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November 28, 2018

Romaine outbreak and understanding commercial contract implications under PACA

With the Advisory from U.S. Food and Drug Administration and Center for Disease Control announcements on November 20th and November 26th, the Trade Practices Department of Western Growers has fielded many calls from shippers on sales contract implications, rights, responsibilities and payment of fulfilled shipments. It is clear that this outbreak has triggered numerous questions regarding the legal ramifications between seller and buyer.

There will be several fundamental areas which need review for assessing responsibility under the terms and conditions of the sales contract for the allocation of the risk of loss. If the contract was FOB,  responsibility will be determined based at what point and time the FDA Advisory was issued.  Was it  prior to shipment, in-transit, or subsequent to arrival and acceptance at contract destination?  If the contract was delivered,  was the FDA Advisory in-transit or subsequent to arrival and acceptance at destination?  These aforementioned examples, as well as any other agreements such as what may be included in a vendor agreement,  will dictate your decision in making an informed business decision.  

The link, here, from the USDA, PACA Division provides general guidance that can provide a better understanding based on certain scenarios dependent on if the contract is FOB, Delivered, or a long term sell/buy arrangement.  The attached does not provide every imaginable situation,  so outcomes will depend on your individual set of facts.  This is for information purposes only and is intended to assist you in being informed as you engage your customers.

Please feel free to contact WG’s Trade Practices Department’s Bryan Nickerson at [email protected], 949-885-2392, or Matt McInerney at [email protected],949-885-2263.