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May 23, 2018

Mitigating Damages on a Wrongful Rejection

In the last blog (What is Considered Timely Notice for an Effective Rejection?) as indicated by the title, we discussed what constitutes a proper, timely and effective rejection by your customer.  Unfortunately, your customer may not always follow the PACA guidelines when it comes to rejecting a shipment.

So while you, as the shipper, have a positive duty to take back rejected goods if, as explained in the previous blog, an effective rejection is made, there are times, no doubt, that a receiver will reject a shipment even though he or she may not be able to establish that a breach of contract has occurred.

In this scenario, without merit, your customer (the buyer) is rejecting a load of produce – what should you do?  You, as the shipper, have an obligation to minimize the overall loss by arranging to conditionally move the shipment, and have it promptly sold for the account of whom it may concern.  Since there is a dispute about contract compliance at destination, you need to immediately place your buyer on notice that the rejection is unwarranted, and that by moving the shipment you are not accepting the buyer’s ineffective rejection.  Further, advise your buyer that the shipment is being moved and sold for your buyer’s account in order to mitigate damages, with all losses from the original sale becoming the responsibility of that buyer.  It is imperative that you act promptly on protecting the load to mitigate damages.  There will be ample time after the produce is sold for you to manage (argue) the claim for this being an improper rejection.  At the time of the disputed rejection you should always strive to take the emotion from the immediate situation and do what is right in a stressful situation.

We have commented in the past about PACA precedent decisions and there are many historical decisions that place a responsibility on the seller to mitigate damages.  So, while becoming engaged in the disposition may seem unfair, it is part of the obligation so you do not contribute to the overall loss by simply turning the rejected load over to a trucker, which is never a good idea.  Always control the situation to finalization.