January 7, 2019

Condition/Quality Exclusions from Sales Contracts Must Be Disclosed, Agreed Upon At Time of Shipment, and Documented

Along with a New Year comes a crucial time of the year to be reminded of leafy greens (iceberg and romaine) exposure to possible freeze conditions in the field. Just last week, USDA Market News reported start of daily harvest curtailed by ice in the fields in the desert southwest lettuce growing regions. The low temperature readings could very well result in field-freeze damage to iceberg, romaine lettuce and other leafy greens. WG’s Trade Practices Department reminds our shipper members to be proactive and have the correct verbiage on their invoice and passing, which will provide disclosure (written and verbal) by excluding most of the traditional effects of field freeze from their sales contracts.

It’s always important when negotiating your contracts to first verbally explain to the buyer that due to freezing temperatures in the region where the leafy green crop is being harvested, all described effects of field freeze damage will be excluded from the sales contract. Once your buyer has accepted those terms excluding all effects of freeze damage, you need to print those terms on your invoice and passing to memorialize the agreement. Aside from the typical verbiage on a standard invoice with the required PACA Trust protection statement, claims reporting requirement, interest statement and disclosure that all sales are no grade contracts, the following is suggested language to be printed at the bottom of all the other preprinted language on both your invoice and passing, as in this example:

In addition, also excluded from this contract are all effects related to field freeze damage, including but not limited to epidermal peel, blistering, feathering, discoloration of the wrapper leaves and all other weather related defects.

It is important to note, that even with an exclusion, there is always an implied warranty of merchantability connected to every contract, meaning unless it’s sold on a FOB Acceptance Final “AS IS” basis, an implied warranty of merchantability is still applicable. The general rule of thumb is that no one condition/quality exclusion on a sales contract may exceed approximately 30 percent for that condition defect. Defects attributable to field freeze damage fewer than 30 percent should comply with the contract, as long as you make good arrival standards based on other condition defects not associated with field freeze.

Have any questions, comments or concerns that you would like guidance on? Please feel free to contact Western Growers Trade Practices Department’s Bryan Nickerson at [email protected], 949-885-2392, or Matt McInerney at [email protected] 949-885-2263.