The Sontag Chain Stores Co., Ltd. v. National Nut Company of California case in 1939 revolved around a contract dispute between the two parties. The Sontag Chain Stores had entered into an agreement with the National Nut Company to purchase walnuts, but later refused to accept delivery and pay for them due to alleged misrepresentation about their quality by the seller. The Supreme Court ruled in favor of National Nut Company, stating that there was no evidence proving any deceitful conduct on their part during negotiations or execution of the contract. Furthermore, it was held that even if such misrepresentation existed, it did not absolve Sontag from its contractual obligations because they failed to exercise reasonable diligence and care before entering into said agreement - as they could have easily verified claims regarding walnut quality themselves prior to finalizing terms.

In the dissenting opinion for Sontag Chain Stores Co., Ltd. v. National Nut Company of California, it was argued that the majority's decision to uphold a state law allowing creditors to recover preferential payments made by insolvent debtors within four months of bankruptcy filing was incorrect. The dissenting justices believed this ruling violated the U.S Constitution’s Contract Clause as it impaired obligations under existing contracts between private parties and retroactively altered their legal rights without due process. They also contended that such laws should be uniform across states, as per Article I, Section 8 of the Constitution which grants Congress power over bankruptcy laws; hence they viewed California's legislation as unconstitutional interference with federal authority in this area.