The Compact theory was popular among the English political philosophers in the eighteenth century. In America, it was supported by Jefferson and Madison. It meant that the thirteen states, by creating the federal government, had entered into a contract about its jurisdiction. The national government was the agent of the states. This meant that the individual states were the final judges of the national government's actions. The theory was the basis for the Virginia and Kentucky Resolutions passed in 1798. The compact theory was used to try to stop the Federalist abuses like the Alien and Sedition Acts.
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