In the case of Wells Brothers Company of New York v. United States, 1920, the Supreme Court examined whether a contract for construction work was subject to federal income tax under the Revenue Act of 1916. The Wells Brothers Company had entered into a fixed-price contract with another company prior to this act's passage and argued that it should not be taxed on profits from this pre-existing agreement. However, the court ruled against them stating that even though their contractual obligations were set before enactment of law, they earned their profit after its enforcement which makes them liable for taxation under new law. Therefore, all earnings received post-implementation are taxable regardless if they stem from contracts made prior to legislation changes.

The dissenting opinion in the case of Wells Brothers Company of New York v. United States argued that the majority's interpretation of the law was overly broad and could potentially lead to unjust outcomes. The dissent contended that a contract for labor should not be considered as goods, wares, or merchandise under section 4 of the Lever Act because it would mean any agreement involving compensation for services could fall within its scope. This would give federal courts jurisdiction over virtually all contracts and transactions across states which they believed was not Congress' intention when drafting this legislation. They also expressed concerns about potential abuses if such an expansive interpretation were allowed to stand, arguing it might infrally on individual rights and freedoms by giving too much power to federal authorities.