In the case of Guarantee Company of North America v. Mechanics' Savings Bank and Trust Company, 1901, the U.S Supreme Court was tasked with determining whether a surety company could be held liable for losses incurred by a bank due to fraudulent activities perpetrated by one of its employees who had been bonded by the surety company. The employee in question had embezzled funds from his employer (the bank), which led to financial loss. The court ruled that since it was within the scope of employment for this individual to handle such funds and because he committed fraud while performing these duties, then indeed, the surety company should bear responsibility for these losses as per their agreement with the bank. This ruling established an important precedent regarding liability issues involving employers, employees and bonding companies.

The dissenting opinion in the case of Guarantee Company of North America v. Mechanics' Savings Bank and Trust Company disagreed with the majority's interpretation of a surety bond contract. The dissent argued that, based on established principles of contract law, the bank should not be allowed to recover from the guarantee company because it had failed to notify them promptly about default payments by their principal debtor. They believed this delay constituted a material alteration in terms without consent which discharged any liability for subsequent defaults under common law rules governing suretyship contracts. Furthermore, they contended that even if there was no express agreement requiring prompt notice, such an obligation could be implied given its importance for protecting sureties against increased risk exposure due to delayed information about defaults.