Case Law Summaries

Cumberland County Improvement Authority v. GSP Recycling Co., Inc.

• Opinion Date: March 12, 2003
• Business Law
• E-Mail

CONTRACTS; DAMAGES—A contract will be interpreted to provide for remedies upon default even if there are no such specific provisions.

An independent county authority responsible for recycling newspapers entered into a contract with a recycling company that purchased old newsprint and recycled it as fiber for sale to a paper mill. The contract required the authority to meet certain minimum quality standards with respect to the newsprint the county supplied to the recycling company. The authority consistently failed to meet the minimum standards, so the authority and the recycling company amended the contract to allow the authority to provide two different grades of recycled paper, each with minimum standards and at different prices. One section of the addendum permitted the recycling company to impose punitive deductions or reject the entire load if the delivery did not meet the minimum qualifications. The second section, dealing with the lower quality newsprint, also contained minimum standards, but did not contain the provisions allowing the recycling company to impose punitive deductions or reject the entire load. The authority continued to supply substandard newsprint and the recycling company stopped paying for the goods, but insisted that the authority continue delivering newsprint, even though it refused to pay for substandard shipments. Eventually, the authority sold its newsprint elsewhere and the recycling company purchased substitute newsprint on the “spot” market. The authority and the recycling company each sued for breach of contract. The lower court rejected the authority’s claim that the recycling company breached the contract by failing to pay for the newsprint deliveries. It found that the authority breached the contract by failing to meet the quality standards in the contract. The Appellate Division affirmed. It found that, although there was no punitive deduction provision for the lower grade newsprint, the provision dealing with the minimum standards for lower grade newsprint would have been meaningless if there was no penalty for failing to meet the standards. The contract needed to be read as a whole to understand the intent of the parties. The Court also found that the parties’ course of dealing supported the recycling company’s position that it could refuse to pay for the substandard newsprint without breaching the contract. Here, the authority continued to deliver newsprint without being paid for the substandard lots and did not object until it filed its suit. The Court also rejected the authority’s claim that by taking delivery of the non-conforming newsprint, the recycling company accepted it and was therefore required to pay for it, in accordance with the Uniform Commercial Code. It found that the recycling company did not accept the non-conforming goods, and that the contract had anticipated that the recycling company would receive, and not pay for, non-conforming newsprint.

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