certificate, driver's license or SSN? In truth and as a matter of law, these documents are not contracts, nor do they evidence contracts. Finally, there are no "invisible contracts" regarding these matters. Furthermore, having an association with some regulated entity like a bank does not supply some nexus to King government, absent some express law. 

Mercier also asserts that social security is an invisible contract. For many years, I have posted the following in another file on my website:


    Art. 1, § 9, cl. 7 of the U.S. Constitution provides that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." While this constitutional provision does not of itself place a maximum ceiling on the amount of debt which can be created by Congress, it does require that appropriating legislation be enacted in order to incur debts. This is aptly demonstrated by the federal cases which have construed this part of the Constitution. In Cummings v. Hardee, 102 F.2d 622 (D.C.Cir. 1939), and Maryland Casualty Co. v. United States, 155 F.2d 823 (4th Cir. 1946), it was held that officers of the United States lacked all power to pay any claim against the United States in the absence of an appropriation from Congress to pay such claim. This principle was more fully explained in Hughes Aircraft Co. v. United States, 534 F.2d 889, 906 (Ct.Cl. 1976), where that Court declared:
"The second principle is that before any expenditure of public funds can be made, there must be an act of Congress appropriating the funds and defining the purpose for such appropriation. Thus, no officer of the Federal Government is authorized to pay a debt due from the U.S., whether or not reduced to a judgment, unless an appropriation has been made for that purpose."
See also Reeside v. Walker, 52 U.S. (11 How.) 272 (1850); Cincinnati Soap Co. v. United States, 301 U.S. 308, 57 S.Ct. 764 (1937); and Office of Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 2471 (1990). In National Association of Regional Councils v. Costle, 564 F.2d 583, 586 (D.C.Cir. 1977), that Court elucidated this principle by stating:
"Government agencies may only enter into obligations to pay money if they have been granted such authority by Congress. Amounts so authorized by Congress are termed collectively 'budget authority' and can be subdivided into three conceptually distinct categories -- appropriations, contract authority, and borrowing authority. Appropriations permit an agency to incur obligations and to make payments on obligations. Contract authority is legislative authorization for an agency to create obligations in advance of an appropriation. It requires a subsequent appropriation or some other source of funds before the obligation incurred may actually be liquidated by the outlay of monies. Borrowing authority permits an agency to spend debt receipts."
Thus, it is quite apparent that in order for the federal government to incur debt, it must adopt legislation authorizing a specific amount of federal obligations to be incurred.

    It is easy to demonstrate the operation of this provision of the Constitution and its application to government contracts. Suppose the feds desired to build a new courthouse at a cost of $200 million. An agency in charge of such a project could theoretically "contract" with a construction company to build this structure. However, until Congress actually appropriates money to pay for construction, there is no contract. Even if the contractor in this example incurred lots of costs preparing to build this courthouse which ultimately does not get built because of lack of funds, he has no claim against Uncle Sam for breach of contract. The same principle applies to every other government contractor, whether aerospace, military, et cet. Government contracts are unique and different from private sector contracts due to this constitutional limitation upon the power to contract.

    Is Social Security a contract? A private insurance policy is clearly a contract because the policyholder makes a promise to pay money to the insurance company, which in turn agrees to likewise pay the policyholder if certain contingencies arise. These "promise to pay" elements are essential for a contract, but they simply are not present with Social Security. First, Social Security "payments" are not premium payments, but are taxes instead. Secondly, there is no corresponding and enforceable "promise to pay" from the Social Security Administration to its "beneficiaries." As noted above, government contracts are very special and require an appropriation from Congress before money can be expended and a contract made. Regarding Social Security, the only "beneficiaries" who have any claim against the public treasury are those for whom Congress has already made an appropriation, which can last no longer than a year. The rest of the Social Security claimants in America have no enforceable claim on public funds, and all they possess is a "political promise," upon which Congress can renege at any moment. If Congress decided tomorrow to cut off all Social Security benefits, nobody would have any claim for payment. Thus, Social Security has never been and is not now a contract. See Flemming v. Nestor, 363 U.S. 603, 610, 80 S.Ct. 1367 (1960)("It is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments"); Richardson v. Belcher, 404 U.S. 78, 80, 92 S.Ct. 254, 257 (1971) ("The fact that social security benefits are financed in part by taxes on an employee's wages does not in itself limit the power of Congress to fix the levels of benefits under the Act or the conditions upon which they may be paid"); Califano v. Goldfarb, 430 U.S. 199, 210, 97 S.Ct. 1021, 1028 (1977) (Brennan J.) (plurality opinion) ("Congress has wide latitude to create classifications that allocate non-contractual benefits under a social welfare program"); and United States Railroad Retirement Board v. Fritz, 449 U.S. 166, 174, 101 S.Ct. 453, 459 (1980) ("railroad benefits, like social security benefits, are not contractual and may be altered or even eliminated at any time").

