<P> The Northwest Ordinance of 1787 established the concept of fee simple ownership, by which ownership was in perpetuity with unlimited power to sell or give it away . This was called the "first guarantee of freedom of contract in the United States ." </P> <P> Passage of the ordinance, which ceded all unsettled lands to the federal government and established the public domain, followed the relinquishing of all such claims over the territory by the states . These territories were to be administered directly by Congress, with the intent of their eventual admission as newly created states . The legislation was revolutionary in that it established the precedent for new lands to be administered by the central government, albeit temporarily, rather than under the jurisdiction of the individually sovereign original states, as it was with the Articles of Confederation . The legislation also broke colonial precedent by defining future use of the natural navigation, transportation and communication routes; it did so in a way that anticipated future acquisitions beyond the Northwest Territories, and established federal policy . Article 4 states: "The navigable waters leading into the Mississippi and St. Lawrence, and the carrying places between the same, shall be common highways and forever free, as well to the inhabitants of the said territory as to the citizens of the United States, and those of any other States that may be admitted into the confederacy, without any tax, impost, or duty therefor ." </P> <P> The most significant intended purpose of this legislation was its mandate for the creation of new states from the region . It provided that at least three but not more than five states would be established in the territory, and that once such a state achieved a population of 60,000 it would be admitted into representation in the Continental Congress on an equal footing with the original thirteen states . The first state created from the Northwest Territory was Ohio, in 1803, at which time the remainder was renamed Indiana Territory . The other four states were Indiana, Illinois, Michigan, and Wisconsin . A portion (about a third) of what later became the state of Minnesota was also part of the territory . </P> <P> The ordinance of Congress called for a public university as part of the settlement and eventual statehood of the Ohio Territory, further stipulating "Religion, morality and knowledge being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged ." In 1786, Manasseh Cutler became interested in the settlement of western lands by American pioneers to the Northwest Territory . The following year, as agent of the Ohio Company of Associates that he had been involved in creating, he organized a contract with Congress whereby his associates (former soldiers of the Revolutionary War) might purchase one and a half million acres (6,000 km2) of land at the mouth of the Muskingum River with their Certificate of Indebtedness . Cutler also took a leading part in drafting the Ordinance of 1787 for the government of the Northwest Territory, which was finally presented to Congress by Massachusetts delegate Nathan Dane . To smooth passage of the Northwest Ordinance, Cutler bribed key congressmen by making them partners in his land company . By changing the office of provisional governor from an elected to an appointed position, Cutler was able to offer the position to the president of Congress, Arthur St. Clair . In 1797, settlers from Marietta traveled upstream via the Hocking River to establish a location for the school, choosing Athens due to its location directly between Chillicothe (the original capital of Ohio) and Marietta . Originally named in 1802 as the American Western University, the school never opened . Instead, Ohio University was formally established on February 18, 1804, when its charter was approved by the Ohio General Assembly . Its establishment came 11 months after Ohio was admitted to the Union . The first three students enrolled in 1809 . Ohio University graduated two students with bachelor's degrees in 1815 . </P>

How did a territory become a state according to the northwest ordinance
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