In the 1933 case of Trainor Co. v. Aetna Casualty & Surety Co., the U.S Supreme Court was tasked with determining whether a surety company could be held liable for damages caused by its principal's breach of contract, even if those damages were not explicitly covered in the bond agreement between them. The dispute arose when Trainor Company sued Aetna Casualty and Surety Company to recover losses it incurred due to a subcontractor’s failure to complete work on time as per their contractual agreement, which had been guaranteed by Aetna through a performance bond. The court ruled in favor of Trainor, holding that while bonds are typically interpreted strictly and only cover what is expressly included within their terms, they also implicitly guarantee performance according to all aspects of the underlying contract. Therefore, since timely completion was an essential part of this particular construction contract (even though it wasn't specifically mentioned in the bond), Aetna was found responsible for compensating Trainor for its delay-related losses.

In the dissenting opinion for the case of Trainor Co. v. Aetna Casualty & Surety Co., Justice Cardozo argued that a surety company should not be held liable for damages caused by its principal's breach of contract if it was unaware of such breaches at the time it issued its bond. He contended that a surety is only responsible to cover losses directly resulting from actions or omissions specified in their agreement, and cannot be expected to assume liability for all potential misconduct by their principal. In this particular case, he believed Aetna had no knowledge or reason to suspect any fraudulent activity on part of Trainor Company when they provided them with a performance bond, hence they shouldn't bear financial responsibility for Trainor’s subsequent fraudulent conduct.