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4 

SAMPLE PACA REPARATION CASES

BY 

SUBJECT MATTER 
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The following list of cases is provided by the PACA Division as a public service. Neither the

PACA Division nor the USDA makes any representation regarding the completeness of the list 

of selected cases. It is likely that there are additional cases that should be referenced and/or

researched for any particular dispute or issue of concern. While the PACA Division will 

attempt to keep this list of sample reparation cases current, the PACA Division does not

guarantee on any given day that the list is complete or up to date with recent judicial decisions.

This case listing has not been reviewed by the Office of General Counsel.

The Agriculture Decisions and other citations listed are all publicly accessible through the

following listed sources:

(1) Office of Administrative Law Judges, Judicial Decisions:

https://oalj.oha.usda.gov/agriculture-decisions-publication

(2) U.S. Government Publishing Office (“GPO”):

https://www.gpo.gov/

(3) Federal Depository Library:

http://catalog.gpo.gov/fdlpdir/FDLPdir.jsp

(4) The National Agricultural Law Center, University of Arkansas School of Law:

https://nationalaglawcenter.org

(5) www.lexisnexis.com (subscription required)

(6) www.westlaw.com (subscription required)

(7) Cornell University Law School (online database):

www.law.cornell.edu

(8) Local college and university law libraries (ex. The Ross-Blakley Law Library at

the Sandra Day O’Connor College of Law at Arizona State University has

Agriculture Decisions)
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Table of Contents

1. ABANDONMENT............................................................................................................... 14

2. ACCEPTANCE OF PRODUCE........................................................................................ 14

a. DIVERSION..................................................................................................................... 14

b. FAILURE TO REJECT IN A REASONABLE TIME................................................. 14

c. UNLOADING OR PARTIAL UNLOADING............................................................... 15

d. PLACING ON CONSIGNMENT................................................................................... 15

e. PRECLUDES SUBSEQUENT REJECTION ............................................................... 15

f. RESALE............................................................................................................................ 16

g. REVOCATION................................................................................................................ 16

h. UNLOADING INTO WAREHOUSE OR COLD STORAGE.................................... 16

i. WHEN UNLOADING IS NOT ACCEPTANCE.......................................................... 16

3. ACCEPTANCE OF REJECTION..................................................................................... 16

4. ACCORD AND SATISFACTION..................................................................................... 17

a. BANK WAS AGENT FOR ACCEPTANCE OF CHECK .......................................... 17

b. CONDITIONAL TENDER NECESSARY.................................................................... 18

c. GOOD FAITH DISPUTE NECESSARY ...................................................................... 18

d. GOOD FAITH TENDER NECESSARY....................................................................... 18

e. MUST BE PLEADED...................................................................................................... 19

f. MUST BE TENDERED AS PAYMENT IN FULL...................................................... 19

g. RETENTION OF CHECK ............................................................................................. 19

h. RETURN OF CHECK..................................................................................................... 19

i. TENDER BY INSTRUMENT NECESSARY................................................................20

j. UNLIQUIDATED AMOUNT......................................................................................... 20

k. VERBAL COUNTERMAND OF EFFECTIVE........................................................... 20

l. VOIDING OF................................................................................................................... 20

m. WHERE PAYMENT DID NOT SPECIFY ACCOUNT FOR APPLICATION........ 20

5. ACCOUNTS STATED........................................................................................................ 21

6. ACCOUNTS OF SALE....................................................................................................... 21

a. ASSIGNMENT OF LOT NUMBERS............................................................................ 21

b. FAILURE TO SHOW DATES OF RESALE................................................................ 21

c. MUST BE MORE THAN SUMMARY STATEMENT ............................................... 21

7. ACT OF GOD ...................................................................................................................... 22

8. ADMINISTRATIVE PROCEDURE ACT ....................................................................... 22

9. AGENCY.............................................................................................................................. 22

a. APPARENT AUTHORITY ............................................................................................ 22

b. BAILMENT...................................................................................................................... 23

c. DISCLOSURE OF PRINCIPAL.................................................................................... 24

d. EMERGENCY POWER OF AGENT AFTER TERMINATION OF 

AUTHORITY................................................................................................................... 25

e. EMPLOYEE OR AGENT OF PRINCIPAL................................................................. 25

f. FIDUCIARY DUTIES..................................................................................................... 26

g. GROWER’S AGENT...................................................................................................... 27

h. LACK OF AUTHORITY................................................................................................ 28

i. LIABILITY OF AGENT OR OTHER PARTY TO PRINCIPAL.............................. 28

j. PAYMENT - PROPER PARTY FOR ........................................................................... 28
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k. PRIOR COURSE OF DEALING................................................................................... 29

l. PROOF OF CONTRACT ............................................................................................... 29

m. PROOF OF EQUITABLE RELIEF .............................................................................. 29

n. RATIFICATION.............................................................................................................. 29

10. ALLOCATION OF PAYMENTS...................................................................................... 30

11. ARBITRATION................................................................................................................... 31

