Date: Sep 18, 2013

What’s a seller to do when your customer unloads and accepts your produce at destination, but claims a breach?  Remember these three facts:

  1. Once accepted (most commonly by the act of unloading), the buyer loses his/her right to subsequently reject.
  2. The buyer must notify you in a timely manner of a breach, or may be barred from any contract adjustment and be required to remit the contract price.
  3. The buyer has the burden and responsibility to establish a breach of contract.

Breach of Contract

It is important to understand that just because the receiver has accepted the produce and lost the right of rejection, it does not mean the receiver has lost the right to recover monetary damages. The evidence of a breach can only be determined by a USDA inspection and the seller must be provided with the certificate timely to ascertain if a breach exists.

Notice of a Breach

Once accepted, the buyer must, within a reasonable time after the discovery of a breach, notify the seller of the breach or be barred from any remedy.

The purpose of the rule is to defeat commercial bad faith, i.e., if you, as the seller, are notified of a breach within a reasonable time, you have the opportunity to ascertain the nature and extent of the breach, or by requesting an appeal inspection if you disagree with any inspection already performed.

"Reasonable time" with respect to notice of a breach is not explicitly defined under the PACA. The relative perishability of the product must be taken into consideration in determining what constitutes timely notice.  Anything in excess of 24 hours and certainly over 72 hours, in my opinion, should not be considered timely notice and you should therefore communicate that to your buyer and have a dialogue if the contract should be paid in full.

Have you experienced a breach of contract?  Let me know if I can help.  Contact me with any questions at 949-885-2269 or tommyo@wga.com.

WG Staff Contact

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