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Dillon’s Rule is the cornerstone of American municipal law. Under Dillon's Rule, a municipal government has authority to act only when :
(1) the power is granted in the express words of the statute, private act, or charter creating the municipal corporation;
(2) the power is necessarily or fairly implied in, or incident to the powers expressly granted; or
(3) the power is one that is neither expressly granted nor fairly implied from the express grants of power, but is otherwise implied as essential to the declared objects and purposes of the corporation.
The Dillon rule is used in interpreting state law when there is a question of whether or not a local government has a certain power. Judge Forest Dillon, the chief justice of the Iowa Supreme Court expounded this famous rule, which was quickly adopted by state supreme courts around the nation.