The following summaries of precedent-setting reparation decisions issued under the Perishable Agricultural Commodities Act (PACA) are intended to help companies understand their rights and responsibilities under PACA. The key facts and core reasoning used to decide cases are presented.
TOPIC: COVER PURCHASES
Associated Produce Distributors
Kurt Van Engel
Commission Company, Inc.
45 A.D. 383, decided February 10, 1986
Associated Produce Distributors (Associated) agreed to sell two truckloads of broccoli to Kurt Van Engel Commission Company, Inc. (Van Engel) at the same fixed price. After shipping the first load, Associated advised Van Engel it would probably be unable to ship the second load, and was allegedly advised that a cover purchase would be made if the second load was not shipped.
Associated then shipped a partial second load, and Van Engel proceeded to make a cover purchase without any further notice to Associated of its intent to do so. PACA explained that whether or not Van Engel notified Associated of its intent to make a cover purchase was immaterial, explaining, “[T]here is no such duty where, as here, there is a failure to ship produce which a shipper is contractually bound to ship… [Associated] should have known that [Van Engel] had a legal right to make cover purchases as a consequence of [Associated’s] failure.”
DNE Sales, Inc.
(Fort Pierce, FL)
50 A.D. 1037, decided June 7, 1991
DNE Sales, Inc. (DNE) contracted to supply Richfood, Inc. (Richfood) a specific quantity of peaches over a period of time. But about a week prior to the time when the shipments were to begin, DNE informed Richfood it would not be able to supply all the product called for in the contract. Richfood advised DNE that it might need to make a cover purchase if DNE could not provide all the peaches called for in the agreement. After shipment had begun under contract, Richfood made cover purchases without informing DNE until after the purchases were made.
PACA held that Richfood was not required to give notice of intent to cover unless it had taken some positive action (beyond simply making a cover purchase), which, in good faith, requires such notification.