Pennsy Supply Inc v American Ash Recycling Corp PDF

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Professor Klass Contracts Case Brief...

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Pennsy Supply, Inc. v. American Ash Recycling Corp Superior Court of Pennsylvania

Summary: Pennsy Supply was involved in a paving project, and was permitted and did indeed use AggRite, which provided bidders with a stupilated quantity for free on a “first come, first serve” basis. So Pennsy obtained 11,000 tons of AggRite for the paving work and used some of it, but it developed extensive cracking. He had to fix these extensive cracks ($251,940) and dispose of the AggRite, which was classified as hazardous waste ($133,777). Pennsy alleges that American Ash benefitted from Pennsy’s use of AggRite because when they offloaded it onto him, they didn’t have to pay to dispose it as hardzous waste themselves. American Ash argued that the AggRite was a conditional gift; Pennsy argues it was a breach of contract. Procedural History: Question/Outcome/Rationale: 1) Was the distribution of AggRite to Pennsy a conditional gift? a. No! “…it is a fair interpretation of the Complaint that AA’s promise to supply AggRite free of charge induced Pennsy to assume the detriment of collecting and taking title to the material, and critically, that it was this very detriment, whether assumed by Pennsy or some other successful bidder to the paving subcontract, which induced AA to make the promise to provide free AggRite for the project.” 2) Is consideration lacking because Pennsy did not allege that American Ash’s avoidance of the disposal costs was part of the bargaining process? a. “The bargain theory of contract does not actually require that the parties bargain over the terms of the agreement…What is required [for consideration to exist] is that the promise and the consideration be “in the relation of reciprocal conventional inducement, each for the other.” [“…The promise induced the detriment and the detriment induced the promise. This would be consideration….” Held. (Orie Melvin, J). Yes. Grounding contracts and the warranty claims brought by the disposer, constitutes sufficient ground for relief of a manufacturer’s obligation, to dispose of a material classified as hazardous waste, such that the cost of disposal is avoided by the manufacturer. A very important element of an enforceable contract which must be bargained for as an exchange for a promise is consideration, which can be further defined as a benefit to the promisor or a detriment to the promise. That the promisee has suffered a legal disadvantage at the request of the promisor is not adequate. The disadvantage suffered by the promisee must be “quid pro quo” of the promise and the inducement for which it is made.

Therefore, a promise is said to be gratuitous and the satisfaction of the condition is not consideration for a contract if the promisor merely had the intention to make a gift to the promise upon the performance of a condition. The allegations which Pennsy (P) made against American Ash (D) in this case not only pointed out that the defendant made a conditional gift of the AggRite to the plaintiff, but that American Ash (D) in order to avoid the cost of disposing the AggRite, gave out the AggRite in an effort to transfer the cost burden on the disposal.

Therefore, Pennsy (P) assumed the detriment of collecting and taking title to the material because Pennsy (P) was induced to receive the supply of AggRite free of charge from American Ash (D). The detriment Pennsy (P) now suffers was the same detriment which induced American Ash (D) to give out the AggRite free of charge. Also, the absence of an actual bargaining process between the parties is not necessary to establish consideration, but this merely shows that the promise induced the detriment and the detriment induced the promise if the fact is proven. If the allegations Pennsy (P) made against American Ash (D) can be proven to be true, this would indicate sufficient consideration to support estoppel claims, breach of contract and breach of warranty. The ruling was reversed and remanded. Key takeaway/Discussion: 1) The bargaining process doesn’t matter. They didn’t have to actually bargain. The difference show between conduct that is a condition to a gift and conduct that constitutes consideration is not a clear one due to the fact that the very same conduct may be a condition to a gift or a consideration depending on how the parties treat the conduct. In determining which construction of the promise is more reasonable is an inquiry into whether the occurrence of the condition would be of advantage to the promisor. This is shown in 17A Am. Jur. 2d S 104 (2004 & 2005 Supp). as “(a)n aid which is not a conclusive test. When this is so, it is a fair inference that the occurrence was demanded as a consideration. Conversely, if the occurrence of the condition is not advantageous to the promisor but it is just to enable the promisee to take custody of the gift, the occurrence of the event on which the promise is conditional, which was brought about by the promisee by relying on the promise, is not properly construed as consideration.” (For a more clear example, see discussion in Kirksey)....