In the 1923 case American Railway Express Company v. Levee, the U.S Supreme Court ruled in favor of American Railway Express Company (AREC). The dispute arose when AREC refused to deliver a package containing alcohol to Mr. Levee during Prohibition because it was against company policy and federal law. Mr. Levee sued for breach of contract but lost at both lower court levels before appealing to the Supreme Court. The Supreme Court held that AREC had not breached its contract with Mr. Levee as delivery would have violated federal law under the Volstead Act which enforced Prohibition by making it illegal to transport alcoholic beverages across state lines or even within states where local laws prohibited such transportation. The ruling emphasized that contracts involving illegal activities are unenforceable and void, thus affirming an important principle in contract law: parties cannot be legally bound by agreements that involve breaking laws.

In the dissenting opinion for American Railway Express Company v. Levee, Justice Oliver Wendell Holmes Jr. disagreed with the majority's decision to hold the railway company liable for a stolen package of jewelry. He argued that it was unreasonable to expect a carrier to be responsible for such valuable goods without being informed about their nature or value beforehand and given an opportunity to charge higher rates or take additional precautions against theft. Furthermore, he contended that there should not be any presumption of negligence on part of the carrier just because they failed in delivering something entrusted to them; instead, actual proof of negligence should be required before holding them accountable. This view is based on his belief in freedom of contract and limited liability principles which dictate that parties can agree upon terms including risk allocation and potential liabilities within legal limits.