Final answer:
The U.S. Supreme Court during the Lochner era used the 'liberty of contract' theory, derived from the Fourteenth Amendment's due process clause, to extend constitutional protections to corporations, striking down labor laws that regulated business's treatment of workers.
Step-by-step explanation:
During the Lochner era, named after the Lochner v. New York decision, the Supreme Court utilized the liberty of contract theory to justify extending constitutional protections to corporations. This legal theory posited that the due process clause of the Fourteenth Amendment safeguarded an individual's right to contract freely without undue governmental interference, thereby striking down labor laws that appeared to infringe upon this liberty. The court viewed labor contracts as part of the individual liberty and thus protected by the Constitution which, in practice, often served to invalidate state efforts to regulate working conditions, hours, and pay during this period.