Can a customer buy against a shipper’s account if the shipper fails to deliver or supply a load that has been negotiated? The simple answer is yes, providing there is a valid and binding contract between the buyer and the seller, which means P.O. numbers or confirmation numbers of some kind stating a contract exactly exist, and have been exchanged. If a shipper fails to ship the negotiated product to the buyer, the buyer, due to this breach of contract, would be allowed to buy against or replace the product that it originally negotiated with the seller. Under case law with the PACA, a buyer, replacing product, must replace the product with like kind. In other words, if the commodity is broccoli crowns from California, then the replacement broccoli crowns need to be from California as well.
If your buyer purchases replacement product from the wholesale market, you would be responsible for the difference between the wholesale market price and the delivered cost to contract destination.
In a reverse situation, should your customer, the buyer, have a confirmed order with you, and cancels the order, you as the shipper may claim damages by placing the load at a wholesale market to be sold for the account of whom it may concern; in this situation, the buyer would be liable to you, the shipper, for the difference between the net proceeds from the handling of the product on a consignment basis verses the original FOB invoice value.
If either the buyer or the seller is going to pursue this type of claim, the buyer or seller should fully document every step from putting the buyer or seller “on notice” to a full detailed accounting.
These are drastic steps for either a buyer or a seller to take, especially when one is trying to maintain good supplier customer relations; however, should you ever get yourself into a situation where these possibilities may occur, please don’t hesitate to pick up the phone and give me a call. My direct line is (949) 885-2269.