CONTRACTS - Pennsy v. American Ash

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LAW 603
Sep 20, 2023
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BRIEF - PENNSY SUPPLY, INC. v. AMERICAN ASH RECYCLING CORP. PARTIES Plaintiff/Appellant: Pennsy Defendant/Appellee: American Ash HISTORY OF LIT Trial Court: Pennsy appeals from the grant of preliminary objections in nature of a demurrer in favor of American Ash Dismissed Count 1 because the allegations established that Pennsy received a conditional gift from AA, and there were no allegations to show that AA's avoidance of disposal costs was part of any bargaining process between the parties Dismissed Counts II, III, IV because contract amounted to a conditional gift rather than a contract for sale (of goods) o Said UCC Article 2 doesn't apply THEORIES OF LIT Pennsy Filed complaint against AA for 1) breach of contract, 2) breach of implied warranty of merchantability, 3) breach of express warranty of merchantability, 4) breach of warranty of fitness for a particular purpose, and 5) promissory estoppel o American Ash filed objections to all five counts FACTS Pennsy was a subcontract for Lobar, a general contractor, who was hired to help the District complete the Project o The Lobar and District contract included a Project Specifications document that permitted TAA or AggRite to be used for a base aggregate in paving work o Project Specifications included a notice to bidders of the availability of AggRite at no cost from American Ash Also included a letter to the Project architect from American Ash confirming a certain amount of free AggRite on a first come first serve basis Pennsy informed AA they'd need 11k tons of AggRite for the Project o Pennsy picked it up and used it for paving work Completed in Dec 2001 Extensive cracking occurred in Feb 2002 Pennsy performed remedial work at no cost in summer 2003 Pennsy had request AA remove the AggRite and they refused, so Pennsy provided notice to AA of its intention to recover costs Pennsy filed a claim for the reason listed in theories of lit o AA filed objections to all five counts ISSUES Pennsy's questions the court must review: Whether the trial court erred in not accepting as true the Complaint allegations that...
o AA promotes the use of its AggRite material, which is classified as a hazardous waste, in order to avoid disposing of it themselves o AA benefitted by Pennsy's use of the material in the form of avoidance of the costs of the disposal of the material Sufficient to ground contract and warranty claims Whether consideration is lacking because Pennsy did not allege that AA's avoidance of disposal costs was part of any bargaining process between the parties Whether Pennsy's relief of AA's legal obligation to dispose of the material, because AA avoided the cost of disposing of it, is sufficient consideration to ground contract and warranty claims Whether the trial court misconstrued the facts of the Complaint by dismissing Pennsy's promissory estoppel claim o Pennsy did not receive AA's product specifications until after the paving was completed (which was not pled and is not factual) o Promissory Estoppel - refers to the doctrine that a party may recover on the basis of a promise made when the party's reliance on that promise was reasonable, and the party attempting to recover detrimentally relied on the promise (This was omitted in the reading) RULES - COUNT 1 Consideration is an essential element of an enforceable contract o Consists of a detriment incurred at the price of a promise and the inducement for which it was made Must actually be bargained for as the exchange for the promise Promisee must seek the detriment in exchange for their promise o Detriment has to induce the promise and the promise has to induce the detriment - Holmes o The occurrence of the condition must benefit the promisor (American Jurisprudence) A conditional gift is one where the promisor made the promise with no particular interest in the detriment that the promisee had to suffer in order to take advantage of the promised gift or benefit o Detriment was incidental or conditional to the promisee's receipt of the benefit Professor Murray The bargain theory of consideration does not actually require that the parties bargain over the terms of the agreement o Just requires reciprocal conventional inducement, each for the other (Holmes) ANALYSIS - COUNT 1 The Superior Court disagrees with the Trial Court dismissing the first count. Using the Holmes formula, one can see that AA's promise to supply AggRite free of charge induced Pennsy to assume the detriment of collecting and taking title to the material. It was this detriment which induced American Ash to make the promise to provide free AggRite for the project.
The Complaint contains facts that if proven show the promise induced the detriment and the detriment induced the promise - consideration. The Court reverse the dismissal of Count 1. RULES - COUNTS II, III, IV We know that AggRite is obviously a good UCC 2-304 o "Price payable in money, goods, realty or otherwise" Pennsy argues that its acquisition of the AggRite whereby American Ash was relieved if disposal costs can constitute a price within the meaning of the "or otherwise" language o Trial court said AggRite was just a conditional gift, so warranties would not apply Superior Court disagrees ANALYSIS - COUNTS II, III, IV The court interprets the UCC provision above to include any consideration sufficient to ground a contract. Since Article 2 would apply if Pennsy proved the allegations in their complaint, then the complaint would support a claim for breach of warranty under Article 2. The Court reverses the grant of the demurrer HOLDING The court ruled that there was consideration in the contract that was bargained for DISPOSITION Reversed and remanded for further proceedings
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