Acme Markets, Inc. v. Federal Armored Express, Inc.

437 Pa. Super. 41, 648 A.2d 1218 (1994)

PARTIES:

Acme Markets(Acme)-Plaintiff-Appellant; Federal Armored Express(Federal)-Defendant

FACTS:

Acme entered into an agreement with Federal for armored car service. On May 19, 1990 a Federal employee was robbed after it had taken into possession one of Acme’s cash bags. Acme suffered a loss of $62,544.32 in the robbery. Federal was promptly notified of Acme’s loss as per their agreement. Federal never reimbursed Acme and Acme filed a breach of contract complaint against Federal.

PROCEDURAL HISTORY:

On September 26, 1991 Federal asserted its defenses to the breach of contract complaint. Federal’s defense relied on the fifth paragraph of their agreement which stated, “Responsibility of Federal under this contract shall begin when said cashbags or packages have been accepted and receipted for by Federal or its authorized employees and shall terminate upon delivery to consignee or upon return to shipper.” On June 30, 1993 Acme moved for summary judgment, Federal responded by filing a cross-motion for summary judgment. At the filing of its cross-motion Federal acknowledged that its employees were in possession of Acme’s cashbag at the time of the robbery. Neither party was in dispute as to the fact that the Federal employee had not given a receipt for Acme’s handbag. On Dec. 21, 1993, the trial court held that the fifth paragraph of the contract was a condition precedent and found in favor of Federal’s motion for summary judgment.

Acme then filed for appeal.

ISSUE:

A) Does the fifth paragraph of the contract constitute a condition precedent?

B) If the fifth paragraph does constitute a condition precedent does its non-occurrence bar Acme’s recovery?

HOLDING:

A) Yes

B) No, a court may excuse non-occurrence of a condition if the condition is found to be an immaterial part of the agreement.

REASONING:

While Acme contends that a condition precedent must be specifically labeled as such, the court said that this contention is erroneous. The court held that in order for a contract to create a condition precedent it needs only to be a clear intention of the agreement. The court held that the language of the fifth paragraph clearly indicates the intention of a condition precedent.

The only question the court had left to decide was whether the non-occurrence of a condition can be excused. The court cited R2K § 229 in deciding this question. § 229 of the restatement says, “To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of a condition unless its occurrence was a material part of the agreed exchange. Forfeiture is defined as not receiving the benefit of what was bargained for in the agreement. The court held that the non-occurrence of the condition of the fifth paragraph of the agreement caused a disproportionate forfeiture. The court then reversed and remanded the case for further proceedings to determine whether the condition was a material part of the agreement.