An Agreement of “Full Protection” Is Rendered Void When The Buyer Fails To Keep Records To Substantiate Its Resales and Losses

Conclusion and effect

Reparation Report

The following summaries of precedent-setting reparation decisions issued under the U.S. Department of Agricultural (USDA) 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.

TOPICS: AN AGREEMENT OF “FULL PROTECTION” IS RENDERED VOID WHEN THE BUYER FAILS TO KEEP RECORDS TO SUBSTANTIATE ITS RESALES AND LOSSES

Albert Fisher Sales/Pompano, Inc.
(Salinas, CA)
v.
T.B. Fruit & Vegetable, Inc.
(Pompano Beach, FL)

54 A.D. 1448, decided November 16, 1995

Pompano, Inc. (Pompano) shipped seven truckloads of mixed produce to T.B. Fruit & Vegetable, Inc. (T.B. Fruit) for a total contract price of $41,810.50. Upon arrival of each of the first six shipments, T.B. Fruit complained to Pompano about defects with the product. In response, Pompano agreed to provide T.B. Fruit with “full protection” on each of the first six transactions. T.B. Fruit remitted a payment to Pompano of just $3,052.50, which was $38,758.00 less than contemplated under the original terms.

The parties disputed whether $38,758.00 remained past due and owing to Pompano for the seven truckloads of mixed produce. T.B. Fruit argued that the contracts for the first six shipments were modified by Pompano’s grant of “full protection” due to the presence of defects. T.B. Fruit acknowledged acceptance of the produce, but maintained that the balance owed was less than the full contract price.

T.B. Fruit, however, failed to produce any records (e.g., inspection certificates or detailed accounts of sale) which would substantiate its alleged losses from the contract price in the first six shipments. PACA has held that it is incumbent upon a receiver that has such an agreement (“full protection”) to keep records to substantiate its resales and losses. Failure to keep such records voids the protection agreement. The voiding of the protection agreement left T.B. Fruit liable for the contract price on the first six shipments. Moreover, T.B. Fruit offered no explanation for its refusal to pay for the seventh truckload of produce, which did not receive a grant of “full protection.”

PACA concluded that T.B. Fruit had not established any basis for taking a deduction from Pompano’s invoices, leaving T.B. Fruit owing Pompano the full contract price for all seven loads at $41,810.50. T.B. Fruit previously remitted $3,052.50 and therefore owed Pompano $38,758.00.

These summaries are not issued by the USDA, nor the PACA Branch, and should not be mistaken for an official government statement or release.


Compiled by Cliff Sieloff, Claims Analyst, Blue Book Services