In the 1935 case American Surety Co. v. Westinghouse Electric Manufacturing Co., the U.S Supreme Court was tasked with determining whether a surety company could be held liable for damages caused by its principal's breach of contract, even if those damages were not explicitly outlined in the original bond agreement. The court ruled that while a surety is generally only responsible for obligations expressly stated in their bond, they can also be held accountable for any losses directly resulting from their principal’s failure to fulfill contractual duties if such consequences are reasonably foreseeable at the time of entering into said contract. In this specific instance, Westinghouse had contracted with another party to deliver certain equipment and American Surety guaranteed this delivery through a performance bond. When Westinghouse failed to deliver on time causing financial loss due to delay, it was deemed that these losses were within reasonable anticipation when signing the guarantee and thus American Surety was found liable.

The dissenting opinion in the case of American Surety Co. v. Westinghouse Electric Manufacturing Co., et al., argued that the majority's decision to hold a surety company liable for damages caused by its principal was incorrect and inconsistent with established legal principles. The dissent contended that a surety is only responsible for fulfilling contractual obligations if its principal defaults, not for any damage or harm caused by the principal’s actions outside of those specific contractual terms. They believed this ruling expanded the liability of sureties beyond what had been traditionally recognized under law, potentially setting a dangerous precedent where such companies could be held accountable for virtually any action taken by their principals, regardless of whether it directly related to their contractually guaranteed performance or not.