Canusa Corp. v. A & R Lobosco, Inc.

986 F. Supp. 723 (1997)

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Canusa Corp. v. A & R Lobosco, Inc.

United States District Court for the Eastern District of New York
986 F. Supp. 723 (1997)

  • Written by Mike Begovic, JD

Facts

A & R Lobosco, Inc. (Lobosco) (defendant) obtained a contract with New York City to accept recycled materials. To facilitate this, Lobosco needed a baler, a large piece of equipment to process recycled paper. Lobosco entered into an equipment-lease contract with Canusa Corp. (defendant) for the lease of a baler. The lease obligated Lobosco to pay rent but did not specify an amount. Instead, the lease referred to an output agreement, indicating that Lobosco was to finance the equipment by supplying Canusa with paper, which would be credited to Lobosco’s account. The terms dictated that Lobosco was to pay Canusa $1,551 per week toward the baler, and any amounts of paper sent in excess would be credited to Lobosco’s account. Additionally, the agreement provided that Lobosco would ship 110 tons per month of number 8 quality newsprint (ONP 8) in 1993, and 1,500 tons per month thereafter. Lobosco did not meet this number. According to Lobosco president Michael Lobosco, there were several reasons for this. First, the materials from the city had a higher percentage of garbage than anticipated. Additionally, Lobosco did not always receive the amount promised under the city contract. In March 1994, Lobosco’s shipment fell to zero. Canusa made two separate offers to relieve Lobosco of its obligations as the seller under the output agreement, but Lobosco declined. Canusa filed a complaint seeking damages for breach of contract, fraudulent inducement, and replevin of the baler. At trial, only the breach-of-contract action remained. Michael Lobosco testified that it would have cost too much and taken too long to produce ONP 8 paper. Canusa argued that Lobosco breached the contract by failing to meet the minimum supply specified in the output agreement. Lobosco argued that output agreements only obligate a seller to what they can produce in good faith.

Rule of Law

Issue

Holding and Reasoning (Trager, J.)

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