The Sinking-Fund Cases involved a dispute between the Union Pacific Railroad Company and the United States. The Union Pacific Railroad Company had been granted a large amount of land by the United States in order to build a transcontinental railroad. The United States had also granted the company a large amount of bonds, which were to be used to finance the construction of the railroad. The bonds were to be paid off over time, with the interest payments being placed in a sinking fund. The Union Pacific Railroad Company argued that the interest payments should be used to pay off the bonds, rather than being placed in the sinking fund. The Supreme Court ruled in favor of the United States, holding that the interest payments should be placed in the sinking fund. The Court reasoned that the sinking fund was necessary to ensure that the bonds would be paid off in full, and that the interest payments should be used to pay off the bonds over time. The Court also held that the Union Pacific Railroad Company had no right to use the interest payments for any other purpose. This ruling established the principle that the interest payments on bonds should be placed in a sinking fund, and that the funds should be used to pay off the bonds over time.

In the Sinking-Fund Cases, Union Pacific Railroad Company v. United States, the Supreme Court was tasked with deciding whether or not Congress had exceeded its authority by requiring that certain bonds issued to finance construction of a railroad be paid off in full before any dividends were distributed to shareholders. The majority opinion held that Congress did have such authority and could impose this requirement on bondholders as part of their contract with the company. However, Justice Field dissented from this decision and argued that while it is true that Congress has broad powers over interstate commerce, they do not extend so far as to allow them to interfere in private contracts between two parties without due process of law. He further argued that if allowed unchecked power in these matters then it would lead to an erosion of rights for individuals who enter into contracts with corporations which are subject to federal regulation.