In the case of Eastern Building and Loan Association v. Williamson, 1902, the U.S Supreme Court was tasked with determining whether a contract between an individual in South Carolina and a New York corporation could be enforced despite it being contrary to public policy in South Carolina. The court ruled that since the contract had been made under New York law where such contracts were legal, it should be upheld even if similar agreements would not have been enforceable within South Carolina's jurisdiction. This decision reinforced principles of federalism by upholding contractual obligations across state lines irrespective of differing state laws on certain matters.

In the dissenting opinion for Eastern Building and Loan Association v. Williamson, it was argued that the majority's decision to uphold a contract clause allowing an association to charge fines for late payments was unjust. The dissenting justices believed this ruling contradicted previous decisions where such clauses were deemed as penalties rather than liquidated damages, thus rendering them unenforceable under common law principles. They contended that these fines disproportionately punished borrowers who missed payments due to circumstances beyond their control and enriched lenders without any corresponding benefit or service provided in return. Furthermore, they pointed out that the borrower had no bargaining power when entering into this contract because he needed a loan urgently while facing financial distress; hence, he could not negotiate better terms or refuse onerous conditions imposed by the lender. Therefore, they concluded that enforcing such punitive contractual provisions would be contrary to public policy and fairness considerations inherent in contract law doctrine.