In the case of United States v. Aetna Explosives Company, 1920, the U.S. Supreme Court ruled in favor of the government and against Aetna Explosives Company. The company had been contracted by the government during World War I to manufacture explosives for military use but failed to deliver them on time due to labor strikes and other unforeseen circumstances beyond their control. As a result, they were penalized under their contract's liquidated damages clause which stipulated that if delivery was delayed, they would have to pay $10 per day for each ton of undelivered explosives until delivered or replaced by others at an increased cost. Aetna argued that this penalty was excessive and violated constitutional prohibitions against excessive fines (Eighth Amendment). However, the court disagreed stating that these penalties were not punitive but rather compensatory as it represented estimated actual loss suffered by the government due to delay in performance. The court also rejected Aetna’s argument that enforcement should be excused because its failure was caused by factors outside its control such as labor strikes; ruling instead that parties who make contracts must take into account foreseeable risks including those arising from war conditions.

In the dissenting opinion for United States v. Aetna Explosives Company, the justice argued that the government should not be allowed to recover damages from a contractor who had supplied defective explosives during World War I. The justice believed that because of the urgent need for munitions at this time, it was understood by both parties involved in the contract that there would inevitably be some risk associated with rapid production and delivery. Therefore, he felt it was unfair to hold Aetna Explosives Company financially responsible for any defects in their products under these circumstances. He also pointed out that if every supplier were held liable for defects during wartime conditions, no company would agree to supply goods under such high-risk conditions without charging exorbitant prices or refusing altogether - which could potentially jeopardize national security efforts.