The U.S. Supreme Court case Smith et al., Co-Partners, Trading as H.J. Baker & Bro v. The Ferncliff et al., 1938 revolved around a dispute over the payment for goods that were lost at sea during their transportation from New York to Cuba in 1936 on board the SS Ferncliff. The plaintiffs, Smith and his co-partners trading as H.J.Baker & Bro, had sold and delivered these goods to an agent of the Cuban government but hadn't received full payment when they were lost due to negligence by those responsible for transporting them (the defendants). They sued under maritime law seeking compensation for this loss from both ship owners and charterers involved in shipping these goods. The main legal question was whether or not they could claim damages despite having transferred ownership of these goods before their loss occurred. In its decision, the court held that since title had passed onto buyers upon delivery at port of shipment prior to voyage commencement (as per sales contract terms), sellers couldn't sue shipowners/charterers directly because they no longer retained insurable interest in cargo after such transfer.

In the dissenting opinion for the case of Smith et al., Co-Partners, Trading as H. J. Baker & Bro v. The Ferncliff et al., Justice Black disagreed with the majority's ruling that a shipowner could be held liable for damages caused by an independent contractor hired to repair their vessel. He argued that this decision contradicted established principles of tort law and unfairly expanded liability beyond reasonable limits. According to him, if a person hires another party who is competent and reputable to perform work, they should not be held responsible for any negligence on part of the latter unless it was foreseeable or within their control directly or indirectly; otherwise it would lead to unjust outcomes in many cases where there is no fault on part of those being made liable.