In the case of a rail car shipment, the time period for rejection extends to 24 hours. Certain circumstances can extend these time periods for rejection; in the event an inspection cannot be made within the specified time period (due to weather conditions or the inability of the inspection service to perform the inspection so quickly), the buyer has two hours from the time the inspection is made and the results known to relay the rejection to the seller.
The buyer must, however, notify the seller that the inspection will be delayed beyond the respective eight or 24-hour period.
In order to be effective, a notice of rejection must be made to the seller of the product. Notice to a true broker, a party with no direct financial interest in the load, is not sufficient to declare that the buyer is rejecting the load. While most brokers will faithfully pass on a rejection to the seller, it is best to be certain as the rejection must be clear and unmistakable to be effective. Phrases such as “I can’t use product that looks like this” are not sufficient to establish the buyer is rejecting the load. Notice of rejection should, preferably, be made in writing, directly to the seller.
When a buyer rejects a load, whether justifiably or not, ownership of the product reverts back to the seller. This means that the seller has the obligation to place the load with another receiver in a timely manner to minimize the loss.
If the seller feels the rejection has been improper or unfair, it should take steps to notify the buyer that it is not accepting the rejection. The seller can then look to the buyer for the damages resulting from an improper rejection.
When the sale is “delivered,” and the buyer has not obtained an inspection, the shipper should obtain the inspection to show the product met contract terms. In fact, PACA recommends all sellers—whose product has been rejected without inspection by the buyer—be inspected. Damages from an improper rejection would be calculated as the difference between the original contract price and the price actually received from the sale. The seller can also recover additional freight charges and other expenses incurred as a result of the improper rejection.
Buyers who reject a load with good reason are entitled to buy a replacement load unless they have entered into a “no replacement” contract with the seller. They can buy against the contract if they reject a shipment that arrives in poor enough condition to show a breach on the part of the seller.
The measure of damages, chargeable against the seller, would be the difference between the invoice value of the original shipment and the price the buyer must pay to obtain a replacement load of the same type, size, and quality of product. Buying 5×6 sized tomatoes to replace a load of 6×7 tomatoes will probably not result in a finding of damages in the buyer’s favor. The replacement purchase must be made quickly and should represent as closely as possible the original market.
PART THREE –
Mixed results
As a general rule, a load of produce must be accepted or rejected as a whole. This is the case even when more than one commercial unit is defined, as all produce is delivered under a single contract and commercial units must be accepted or rejected in their entirety.
