Date: Oct 03, 2013

In previous blogs, we extensively discussed rejections and breach of contract. Today, I do not focus on the merits of the buyers’ right of rejection, but rather focus on the practical reality of how to protect your original contract. This includes moving the produce without jeopardizing your rights to any potential claim against the buyer and maximizing the salvage value of the load while minimizing-out of-pocket losses.

While it is fundamentally important that the buyer obtain a USDA inspection to support its contention that the product does not meet the negotiated contract terms of sale, in some isolated cases, the buyer may still choose to refuse the load even in the face of overwhelming evidence to the contrary. The buyer has a reasonable time after receipt of the product to reject it and this is defined by the PACA. The PACA defines reasonable time of rejection by truck as “… not to exceed eight hours after the buyer is given notice of arrival and the product is made accessible for inspection.” By rail car, a reasonable time is “…not to exceed 24 hours after notice of arrival, and the car has been placed in a location where the product is made accessible for inspection.” It should be noted that this reasonable time covers regular business hours. Therefore if the product arrives on a non-working day, those hours are not counted into the reasonable time. Once a rejection is made, it has to be determined whether or not it was a rightful or wrongful rejection. If your customer rejects the product even though it conforms to the contract terms of sale, this would be considered a wrongful rejection.

Whether or not it was a rightful or wrongful rejection, you, as a shipper, should immediately find a home for the product and have it sold as quickly and as effectively as possible in order to minimize damages. Simultaneous with moving the load, immediately put the buyer on notice that you are not accepting the rejection, and that you will be selling the product in order to minimize losses and will hold the buyer liable for any and all losses incurred due to the wrongful rejection. Many times I hear from shippers who fear that exercising this practical step will jeopardize their standing to get full payment at a later date. In the heat of the moment, do not fall victim to becoming paralyzed to do what is in the best interest of your company. Take ownership of the problem and control of the product to manage the money from the salvage. Controlling disposition makes sense to maximize the return to you as the shipper and reducing the claimed damages. Again, you can do this without jeopardizing your right of losses against the buyer.

In summary, if you feel that your buyer wrongfully rejected the product, you should put the buyer on “notice” that:

  1. You are not accepting his unwarranted rejection and that you are moving the product to be sold for the account of whom it may concern;
  2. You will be looking to the buyer for any and all losses if it is ultimately determined to be a wrongful rejection.

Remember to document your actions in written form. As always when this type of situation arises please feel free to contact me to discuss your rights and responsibilities.


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