In the case of Danville Water Company v. Danville City in 1900, the U.S Supreme Court was tasked with determining whether a city had violated contract rights by constructing its own waterworks system while under an existing agreement with a private company to supply water. The Danville Water Company held an exclusive contract for thirty years to provide water services within the city limits of Danville, Kentucky. However, due to dissatisfaction with service quality and rates charged by this company, the city decided to build its own municipal waterworks system before expiration of that contract period. The court ruled in favor of the City of Danville stating that no irreparable damage was done as there were no clauses preventing competition in their original agreement and also because public welfare is paramount over any contractual obligations between parties.

The dissenting opinion in the case of Danville Water Company v. Danville City argued that the city had no right to arbitrarily fix water rates without considering the company's investment and fair profit. The justice believed that such an action violated constitutional rights, specifically those related to property protection under due process law. They contended that while a municipality has power over local affairs, it does not have unlimited authority to disregard contractual obligations or deprive corporations of their property without just compensation. This would be tantamount to confiscation rather than regulation, which is against principles of equity and fairness inherent in American jurisprudence.