Negotiating a rejection

So, it’s understood that a shipment cannot be unilaterally rejected after acceptance by, let’s say, unloading it from the truck. And the seller cannot properly insist upon the return of the product after receiving trouble notice.

But what if the seller, after receiving notice, wants to take the product back and the buyer wants to accommodate the seller’s request? Can the product be rejected to the seller by agreement?

Yes, it can. Industry trading rules are simply the default in the absence of a contrary agreement between parties. There are, in fact, countless scenarios where special agreements (which are quite routine) between the parties serve the best interests of all concerned. But knowing what the default rules are is often critical to negotiating fair and favorable terms.

Let’s say, for example, the buyer orders size 200 limes, but 150s are tendered. If, without thinking, the buyer accepts the limes by unloading before calling the seller to negotiate a price adjustment, the buyer will have forfeited negotiating leverage by forfeiting its right to unilaterally reject.

Preferably, the buyer would be able to explain to the seller, “Look, this isn’t what we ordered or what our customers expect. We’re going to need to reject if we can’t work out a price adjustment.”

But if the buyer has already accepted the limes, the buyer is left merely asking for a price adjustment and hoping the breaching seller will be reasonable.

And while it’s true that buyers typically may accept and claim damages when the seller’s breach is for condition defects, in this example, if the USDA’s Market News Service does not show that 150s were selling for less than 200s, then the buyer will be left without an objective basis for establishing damages, even though the buyer’s customers may prefer or insist upon 200s.

For better or worse, managing trouble loads is a fact of life in the produce industry. Effectively working with trading partners to handle this unwelcome task can save time, money, and business relationships.

Whether the buyer decides to accept, reject, or attempt to negotiate a special agreement with the seller, a fundamental understanding of acceptance and rejection principles can help.

Doug Nelson is Vice President of Trading Assistance for Blue Book Services Inc.