All too often we see suppliers blindly accept whatever returns are offered by the salvaging firm, and then when the carrier objects to the low returns and/or lack of support, the supplier ends up absorbing a shortfall for what was the carrier’s breach.
Damages When Late Product Is Rejected
When product is rejected to a carrier for lateness, and particularly when the truck is rejected before it even arrives at destination (e.g., truck breaks down early in the trip without a repower), claimants will sometimes argue that “because the carrier didn’t deliver, it didn’t earn any freight,” and therefore seek to recover the full destination value of the product from the carrier. Damages, however, are not based on what the carrier may or may not have earned.
Damages are based on making the injured party whole; the breaching party (the carrier) is responsible for placing the injured party in the same position it would have been in had there been no breach, without regard to what the injured party feels the carrier earned.
The injured party’s damages, following a proper rejection, may be calculated by taking the difference between the value of the product the receiver would have received had it arrived on time, and the value of the product the receiver, in fact, received following the rejection—which would be zero, assuming the entire shipment was rejected. (Note that the “commercial unit” rule applicable to vendor-to-vendor rejections does not apply between vendors and carriers.)
The resulting figure must then be reduced by the amount of any unpaid freight which the injured party anticipated paying to the carrier under the original bargain.
If the injured party were to realize the destination value of the produce without any reduction for the cost to ship the product, it would realize an improper windfall. The injured party is entitled to be made whole, it is not entitled to a windfall.
In Conclusion
Produce vendors and carriers share a common interest in timely transportation. Vendors want their product as fresh as possible, and carriers want to free up their trucks as soon as possible.
Given this shared interest, there is certainly opportunity for vendors and carriers to work in partnership with one another, especially as the industry adjusts to the implementation of electronic logging devices. When late claims are necessary, a shared framework guiding the resolution of claims can be an important part of that partnership.
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