So let’s say you are a shipper and your product arrives at your customer’s facility and is unloaded and accepted, but your customer secures a USDA or CFIA inspection and claims that your product failed to meet good delivery upon arrival. As a shipper you need to understand your rights and remedies:
- Remember that once the product is unloaded by your customer it is considered to be accepted, and your customer by the act of unloading has given up their right to reject the product back to you, the shipper.
- Your customer must notify you in a timely manner if the product fails to meet good delivery, or it might be barred from any contract adjustment and be required to remit the full contract price.
- Your customer as the buyer, has the burden and responsibility to establish that the product fails to meet good delivery and its best evidence would be by a USDA or CFIA inspection.
If in fact your customer has unloaded the product and secured a timely inspection, and notified you in a timely fashion, your customer may have accepted the product. However, this does not mean that your customer has given up its right to recover monetary damages. It is imperative to remember evidence of a breach of contract should only be determined by either a USDA or CFIA inspection.
If your product has in fact failed to meet good delivery and a breach of contract exists, you may want to consider one of the following:
- If the product is accepted by your customer, and not rejected, you may want to consider renegotiating a price adjustment with the buyer and settling the matter immediately (in my opinion, always the best option).
- You as a shipper may want to authorize the customer to handle the product for your account on a consignment basis; which you would be entitled to a detailed account of sales.
- you may want to allow your customer to sell the product on a "price after sale" basis, with a final price to be determined after sales have completed (please note: that no detailed accounting is required as in a consignment)
- Lastly, you may want to tell your customer to sell the product for the best advantage for all parties concerned. Your customer would be entitled to reasonable damages because of the breach of contract. Damages could be calculated based on USDA Market News quotes at time of arrival when the USDA or CFIA inspection was secured. Calculating damages can be difficult and confusing and I recommend that you contact either the PACA or me before presenting your calculations to your buyer.
In conclusion, please remember that if the buyer receives your product and gets it inspected and there is a breach of contract, meaning your product fails to meet good delivery, the buyer is not obligated to release the product back to your control. The buyer is allowed to keep the produce since your customer purchased it from you originally, on either a FOB or delivered basis. If your customer decides to keep the product, proof of damages from the breach of contract is still required.
As always, should you have any questions concerning what course of action to take or calculate provable damages, please contact me at 949-885-2269 or email me TommyO@wga.com.