In the case of Bisso, Receiver v. Inland Waterways Corporation (1954), the Supreme Court ruled that exculpatory clauses in towage contracts on navigable waters were unenforceable as they violated public policy. The court held that such clauses could potentially encourage negligence and carelessness by relieving tower operators from liability for damages caused due to their own fault or neglect. This decision was based on a long-standing maritime principle which discourages conduct likely to increase hazards to shipping. Therefore, despite an agreement between parties involved in a towage contract stating otherwise, if damage occurs due to negligence or misconduct during towing operations, the party at fault cannot escape liability through an exemption clause in the contract.

In the dissenting opinion for Bisso v. Inland Waterways Corporation, Justice Reed argued that the majority's decision to prohibit exculpatory clauses in towage contracts was an overreach of judicial power and a deviation from established maritime law principles. He contended that such decisions should be left to legislative bodies rather than courts. Furthermore, he disagreed with the majority's view that these clauses were inherently unfair or unjust, noting their widespread use in other types of commercial agreements without issue. He also pointed out inconsistencies within the court’s own rulings on similar matters where it upheld exculpatory provisions under different circumstances. Thus, he believed there was no compelling reason to treat towage contracts differently and ban such clauses outright.