In the case of International Life Insurance Company v. Sherman, 1922, the U.S. Supreme Court ruled in favor of International Life Insurance Company (ILIC). The dispute arose when ILIC refused to pay a life insurance claim to Mrs. Sherman after her husband's death due to suicide within two years of taking out the policy - a circumstance explicitly excluded from coverage by terms in the contract. Mrs. Sherman argued that such exclusion was against public policy and therefore void, but both lower courts upheld its validity. The Supreme Court affirmed these decisions on appeal, stating that while some states did have laws prohibiting clauses excluding suicide from life insurance policies, no such law existed at federal level or in Missouri where Mr. Sherman had lived and signed his contract with ILIC; hence there was no basis for declaring it contrary to public policy. Therefore this case established that unless specifically prohibited by state law or otherwise violating recognized principles of morality and justice, provisions agreed upon between private parties are not subject to invalidation as being against public policy.

In the dissenting opinion for International Life Insurance Company v. Sherman, Justice Holmes argued that the court should not have ruled in favor of Mr. Sherman because he had willingly entered into a contract with the insurance company and was aware of its terms. He believed that it was not within the purview of courts to protect individuals from their own imprudence or lack of foresight when entering contracts freely and voluntarily. According to him, if an individual is dissatisfied with a contract's terms after signing it, they should seek redress through legislation rather than litigation. Furthermore, he disagreed with majority’s interpretation regarding “unconscionable” contracts as being void under common law principles; instead arguing such determination requires legislative action.