In my 35 plus years of advising Western Growers’ members on their rights and responsibilities with sales contracts, I often hear the term “broker” used loosely in conjunction with the negotiating and follow through on sales contracts. This blog addresses the duties of a produce broker as defined under PACA. For different types of brokers, please see this LINK
Except in the case of a collect and remit broker, here is the standard definition of a produce broker:
A produce broker facilitates negotiations between a willing seller and a willing buyer, which leads to a valid and binding contract. A broker does not normally act as a general agent for either the seller or buyer. Unless otherwise agreed, the broker is entitled to payment of a brokerage fee from the party who engaged his or her services. Finally, a produce broker does not guarantee the performance of the contract (i.e. the load will meet good delivery), only that the terms and conditions as negotiated with the parties are correct and documented.
What are the responsibilities of a produce broker?
- Inform the parties concerning all proposed terms and conditions of the proposed contract
- Prepare in writing and deliver promptly to all parties a properly executed confirmation or memorandum of sale, which includes the true and correct essential details of the agreement, including identifying the party who engaged the broker
- The broker is required to retain a copy of the confirmation or memoranda as part of its accounts and records
- The broker is to take into consideration the time of delivery, and all other circumstances of the transaction, in selecting the proper method for transmitting the written confirmation or memorandum of sale to the parties
What if a broker fails to properly perform his or her duties?
- The broker is violation of the Act (PACA) and may be subject to penalties and may be held liable for damages if:
- He or she fails to prepare the documents and retain copies in their files, and fails to deliver copies to all parties involved in the transaction
- If the confirmation or memorandum of sale contains false or misleading statements
- If his or her records do not support that a binding contract was negotiated with proper notice to the parties, and may therefore be held liable for any loss or damage resulting from such negligence
What does this mean to the shipper?
- This means that once the broker has brought the buyer and seller together and negotiated a valid and binding contract the broker has completed his or her duties and is entitled to an agreed upon brokerage fee.
- After the broker has negotiated a valid and binding contract the broker must issue a brokers confirmation of sale to both the buyer and seller outlining all the details to the contract.
- If the broker fails to perform these duties, the buyer or seller may pursue a claim against the broker for claimed damages due to a failure to perform.
Should you need any guidance concerning broker conformations of sale or need additional information, please contact me directly at 949-885-2269 or TommyO@wga.com.