What do “FOB Acceptance Final” and “Purchase After Inspection” mean according to the PACA? Many shippers believe that selling produce under either of these terms is the ultimate assurance that the buyer will never have recourse once the produce is shipped and it arrives at contract destination. They are very clear and definitive terms indeed, but there are nuances to each of these two terms. Under FOB Acceptance Final (FOBAF) or Shipping Point Acceptance Final, the produce must still arrive in a merchantable condition at destination allowing the customer to sell or utilize the produce for its intended propose. While the produce shipped does not have to make suitable shipping condition guidelines under these FOBAF terms, the produce must have commercial value. The PACA definition is as follows:
F.o.b. acceptance final or Shipping point acceptance final means that the buyer accepts the produce at shipping point and has no right of rejection. Suitable shipping condition does not apply under this trade term. The buyer does have recourse for a material breach of contract, providing the shipment is not rejected. The buyer's remedy under this type of contract is by recovery of damages from the seller and not by rejection of the shipment.
As noted, the buyer gives up its right to reject the product at contract destination. If by chance it is deemed that the product was not the type as ordered (a material breach of contract), the buyers only remedy is by recovery of damages and not rejection.
Alternatively, in order to alleviate any buyer recourse whatsoever, a seller should consider the sales term “Purchase after inspection”. Once the buyer has had the produce inspected at shipping point or “had the opportunity to inspect the produce at shipping point”, the buyer has no right of rejection and waives all warranties as to quality or condition. The PACA definition is as follows:
Purchase after inspection means a purchase of produce after inspection or opportunity for inspection by the buyer or his agent. Under this term the buyer has no right of rejection and waives all warranties as to quality or condition, except warranties expressly made by the seller.
These two separate terms are used sparingly, usually only in extreme availability or quality/condition ssituations. When negotiating these types of contracts, you as the seller need to verbally explain to the buyer the clear terms of sale (which is essentially, it is a purchase “as is”), which the buyer needs to agree upon. Once your buyer has verbally accepted those terms, obtain the commitment in writing by email before the truck is loaded, then you need to boldly print those terms on your passing and your invoice to memorialize and properly document the agreement.
Should you have any questions concerning any of these described terms, or other contract terms, please contact me at 949-885-2269 or TommyO@wga.com.