Liability

Conclusion and effect

Reparation Report

The following summary of a precedent-setting reparation decision issued under the Perishable Agricultural Commodities Act (PACA) is intended to help companies understand their rights and responsibilities under PACA. The names of the companies involved have been changed, but the key facts and core reasoning PACA used to reach its decision are presented.

TOPIC: LIABILITY

Seller, Inc.
(Delano, California)

v.

Buyer, Inc.
(Forest Park, Georgia)

49 A.D. 1207, decided October 16, 1990

Seller, Inc. (Seller) shipped one truckload of 2,056 lugs of Chilean Flame Seedless grapes to Buyer, Inc. (Buyer) for a total contract price of $18,504.00. Buyer accepted the grapes in compliance with the contract of sale. Two weeks after the Buyer accepted the product, two cyanide-tainted grapes were discovered in a shipment of Chilean fruit. A “Stop Sale” was issued by the federal government in response to the cyanide-tainted grapes. The Buyer paid the Seller $10,514.00, leaving a balance due of $7,990.00.

The parties disagreed as to who should be responsible for the grapes that could no longer be sold due to a “Stop Sale” directive issued by the federal government.

The Buyer took the position that the Seller should bear the loss since the grapes became unmerchantable before it completed its resale of the product. Conversely, the Seller contended that since the Buyer received and accepted the produce, the Buyer was liable for the full contract price.

Furthermore, the Seller argued that because the “Stop Sale” directive on Chilean fruit was issued two weeks after the Buyer accepted the grapes, the Buyer had sufficient time to sell all 2,056 lugs of grapes following normal business practices.

It was concluded by PACA that the Buyer had not provided evidence to support an allegation of a breach by the Seller. As a result of the unfortunate circumstances over which Seller had no control, the grapes became unmerchantable.

The Buyer was ordered to pay the Seller, as reparation, $7,990.00.

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