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The theory you are probably thinking of was nullification, a doctrine proposed by Thomas Jefferson before he became President. Jefferson's theory was not exactly as stated, however. He believed that a state could only nullify an act of Congress if it were unconstitutional. However, at the time, there would have been no clear way to judge whether an Act of Congress, contested by one or more states, was unconstitutional. The doctrine of judicial review had not yet been established. Nullification was most famously attempted by South Carolina during the Jackson administration. A convention of South Carolina citizens passed a resolution stating that a federal tariff law was unconstitutional, null and void. Subsequently, the South Carolina legislature passed legislation meant to enforce this resolution in the state courts. South Carolina's stance was influential in getting Congress to change the law, but President Jackson also threatened to send in troops if South Carolina did not back down (similar to President Washington's actions in Pennsylvania in 1794.) While nullification was not an explicit issue in the Civil War, given the connotations attached to the idea of state sovereignty after the defeat of the Confederate States, the doctrine was largely repudiated afterwards.

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Q: What was the theory that said a state could cancel out a law passed by congress if it was unfair to the state?
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