    In 1953, a subcommittee of the House Ways and Means Committee conducted hearings for the express purpose of settling the question of whether social security was contractual in nature; see Hearings of November 27, 1953 entitled "The Legal Status of OASI Benefits," (Part 6). The witness at the hearing was Dr. Arthur J. Altmeyer, who held several offices in the Roosevelt administration. He was a member of the first Social Security Board, and by 1946 became the Social Security Commissioner, retiring in 1953. During this hearing, various parties stated that social security was not a contract:

At page 918:

"Mr. Altmeyer: * * * There is no individual contract between the beneficiary and the Government.

"Mr. Dingell: Congress knew that, did it not?

"Mr. Altmeyer: Yes, of course. I am sure it did.

* * *

"Chairman Curtis: The individual * * * has no contract? Is that your position?

"Mr. Altmeyer: That is right.

"Chairman Curtis: And he has no insurance contract?

"Mr. Altmeyer: That is right."

At page 937:

"Chairman Curtis: We came to an agreement on one of our major premises, that this was no insurance contract, and the words did not come from me. They were volunteered by Mr. Altmeyer."

At page 968:

"Mr. Winn: * * * Mr. Altmeyer, there being no contractual obligation between the Government and the worker, it follows, does it not, that the benefit payments under title II of the Social Security Act are merely statutory benefits which Congress may withdraw or alter at any time?"

At page 969:

"Mr. Winn (reading): ‘These are gratuities, not based on contract * * *. Moreover, the act creates no contractual obligation with respect to the payment of benefits. This Court has pointed out the difference between insurance which creates vested rights, and pensions and other gratuities, involving no contractual obligations, in Lynch v. United States, (292 U.S. 571, 576-577)."

At page 994:

"Mr. Altmeyer: I have answered your question, sir. If you will refer to section 1101, you will find, as you read into the record, that there are no vested rights, that Congress may create different rights * * *."

At page 996:

"Mr. Winn: We have also established that there is no insurance contract between the Government and the worker within a covered wage whereby the rights and obligations of a party are set; that is correct, is it not?

"Mr. Altmeyer: No. You did not establish that. That has been self-evident since the law was passed in 1935."

At pages 1013-14 (the Chair's concluding remarks):

"Chairman Curtis: Mr. Altmeyer, it is apparent that the people of the country have no insurance contract. That does not mean that I do not want to do my full part to do justice to them and to carry out and make good on the moral commitment that has been made to them. Yet, notwithstanding the fact that they had no insurance contract, it remains true that the agency under your direction repeatedly in public statements, by pamphlets, radio addresses, and by other means, told the people of the country that they had insurance. I think a number of people were misled by that."

The position asserted by Mercier that social security is a contract, visible or invisible, thus does not manifest itself in the decisions of federal courts. See also McLaughlin v. CIR, 832 F.2d 986, 987 (7th Cir. 1987)("The notion that the federal income tax is contractual or otherwise consensual in nature is not only utterly without foundation but... has been repeatedly rejected by the courts."); and United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983). Contentions that driver licenses are contracts are baseless. See Hershey v. Commonwealth Dep't. of Transportation, 669 A.2d 517, 520 (Pa.Cmwlth. 1996); and State v. Gibson, 697 P.2d 1216 (Idaho 1985).

Mercier also had a chapter of his work making some vague contention about admiralty. There are lots of phony admiralty arguments being promoted in the freedom movement, all asserting essentially an argument that admiralty has invaded "inland", and "everything is admiralty". I address that groundless argument here.  Mercier also made snide remarks that the money argument relating to gold, silver and Federal Reserve Notes that is popular with many is baseless, but I demonstrate otherwise here.

There are lots of other flaws in Mercier's legal argument about Invisible Contracts, but I will not address them here. What is important is that Phil Marsh started an organization named the Pilot Connection Society back at the end of the 1980s, and the central legal argument that he promoted was based entirely on Invisible Contracts. Mercier's "book" advocated that a citizen should give King government a wide variety of notices rescinding the "Invisible Contracts", and Marsh's organization did precisely this for hundreds of people. Marsh was prosecuted and convicted, and died in jail.