In the case of New Orleans v. New Orleans Water Works Company, 1891, the Supreme Court ruled in favor of the city of New Orleans. The dispute arose when a private company was given a contract to supply water to the city and its inhabitants for twenty-five years starting from 1877. However, after several years into this agreement, the City Council decided that it would be more beneficial for them to operate their own waterworks system instead and passed an ordinance accordingly in 1884. This led to litigation by both parties with each claiming rights over supplying water within city limits. The court held that while contracts between public bodies and private entities are legally binding under normal circumstances; they cannot infrally limit or surrender powers essential for public welfare such as providing clean drinking water which is considered an inherent function of municipal government. Therefore, despite having entered into a contract with Water Works Company earlier on good faith basis; if later deemed necessary due to changing circumstances or better understanding - municipalities have right & duty towards citizens' wellbeing above all else even if it means breaking said agreements without any legal repercussions.

In the dissenting opinion for New Orleans v. New Orleans Water Works Company, it was argued that the city of New Orleans had no right to terminate its contract with the water company without compensating them for their investment in infrastructure and services provided. The justice believed that such a termination would violate constitutional protections against impairing contractual obligations and taking private property without just compensation. He contended that while municipalities have certain rights to regulate utilities in public interest, they cannot arbitrarily end contracts or seize assets from private companies providing those utilities. This view emphasized respect for contract law and protection of private investments made under legal agreements.