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March 28, 2018

Utilize clear and precise language in contract negotiations to avoid confusion later

Sometimes, what we view as a routine sales transaction, or at least appears to be a rather basic sale, can end up getting complicated when you hit an interpretation snag at contract destination.  This can especially be true when the sales contract may be more than a simple straight load involving a standard commodity sold under an FOB no-grade contract.  However, whether a straight forward sale or one involving several commodities, sizes, varieties, it is important to make sure both you and your buyer are clear on the terms of the contract, including description of the produce items and also, any possible exclusions from the sales contract.  This can be best accomplished by using precise language and, of course, always documenting and confirming the exact agreement in email, passing and by invoice.

When describing a product we, on occasion, hear industry slang terms such terms as “Choice”, “Second Grade”, “Second Label” or other grade or condition description related to unusual growing or weather related problems. Each sales contract must have full disclosure and relying on past performance or terms is no guarantee of future acceptance of the current contract you are negotiating.

These various industry slang terms are not located in the U.S. Grade Standards, and using such terms, will only invite ambiguity as to what was really agreed upon, especially when not documented with a written confirmation.  Your customer can conveniently (or honestly) forget the telephone conversation and the specifics that took place five days earlier. Relying on “she said, he said” is never a good place to find yourself when there is a difference of opinion between seller and buyer. An after shipment endeavor to renegotiate the terms of what each party thought the sales contract was, will never have a good outcome.  This is why you need to be clear with negotiations using language that articulates your expectations.  Too many times, we hear some shippers suggest, “the buyer knew what I meant”. That approach will be a sure way to lose a PACA action or be provided a rejection where you will have little recourse. This is why it is a best practice to document your conversation with the passing and invoice. Always describe the product in understandable terms, and what condition defects are to be excluded, memorialize your understanding for both parties in an email, passing and invoice.

Please contact Ken Gilliland or Matt McInerney with any questions or suggestions for a future blog