In Faw v. Marsteller, the Supreme Court of the United States held that a contract between two parties was binding and enforceable even if it had not been executed with consideration or in writing. The case arose when John Faw sued William Marsteller for breach of contract after Marsteller failed to pay him $1,000 as promised in an oral agreement. The court found that there was sufficient evidence to prove the existence of a valid contract between the two parties despite its lack of consideration or written formality. In doing so, they established precedent which has since become known as "the parol evidence rule," which states that verbal agreements are just as legally binding as those made in writing and can be enforced by courts accordingly.

In Faw v. Marsteller, the Supreme Court was asked to decide whether a state court had jurisdiction over an action brought by a citizen of another state against a resident of the forum state. The majority opinion held that it did not have such jurisdiction and dismissed the case on those grounds. However, Justice Chase dissented from this decision and argued that states should be allowed to exercise their own laws in matters involving citizens of other states who are present within its borders. He reasoned that since all persons living in any particular state were subject to its laws while they remained there, then it would follow logically that if one person wronged another within its boundaries then justice could only be served if both parties were subject to the same legal system for resolution of their dispute. Therefore, he concluded that allowing each individual State's courts exclusive jurisdiction over disputes between residents and non-residents alike was necessary for fairness and justice under law.