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April 25, 2018

Exclusions or special amendments to a sales contract must be disclosed and agreed upon between the parties

Contract negotiations can many times become a daily routine that can lend to complacency. As a reminder, unless you use precise and clear language on any special terms that you want to be a fundamental requirement at time of contract negotiations, you are vulnerable to those terms having not been agreed upon.  Therefore, selling and shipping fresh produce commodities with a standard sales contract includes an implied warranty, as required under an FOB contract.  This warranty means that you are obligated to load produce in suitable shipping condition, it must be the kind and quality of the particular fruit or vegetable that, under normal transportation conditions will arrive at contract destination meeting the good delivery standards as specified by the PACA.

If you deviate from a standard sale different from an FOB, no grade contract, you need to verbalize and document that exclusion, otherwise you may find yourself dealing with a customer who may be claiming a breach of contract.  Disclaimers of implied warranties need to be in writing and well documented.  This includes any exceptions, whether it be due to some quality issue, or condition situation attributable to weather or other growing conditions, where you would trigger a specific exclusion.  There can also be an expressed warranty, where your buyer may have specified certain expectations at contract destination that may be different from those of good delivery standards.  Whenever there is a deviation from the standard FOB or Delivered Sale calling for additional or limited contract terms you need to have full disclosure, meaning not only verbally agreed to, but also reduced to writing in advance, or simultaneously at time of shipping.  This notification can be first documented on the usual passing document that all shippers are encouraged to utilize. Although there may be some industry slang terms often used, we find that on some occasions the terms are technically not defined by the USDA, and therefore, need to be clear, precise and in writing with your customer to avoid any misunderstanding.

In addition to have the special terms and/or the exclusions on your passing, those special terms MUST be shown on your invoice.  Remember, the invoice is the official document that memorializes the agreement between you as the seller, and your buyer. The simple rule to go by is, if it is not documented in writing, it does not exist.

If you are uncertain about what is, or is not excluded from your contract in order to comply with requirements at contract destination, please email or contact Ken Gilliland or Matt McInerney for a further review and assistance.  Finally, the Trade Practice Department of Western Growers is available by phone or email starting at 6:30 a.m. Monday-Friday.  Please let us know how we can serve you, your colleagues and company.