12. ASSIGNMENT FOR BENEFIT OF CREDITORS NOT A DEFENSE ........................ 31

13. BOND REQUIREMENT FOR FOREIGN RESIDENTS ............................................... 32

14. BREACH OF CONTRACT................................................................................................ 32

a. ANTICIPATORY REPUDIATION............................................................................... 32

b. BY REASON OF BRAND............................................................................................... 33

c. BY REASON OF GOVERNMENT STOP SALE ORDER ......................................... 33

d. MATERIAL BREACH ................................................................................................... 33

e. MISBRANDING .............................................................................................................. 34

f. OPEN SALE – BUYER’S BREACH BY SALE TO THIRD PARTY........................ 34

g. PART PERFORMANCE................................................................................................ 34

h. TIMELY NOTICE REQUIRED.................................................................................... 35

15. BROKERS............................................................................................................................ 35

a. ACCOMMODATION BROKERS................................................................................. 35

b. ACTS INCONSISTENT WITH AGENCY RELATIONSHIP ................................... 36

c. APPARENT AUTHORITY ............................................................................................ 36

d. AUTHORITY................................................................................................................... 36

e. BREACH OF DUTY........................................................................................................ 36

f. COMMISSION ................................................................................................................ 38

g. CONFIRMATION OF SALE......................................................................................... 38

h. DUTIES............................................................................................................................. 38

i. STATEMENTS OF.......................................................................................................... 39

16. BURDEN OF PROOF......................................................................................................... 39

a. ACCEPTANCE................................................................................................................ 39

b. AFFIRMATIVE DEFENSE ........................................................................................... 39

c. AGENCY .......................................................................................................................... 40

d. BREACH OF CONTRACT............................................................................................ 40

e. COMMERCIAL VALUE ............................................................................................... 40

f. CONDITION OF REJECTED GOODS........................................................................ 40

g. CONFLICTING ALLEGATIONS AS TO CONTRACT TERMS............................. 41

h. CONTRACT..................................................................................................................... 41

i. CONTRACT MODIFICATION .................................................................................... 41

j. DAMAGES ....................................................................................................................... 42

k. DELIVERY ...................................................................................................................... 42

l. FOB – NORMAL TRANSPORTATION ...................................................................... 42

m. IDENTITY OF GOODS SHIPPED................................................................................ 43

n. JURISDICTION .............................................................................................................. 43

o. NOTICE OF BREACH ................................................................................................... 43

p. NOTICE OF REJECTION............................................................................................. 43

q. PROPONENT OF CLAIM ............................................................................................. 43

r. RECEIPT OF GOODS.................................................................................................... 44
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s. REJECTED GOODS....................................................................................................... 45

17. CAUSE OF ACTION .......................................................................................................... 45

a. ACCOUNTING................................................................................................................ 46

b. AS TO FREIGHT CHARGES ....................................................................................... 46

c. COUNTERCLAIM AS TO FOREIGN COMPLAINANT.......................................... 46

d. COUNTERCLAIM BASED ON DIFFERENT CAUSE OF ACTION....................... 46

e. FAILURE OF AGENT TO FILE TRUST NOTICE.................................................... 47

f. RUNNING ACCOUNT ................................................................................................... 47

18. COLLATERAL ATTACK ON STATE COURT JUDGEMENT.................................. 48

19. COLLATERAL ESTOPPEL ............................................................................................. 48

20. COMMERCIAL UNIT....................................................................................................... 48

21. CONFLICT OF LAWS....................................................................................................... 49

22. CONSIGNMENTS .............................................................................................................. 50

a. ADEQUACY OF ACCOUNTING ................................................................................. 50

b. BREACH OF CONSIGNMENT CONTRACT ............................................................ 51

c. CONSIGNOR BOUND BY ACTS OF ITS CONSIGNEE .......................................... 51

d. CONSIGNEE’S – DUTIES OF....................................................................................... 51

e. DUTY TO SELL IN CONSIGNEE’S MARKET AREA............................................. 52

f. LIABILITY OF AGENT FOR ACTS OF SUB-AGENT............................................. 53

g. NEGLIGENCE OF AGENT........................................................................................... 53

h. PERMISSION TO HANDLE ......................................................................................... 55

i. REJECTION .................................................................................................................... 56

j. SALE ON OPEN BASIS DISTINGUISHED FROM................................................... 56

23. CONSTITUTIONALITY OF ACT.................................................................................... 56

24. CONTRACTS ...................................................................................................................... 56

a. ABSENCE OF CONTRACT OR BREACH OF CONTRACT................................... 57

b. AGENT ............................................................................................................................. 57

c. ASSIGNMENTS .............................................................................................................. 57

d. CONDITION PRECEDENT .......................................................................................... 58

e. CONTRARY TO PUBLIC POLICY ............................................................................. 58

f. DIVISIBLE OR ENTIRE................................................................................................ 58

