In the 1905 case of Vicksburg v. Vicksburg Waterworks Company, the U.S Supreme Court ruled in favor of the city of Vicksburg, Mississippi. The dispute arose when the city decided to construct its own waterworks system despite an existing contract with a private company that granted it exclusive rights to supply water for 30 years. The private company sued on grounds that this action violated their contractual rights and constituted a breach by unlawfully impairing their contract under Article I, Section 10 of the Constitution which prohibits states from passing laws impairing contracts. However, Justice Oliver Wendell Holmes Jr., writing for majority opinion held that public health and safety were paramount concerns over any contractual obligations made by cities or towns; therefore, municipalities had inherent power to establish and operate utilities like water systems even if they conflicted with existing contracts as long as it was done in good faith without intention to destroy or injure such corporations.

In the dissenting opinion for Vicksburg v. Vicksburg Waterworks Company, it was argued that the city of Vicksburg had no right to terminate its contract with the water company prematurely without providing just compensation. The justice emphasized that a municipality cannot simply disregard contractual obligations under the guise of exercising police power or protecting public health and safety. They contended that such an act constituted a violation of due process rights as outlined in the Fourteenth Amendment. Furthermore, they maintained that if every municipal corporation could annul contracts at will, then all property and contract rights would be subject to uncertainty and insecurity which is against principles of fairness and justice.