“I have a number of loads to ship in the coming week(s) with confirmed prices and P.O. numbers exchanged, however, due to the weather conditions I do not have product available to fulfill my commitment with the buyer. The buyer is threatening to buy against my account if I don’t supply him with the product which has already been confirmed. What should I do now?”

The Western Growers Trade Practices Department has been fielding questions like this one. As the western region of the United States continues to experience the “Perfect Storm” of impressive winter precipitation, along with below-normal temperatures, it is inevitable that a combination of these conditions will have an adverse effect upon projected production yields, harvest quality and the fulfillment of verbal or written contractual obligations.

Let’s take a step back and start with what should be done to protect your company to be in the best position to handle this type of problem.

Prior to entering into a contractual agreement (verbal or written), it is always recommended that you:

1. Before you even consider entering into such a near or long term contract, know your customer. What is their business type? Retailer, wholesaler, broker? What is their Blue Book rating and have you heard about their reputation from your other trade contacts. Is this a customer we do business with routinely, or is this a new buyer? If an existing customer, what have I heard or experienced in past dealing, and how was any anomaly to a past contract issue handled?  Was it professional and was flexibility shown?  Bottom line, use past experience to drive your current decision, and if the customer is new, be measured with the extent of your commitment until you build an experience of performance with the customer. 
    
2. Confirm with your customer the precise number of units they are going to purchase, at what price, and the start and ending shipping dates. Any exclusions (such as condition or otherwise) must be disclosed at the time of negotiations and contained in the contract.
    
3. Written contracts are always more protective than verbal contracts. Include language in the contract that will disclose and exclude circumstances beyond your control. This is often referred to in commercial contracts as force majeure events. (Click this link to view some limited examples of force majeure events.) It is a best practice that you send your customer a detailed email during and then after your  negotiations of the contract are finalized.  Clearly detail the terms (FOB or Delivered), price, quantity, shipping location, other contingencies, and that performance of the contract is subject to availability of the produce item. Failure to ship when supply is not available due to weather conditions (or other force majeure events) may be excused only if expressly contained in the contract and then only when the event totally prevents all harvest operations. If your harvest is not totally interrupted, you must make every reasonable effort to ship what limited production you have harvested on a prorated basis if you have multiple commitments.  How this prorate is handled should be disclosed in your agreement.    
    
4. Before agreeing, or inking the deal, have the contract agreement reviewed by a designated internal team, or seek the guidance of legal counsel prior to signing any agreement to ensure the contract is consistent with your company policy and meets the shipper complete expectations.

By documenting the complete exceptions to the contract, you will avoid any ambiguity about contract interpretation at a later date. Never assume that failure to ship because of Acts of God, weather conditions and availability excuse your performance under the sales contract.  You MUST clearly define and document conditions excusing performance in the contract and prior to shipment.

If you have any questions, please feel free to contact Western Growers Trade Practices Department’s Bryan Nickerson at [email protected], 949-885-2392.

Examples of force majeure events include: (a) acts of God including, but not limited to, severe weather; (b) flood, fire, earthquake or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order or law; (e) actions, embargoes or blockades in effect on or after the date of this Agreement; (f) action by any governmental authority; (g) national or regional emergency; (h) strikes, labor stoppages or slowdowns or other industrial disturbances; and (i) shortage of adequate power or transportation facilities.

As the saying goes, “Timing is everything” and that continues to ring true within your ability to quickly identify and pursue a claim against your buyer. The timing to commence a potential claim is not debatable; it should be when you first become aware of a problem with a shipment. It could be either a potential truck claim or dispute with a customer, whichever the case, the situation needs to be addressed immediately and memorialized through documentation. This may be accomplished by merely documenting a telephone conversation by sending a timely email to confirm your position. It is never acceptable to put a problematic load on the back burner, but rather keeping it front and center at all times. They can start out as a small dispute and morph into a complex issue, becoming more complicated and possibly compromised if and the matter is not acted upon in real time (immediately). There’s another coined phrase that tends to be true, “the one that has the most documentation wins the dispute”. It is necessary as a Best Practice to document your telephone calls and any verbal agreements you make with your customers with a short email of what was discussed and agreed upon. Remember, if it is not documented, it never happened.

I have linked an Arrival Inspection Check List of questions to aid you with asking the right questions in determining if there has been a breach of contract. 

What if your invoice is paid short, do you immediately pursue a claim against your customer? Unfortunately, there are times where your buyer will unilaterally remit less than the original invoice amount by taking an unauthorized deduction from your invoice. 

If there is no dispute, follow these steps:

1. Immediately contact your buyer seeking the full balance due.
2. Explain to your buyer that no deduction was ever granted and that you expect immediate payment of the balance due.
3. Confirm all conversations by email. Very important!
4. Also issue a balance due invoice. 

It is also stressed to be diligent in having an internal process in place that keeps an ongoing record of buyers who consistently short pay your invoices. Asking yourself, “Are these the type of customers I want as partners?”  This internal discipline can go a long way in avoiding these types of buyers that typically cost your company more money when averaged out over the course of the relationship.

If after exhausting every attempt to settle directly with your customer regarding a dispute or a straight no-pay situation, please remember that if you wish to file a Perishable Agricultural Commodities Act (PACA) complaint, you have a 9-month statutory window from the ship date.
                                For example:      Ship date of June 20, 2018.
                                                           Today, March 20, 2019 is your last day to file a PACA complaint.

As an additional Best Practice recommendation, if you have not resolved the dispute within 60 days of date of shipment, it’s the opportune time to contact me to further assist you in reaching out to the buyer on the disputed transaction and, if warranted, pursue payment through the power and jurisdiction of PACA. If you have a claim or dispute that you are not exactly sure what your next step should be, please give me a call directly at (949) 885-2392 or by email at [email protected]. The timing is NOW as I stand ready and poised to assist our regular member companies in recouping monies that are owed.