The case law applicable to common carriage, on its face, is not as permissive of rejections as the UCC. The case law suggests that, depending on the facts of the particular shipment, there may be a duty to receive (or not reject) goods that have been damaged in transit unless the goods are “practically worthless.”
This purported duty, however, clashes with the perfect tender rule where delivered sales are concerned and hypothetically creates a situation where a receiver could reject a shipment for a carrier’s failure to use reasonable dispatch if the supplier hired the carrier (as when produce is purchased on a delivered basis), but not if the receiver hired the carrier (as when produce is purchased on an FOB basis).
From the supplier’s perspective, this creates, on its face, a situation where a receiver may reject a shipment it purchased on a delivered basis to the supplier due to a transportation problem; but the supplier does not necessarily have the right to follow suit and reject this same shipment to the carrier it hired.
A closer look at the “practically worthless” rule, however, reveals that this rule is not all it appears to be.
First, this rule applies to common carriers, not contract carriers. The question of whether a carrier acted as a common carrier or a contract carrier has been the subject of much litigation over the years and could be argued either way with respect to carriers of fresh produce.
But given the roughly equal bargaining power between carriers and the parties that hire them in the fresh produce industry (a far cry from the historical context in which the laws applicable to common carriage arose to protect the public from one-sided terms imposed by railroads in the early 1900s), we have generally been inclined to view carriers that haul fresh produce as contract carriers. (Note: suggestions that regulations have ended the statutory distinction between contract and common carriage disregard the fact that fresh produce hauls are, with few exceptions, exempt from federal economic regulation per 49 USC Sec. 13506 (a)(6).)
Second, even if the carrier were to establish it was acting as a common carrier and that the goods were not practically worthless, this would not preclude the receiver from rejecting for lateness and recovering damages resulting from the carrier’s late delivery.
At most, the practically worthless rule would provide the carrier with a basis for arguing that any damages claimed against it should be reduced, provided it can show the vendor that rejected the product to the carrier (whether the receiver or an upstream supplier) could have salvaged the product for more than the carrier (using reasonable and good faith efforts) was able to realize.
