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

Nature of the Case

Subcontractor Pennsy Supply (P) appealed an order from the Court of Common Pleas granting preliminary objections in the nature of a demurrer in favor of American Ash Recycling Corp. (D).

Facts

Pennsy Supply informed American Ash that it would require approximately 11,000 tons of AggRite for a school project. Pennsy picked up the AggRite and used it for the paving work.

The pavement ultimately developed extensive cracking and Pennsy was forced to remedy the defective work at no cost. The remedial work included the removal and appropriate disposal of the AggRite, which was classified as a hazardous waste material.

Pennsy requested American Ash to arrange for the removal and disposal of the AggRite. American Ash did not do so and Pennsy provided notice of its intention to recover costs. Pennsy alleged breach of contract, breach of implied warranty of merchantability, breach of express warranty of merchantability, breach of warranty of fitness for a particular purpose, and promissory estoppel.

On the breach of contract claim the trial court determined that any alleged agreement between the parties is unenforceable for lack of consideration. The trial court also stated the facts as pleaded did not support an inference that disposal costs were part of any bargaining process or that American Ash offered the AggRite with an intent to avoid disposal costs.

The trial court dismissed Count I for two reasons related to the necessary element of consideration: one, the allegations of the Complaint established that Pennsy had received a conditional gift from American Ash, and, two, there were no allegations in the complaint to show that American Ash’s avoidance of disposal costs was part of any bargaining process between the parties.

Issues

  1. Does bargained for consideration exist when the promise induces the detriment and the detriment induces the promise?
  2. How are words of condition in a promise generally determined to be consideration as opposed to a gift?

Holding and Rule of Law

  1. Yes. Bargained for consideration exists when the promise induces the detriment and the detriment induces the promise.
  2. Words of condition in a promise are generally determined to be consideration as opposed to a gift by whether the condition would benefit the promissor.

Consideration consists of a benefit to the promissor or a detriment to the promisee. The detriment incurred must be the ‘quid pro quo’, or the ‘price’ of the promise, and the inducement for which it was made. If the promissor merely intends to make a gift to the promisee upon the performance of a condition, the promise is gratuitous and the satisfaction of the condition is not consideration for a contract.

Whether a contract is supported by consideration presents a question of law. The promise must induce the detriment and the detriment must induce the promise. If the promissor made the promise for the purpose of inducing the detriment, the detriment induced the promise. If, however, the promissor made the promise with no particular interest in the detriment that the promisee had to suffer to take advantage of the promised gift or other benefit, the detriment was incidental or conditional to the promisee’s receipt of the benefit. Even though the promisee suffered a detriment induced by the promise, the purpose of the promissor was not to have the promisee suffer the detriment because she did not seek that detriment in exchange for her promise.

In determining whether words of condition in a promise indicate a request for consideration or state a mere condition in a gratuitous promise, we inquire into whether the occurrence of the condition would benefit the promissor. If so, it is a fair inference that the occurrence was requested as consideration. If the occurrence of the condition is no benefit to the promissor but is merely to enable the promisee to receive a gift, the occurrence of the event on which the promise is conditional, though brought about by the promisee in reliance on the promise, is not properly construed as consideration.

American Ash actively promotes the use of AggRite as a building material and provides the material free of charge, in an effort to have others dispose of the material and thereby avoid incurring the disposal costs itself. Pennsy’s use of AggRite saved American Ash thousands of dollars in disposal costs it otherwise would have incurred. American Ash’s promise to supply AggRite free of charge induced Pennsy to assume the detriment of collecting and taking title to the material. Pennsy’s detriment induced American Ash to make the promise to provide free AggRite for the project.

The bargain theory of consideration does not actually require that the parties bargain over the terms of the agreement. All that 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. Consideration is present because the complaint alleges facts which, if proven, would show the promise induced the detriment and the detriment induced the promise.

Disposition

Reversed.


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