Dear Ms. PACA Law:
I have a customer who ordered bell peppers for pick up on Monday, February 4 in Nogales for delivery to Portland. Since we were consolidating product for the customer, the product was in our warehouse for pick up on Monday. The customer’s truck did not pick up until Tuesday, February 5, and did not deliver in Portland until the evening of Friday, February 8. On the evening of Saturday February 9, I received an email that the product arrived with problems. We are acting as a broker on this product.
Normal transit from Nogales to Portland is 3 days with approximately 1510 miles. So the product arrived in a timely manner, and an in-house inspection was made on Saturday morning. We were not notified of a potential problem until p.m. Saturday evening.
The customer has requested a USDA inspection on the product. As we consolidated this product on Monday for pick up, we are out of time for timely notification to our shipper.
My question to you is, is the Portland customer also outside of timely notification of trouble to us or are we on the hook for any loss if the product is out of grade on the USDA inspection?
-Not Having it in Nogales
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Dear Nogales:
In short, it appears that your customer will have a difficult time proving a breach of contract by you, and owes you the full purchase price of the peppers. To begin, let’s define what was agreed to by you and your customer. I assume that you have written communications that memorialize the agreement that the peppers were to be loaded on Monday, February 4, such as emails, a purchase order, an invoice, etc. Since this is an FOB sale, as the seller, you are obligated to have peppers that will make good delivery in Portland ready for loading on February 4.
Having established the terms of the agreement between you and your customer, we then need to look at whether or not the customer accepted or rejected the peppers. For shipments transported by truck, the customer accepts the load by unloading the peppers from the truck. The PACA regulations also state that the peppers are when the customer fails to notify the seller of rejection “within a reasonable time”. For shipments by truck, “a reasonable time” is defined as within eight hours of arrival. Your letter states that the peppers were delivered on the evening of February 8, and you were not notified until 5:00 pm the next day. Clearly more than eight hours elapsed, and the peppers were accepted by your customer. Once the customer accepts the peppers, it is liable for the full purchase price, less any damages caused by the seller’s breach of contract. From the information that you have provided, I think that your customer will have a difficult time proving any breach of contract by the seller.
The customer is claiming that the product arrived in poor condition, and appears to be claiming that the peppers did not satisfy the warranty of suitable shipping condition. “Suitable shipping condition” means that at time of shipment, the peppers are in a condition which, if handled under normal transportation service and conditions, will arrive in Portland without abnormal deterioration. The flaw in this argument lies in the fact that the customer’s truck was a day late. As a result, the circumstances surrounding transportation were not normal. Abnormal transportation will void the warranty of suitable shipping condition, unless the nature and extent of the damage at the time of arrival is such that the commodity would have been abnormally deteriorated even if the transportation was normal. Your letter does not get into the specifics of the customer’s complaints, so it’s difficult to determine whether this exception to the warranty would apply.
Second, your customer will have a very difficult time proving the condition of the peppers when they arrived on Friday, February 8. Your letter was sent to me on February 11, and indicates that as of that date, a USDA inspection had not yet taken place. By waiting to obtain an inspection, the buyer will have a difficult time proving that a breach of contract did take place. An inspection conducted several days after arrival will provide little evidence of the condition of the product at the time it arrived.
Obviously, I’ve arrived at this conclusion without having any details about you’re your letter describes as a “potential” problem described in the February 9 email, or any details regarding how bad the peppers were at the time of arrival. That having been said, I think you have a strong argument to make that no breach occurred and any problems with the pepper at the time of arrival is the exclusive result of the delay in pickup, which is the responsibility of the customer.