An understanding of the contours and function of American federalism is vital to comprehension of the workings of the law in the United States. The division and sharing of power between the fifty American states and their federal government in both public law and private law spheres is more fundamental and intricate than is the case with any other modern federal nation-state.

When considering American federalism, it must be constantly kept in mind that the American nation-state is the result of the voluntary association of thirteen independent former colonies, each with a degree of individual sovereignty and its own complete system of public and private law. The American states are not provinces or regions of a larger comprehensive whole; rather, the national government that binds them together is the product of a voluntary fusion of the sovereign states that had been there before.

This historical development stands in contrast with that of other modern democracies, even those with some federal characteristics. In most of these jurisdictions, political consolidation had preceded or accompanied the development of a national legal order. Even in European federal democracies such as Germany, private law as well as much of public law is and remains national despite the increased federalization of the German state following World War II.