In the case of Fidelity & Deposit Company of Maryland v. United States, 1921, the Supreme Court ruled on a dispute involving a surety company's liability under a construction contract. The Fidelity & Deposit Company had issued performance bonds for two contractors who were building post offices for the federal government. When both contractors defaulted, the U.S Government completed their work and then sued Fidelity to recover its costs. The main issue was whether or not these costs could be recovered from a surety when they exceeded original contract prices due to changes made by the government after contracts were signed but before defaults occurred. The court held that while ordinarily such excesses would not be chargeable against sureties without their consent, in this instance there was an implied obligation on part of Fidelity as it knew about modifications being made and did nothing to limit its responsibility towards them. Therefore, it was liable for all reasonable expenses incurred by US Government in completing buildings according to modified plans.

In the dissenting opinion for Fidelity & Deposit Company of Maryland v. United States, Justice McReynolds disagreed with the majority's interpretation of a surety bond contract between Fidelity and the U.S. government. He argued that when interpreting such contracts, courts should consider not just their literal wording but also their broader context and purpose - in this case, to protect taxpayers from losses due to default by government contractors. According to Justice McReynolds, if a contractor defaults on its obligations under one contract while performing satisfactorily under others covered by the same bond, it would be unreasonable and contrary to public policy for the surety company (Fidelity) to escape liability simply because those other contracts were technically completed before default occurred on another one. The justice believed that allowing such an outcome would undermine confidence in federal contracting processes and potentially expose taxpayers to significant financial risk.