This week I am pleased to have a guest post from Mr. Jason Read from the law firm of Rynn & Janowsky. Jason is a Partner of this law firm who specializes in agriculture, PACA and employment law. Jason contacted me about a recent PACA decision that his firm handled resulting in a USDA Decision and Award which highlights the importance of including specific language on invoices and even purchase orders or written sales confirmations. I asked him to write a post about it, so you can better understand the need and benefit to document contract terms and sales contract expectations.
I'll be writing a follow-up blog next time and would be eager to include your comments as well. Contact me at 949.885.2269, or email me at email@example.com.
The Importance of Including Restrictive Claim Terms on Invoices or Confirmations of Sale.
Savvy shippers will include terms on invoices or confirmations of sale restricting how and when claims will be accepted. As confirmed by a recent USDA Decision & Award, utilizing such language can make the difference between winning or losing a claim.
In that case, a load of broccoli arrived at the contract destination after normal transportation. A USDA inspection concluded that the broccoli arrived with 37% defects, of which 35% was due to discolored bud clusters and 2% decay. Based on the result of the inspection, the buyer notified the seller that the broccoli did not make good arrival and offered to pay only a fraction of the original invoice price. The seller stood ground and refused to grant an adjustment because the confirmation of sale contained restrictive claim terms governing how and when a claim would be accepted. According to the seller, the buyer did not comply with those terms and therefore was not entitled to assert a claim. Being unable to agree on an adjusted price, the seller filed a USDA complaint seeking full payment of the invoice price.
In the decision, the USDA acknowledged that the defects disclosed by the inspection were clearly "extensive." Standing alone, the inspection would certainly support the buyer's conclusion that the broccoli failed to make good arrival and, therefore, the shipper breached the warranty of suitable shipping condition. However, the shipper's confirmation of sale issued to the buyer contained the following terms restricting how and when claims would be accepted: "No claim will be considered unless (1) reported by the buyer within 8 hours of delivery; (2) USDA inspection taken within 24 hours of delivery; and (3) buyer presents evidence of proper transit temperatures." In addition, the confirmation of sale contained terms excluding and disallowing discoloration defects from scored defects.
Because the buyer did not object to any of these terms, the USDA properly concluded that the each of these terms were incorporated into and became part of the contract of sale. Thus, in order to establish breach of the warranty of suitable shipping condition, the buyer not only had to prove that the broccoli did not make good arrival, but also had to prove that Respondent complied with each of the above three conditions to asserting a claim. The buyer was unable to do so and on these grounds alone, the USDA concluded that the buyer was unable to assert a breach of contract. Moreover, the USDA noted that even if the buyer had complied with these terms, the USDA inspection certificate could not be used to establish a breach of contract because 35% of the defects disclosed by the inspection were for discoloration, which was expressly excluded from scored defects under the terms set forth on the confirmation of sale. That left only 2% decay as a scorable defect, which did not establish breach of contract.
By including restrictive claim terms on its confirmation of sale, this shipper prevailed on what would have otherwise been a losing case.
R. Jason Read is a partner with the law firm of Rynn & Janowsky, LLP, a Newport Beach, CA based law firm specializing in agriculture, PACA and employment law. Jason is also an arbitrator with the DRC and California Dept. of Agriculture. More information about Jason and Rynn & Janowsky, LLP can be found at www.rjlaw.com