In the case of New Orleans Waterworks Company v. Louisiana Sugar Refining Company, the Supreme Court of the United States was asked to decide whether the Louisiana Sugar Refining Company was liable for damages caused by the overflow of its canal. The New Orleans Waterworks Company had constructed a waterworks system in the city of New Orleans, and the Louisiana Sugar Refining Company had constructed a canal adjacent to the waterworks system. The canal had been constructed in such a way that it caused the waterworks system to overflow, resulting in damage to the waterworks system. The Supreme Court held that the Louisiana Sugar Refining Company was liable for the damages caused by the overflow of its canal. The Court reasoned that the company had a duty to construct the canal in such a way that it would not cause damage to the waterworks system, and that it had failed to do so. The Court also held that the company was liable for the damages even though it had not intended to cause the damage. The Court concluded that the company was liable for the damages caused by the overflow of its canal, and ordered it to pay the New Orleans Waterworks Company for the damages.

In New Orleans Waterworks Company v. Louisiana Sugar Refining Company, the Supreme Court was asked to decide whether a state law granting exclusive rights to a company for water supply services violated the Constitution's Contract Clause. The majority opinion held that it did not violate the clause because there was no contract between the parties and therefore could not be impaired by subsequent legislation. Justice Field dissented from this decision, arguing that even though there had been no formal contract between them, an implied agreement existed which gave rise to contractual obligations on both sides and thus should have been protected under the Contract Clause of the Constitution. He argued further that since such contracts are essential for economic development in any society, they must be respected by government action or else businesses will lack confidence in their ability to make long-term investments with assurance of protection against arbitrary interference from legislative acts.