Excusing Conditions when strict interpretation would amount to forfeiture

Acme Markets Inc. v. Federal Armored Express, Inc. (1994)
Author: Richard

P/S: P appeals from summary judgment for D in Court of Common Pleas

Facts: P grocery chain and D armored car service entered into a contract for armored car service and the agreement later was amended to provide for the timely reimbursement of service-related losses. P brought a breach of contract action after it alleged that a robber stole one of P’s cash bags in D possession and D refused to reimburse appellant.  P claims that D was in possession of the money bag when it was stolen, and the fact that no receipt was issued was immaterial and D claims that although they were in possession, they were not responsible for the bags until “the bags have been accepted and receipted for by its employees”, according to paragraph 5 of the contract.

Issue: Whether the court can excuse the non-occurrence of a condition, the issuing of a receipt, that is expressly stated in a contract.

Holding:  the receipt provision was a condition precedent, but it could be excused if it was not a material part of the contract.

Outcome:  REVERSED AND REMANDED, FOR P.  The court remanded for a determination of the materiality of the receipt provision.  The court also  remanded to determine whether the forfeiture (not enforcing the receipt condition) would be disproportionate.  Standard

Rule: To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange. (Restatement 229) 

Rationale: The P entered into the contract so that it would have a secure method to transfer their cash and checks.  The requirement of the receipt was little more than an accounting device for the D, and did nothing to protect the P. To determine whether the fortitude is disproportionate is found in section 229, comment b: “In determining whether the forfeiture is "disproportionate," the court must weigh the extent of the forfeiture by the obligee against the importance to the obligor of the risk from which he sought to be protected and the degree to which that protection will be lost if the nonoccurrence of the condition is excused to the extent required to prevent forfeiture.”