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Produce Pointers

Warranty is tied to the whole lot, regardless of two bad pallets

The Problem: Order filled out with two suspect pallets of squash.

The Key Point: The warranty of suitable shipping condition is based on the percentage of defects found in the lot as a whole.

The Solution: Recognize that this shipment complied with the sales agreement and attempt to reach a better understanding with your shipper for future loads.

QUESTION:  We are a wholesaler based in Texas.  We recently purchased a straight load of Mexican yellow squash from an importer-shipper based in Arizona. Out of the twenty  pallets shipped (1,600 cases) two of the pallets (180 cases) had issues.  When we notified the salesperson, she told us she had sold us an entire load and that the entire load needed to be inspected.  So, we did inspect the entire load, but we asked the inspector to note the two pallets separately—instead of inspecting 1,600 cases, he inspected 1,440 cases and 160 cases, for a total of 1,600 cases.

As we anticipated, the results came out okay on the eighteen pallets, and very poor on the two pallets of 160 cases.  When we sent the inspection to the salesperson, she responded that if the percentages are averaged across the entire load, then it makes good arrival.  I am not sure how this works because if the inspector would have sampled out of the two problem pallets, the entire load would have failed, and all I am claiming is that two pallets failed to make good arrival. Can you please clarify?

ANSWER:  We can understand your frustration if, in fact, your shipper knowingly filled out your order with a couple of suspect pallets.  But technically speaking, the shipper only promises that the lot as a whole will meet good arrival averages, not that each pallet will be within these averages.  Where the warranty of suitable shipping condition is concerned, it makes no difference whether the distressed cases are found among two pallets or whether they are scattered throughout the lot.

Here because 1,440 cases were affected by 8% average (i.e., not serious) defects and 160 cartons were affected by 22% average defects, we determine total scorable defects by multiplying 1,440 by 8 (the percentage of defects affecting these 1,440 cases) to arrive at 11,520; then we multiply 160 by 22 (the percentage of defects affecting the remaining cases) to arrive at 3,520; dividing the resulting total of 15,040 by 1,600 total cases we arrive at 9.4% scorable defects, which would not exceed good arrival guidelines for average defects.

Going forward, we suppose you could attempt to specify in the sales agreement with this shipper that “in addition to meeting good arrival guidelines, no single pallet shall contain more than 18% condition defects,” but there are problems with this approach.  First, this is asking the shipper to agree to a stricter standard than the default “good arrival” standard, and second, even if your shipper was willing to go along with such a provision in the agreement, actually proving a breach would be complicated by the fact that distressed cases from anywhere in the lot could easily be restacked and grouped onto one or two pallets to create the appearance of a breach of contract.

Practically speaking, we would typically expect your shipper to work this out with you informally with a slight price adjustment on these two pallets.  But if not, and if this continues to be a problem with this shipper, your recourse is to source your product elsewhere.

Regarding your question on sampling, the inspector will sample from different parts of the load (on an unrestricted inspection anyway).  If you feel the samples taken do not reflect the overall condition of the lot, you can request an appeal inspection which significantly increases the number of samples taken.


Your questions? Yes, send them in.  Legal answers? No, industry knowledgeable answers. If you have questions or would like further information, email


Doug Nelson is vice president of the Special Services department at Blue Book Services. Nelson previously worked as an investigator for the U.S. Department of Agriculture and as an attorney specializing in commercial litigation.