Sherman vs. Smith was a case heard by the United States Supreme Court in 1861. The dispute centered around whether or not an individual could be held liable for damages caused to another person's property as a result of negligence on their part. At issue was whether Sherman, who had been hired by Smith to build a bridge, should be held responsible for any damage that occurred due to his failure to properly construct it. In its ruling, the court found that Sherman could indeed be held liable and ordered him to pay restitution for any losses suffered by Smith as a result of his negligence. This decision established important precedent regarding liability in cases involving negligent acts and set forth clear guidelines concerning when individuals can be held accountable for their actions which cause harm or loss to others.

In Sherman v. Smith, the Supreme Court was asked to decide whether a state court had jurisdiction over a case involving an alleged breach of contract between two citizens of different states. The majority opinion held that the state court did not have jurisdiction because it would be in violation of Article III, Section 2 of the Constitution which grants exclusive federal judicial power over cases involving citizens from different states. Justice Grier dissented and argued that while Congress has been granted authority to regulate interstate commerce, this does not mean they can take away all powers from state courts when it comes to disputes between citizens from different states. He further argued that allowing such suits in state courts is necessary for justice as there are many instances where parties may prefer their local court system rather than having to travel long distances or wait extended periods for relief through federal courts.