In the case of Bienville Water Supply Company v. Mobile in 1901, the U.S Supreme Court ruled on a dispute between a city and a private water company over contractual obligations. The City of Mobile, Alabama had entered into an agreement with Bienville Water Supply Company to provide its residents with water for thirty years. However, after ten years, the city decided to establish its own waterworks system and ceased honoring their contract with Bienville. In response, Bienville sued for breach of contract but lost in lower courts which held that such long-term contracts were not permissible under state law as they could bind future administrations indefinitely. The Supreme Court reversed these decisions stating that while it is true public bodies cannot enter into contracts that unduly restrict their successors' discretion or control over public affairs; this principle does not apply when cities voluntarily limit themselves through lawful agreements like leases or franchises where consideration has been given by another party who acted upon faith in them. Therefore, since there was no evidence suggesting any fraud or corruption involved during formation of this particular agreement nor did it impose unreasonable restrictions on future municipal authorities - it should be upheld.

In the dissenting opinion for Bienville Water Supply Company v. Mobile, it was argued that the city of Mobile had no right to terminate its contract with Bienville Water Supply Company without proper compensation. The justice contended that a municipality cannot unilaterally alter or abolish a contract made in good faith and under lawful authority, especially when substantial investments have been made based on this agreement. He further stated that such an act would be contrary to constitutional principles protecting property rights and contractual obligations from arbitrary state action. This view held that even if public interest demanded termination of the contract, due process required adequate compensation for any resulting losses suffered by the company.