g. EXCUSED PERFORMANCE – DURATION OF EXCUSE....................................... 58

h. FAILURE TO ENFORCE TERMS............................................................................... 58

i. FORUM SELECTION CLAUSES................................................................................. 59

j. FRAUD - EFFECT ON CONTRACT............................................................................ 59

k. IMPOSSIBILITY OF PERFORMANCE...................................................................... 60

l. INSTALLMENT.............................................................................................................. 62

m. INTENT OF THE PARTIES.......................................................................................... 62

n. JOINT VENTURE........................................................................................................... 63

o. LACK OF AGREEMENT AS TO A MATERIAL TERM.......................................... 63

p. LIMITATION OF REMEDIES ..................................................................................... 63

q. MEETING OF THE MINDS.......................................................................................... 64

r. MISREPRESENTATION AND MISTAKE ................................................................. 64

s. MODIFICATION ............................................................................................................ 64

t. NOVATION...................................................................................................................... 65

u. PRIVITY........................................................................................................................... 65
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v. PROVISIONS – CONFORMITY WITH ...................................................................... 66

w. PURCHASE BY SAMPLE ............................................................................................. 66

x. REQUIREMENTS CONTRACT – DEFINITION....................................................... 67

y. RIGHT TO ADEQUATE ASSURANCE OF PERFORMANCE ............................... 67

z. SALE BY SAMPLE......................................................................................................... 67

aa. SEVERABILITY ............................................................................................................. 68

bb. TERMS – INTERPRETATION .....................................................................................68

cc. TIME – WHETHER OF THE ESSENCE..................................................................... 69

25. CONVERSION.................................................................................................................... 69

26. COVER................................................................................................................................. 69

a. EXPENSES SAVED IN CONSEQUENCE OF BREACH........................................... 69

b. NO NEED TO GIVE NOTICE OF INTENT TO COVER.......................................... 70

c. PURCHASES MUST BE TIMELY ............................................................................... 70

d. WHEN BUYER HAS THE RIGHT TO DO SO........................................................... 70

e. WHEN THERE HAS BEEN AN ACCEPTANCE ....................................................... 71

27. CUSTOM AND USAGE ..................................................................................................... 71

a. PROOF OF CUSTOM..................................................................................................... 71

28. DAMAGES........................................................................................................................... 71

a. ACCOUNTINGS.............................................................................................................. 72

b. BUYER’S FOR NON-DELIVERY WHERE NO COVER MADE............................. 72

c. ESTIMATION OF........................................................................................................... 73

d. FREIGHT......................................................................................................................... 74

e. INCIDENTAL AND CONSEQUENTIAL .................................................................... 74

f. MATERIAL BREACH ................................................................................................... 75

g. MITIGATION.................................................................................................................. 75

h. NOT PROVEN................................................................................................................. 76

i. OPEN SALES AND CONSIGNMENTS ....................................................................... 77

j. QUANTUM MERUIT RECOVERY ALLOWED......................................................... 77

k. SELLER’S FOR NON-ACCEPTANCE OR REPUDIATION ................................... 77

l. SELLER’S FOR WRONGFUL REJECTION.............................................................. 78

29. DEFERRED BILLING ....................................................................................................... 78

30. DELIVERED SALE............................................................................................................ 79

a. BREACH OF DELIVERED CONTRACT ................................................................... 79

b. FREIGHT......................................................................................................................... 80

c. RESPONSIBILITY FOR TRUCKER’S FAILURE TO TENDER. ........................... 80

d. TRANSIT CONDITIONS............................................................................................... 81

31. DIVERSION......................................................................................................................... 81

32. DUMPING............................................................................................................................ 81

33. ELECTION OF REMEDIES ............................................................................................. 82

34. ESTOPPEL .......................................................................................................................... 83

a. DUTY TO SPEAK ........................................................................................................... 83

b. ESTOPPEL TO DENY AGENCY ................................................................................. 83

c. NECESSARY ELEMENTS ............................................................................................ 83

35. EVIDENCE.......................................................................................................................... 84

a. ALTER EGO.................................................................................................................... 84

b. ATTORNEYS................................................................................................................... 84
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c. BROKERS........................................................................................................................ 85

d. CLEAR AND CONVINCING ........................................................................................ 85

e. CREDIBILITY................................................................................................................. 85

f. EQUITY............................................................................................................................ 85

g. FAILURE TO OBJECT.................................................................................................. 86

h. FOUNDATION ................................................................................................................ 86

i. HEARSAY........................................................................................................................ 86

j. INFERENCE DRAWN FROM FAILURE TO FOLLOW NORMAL PRACTICE

AND REQUIREMENTS ........................................................................................................ 87

k. INSPECTION BY INSPECTOR CONVICTED OF RECEIVING BRIBES............. 87

l. INSPECTION NECESSARY TO PROVE BREACH.................................................. 87

m. INVOICES NOT CONCLUSIVE EVIDENCE OF CONTRACT .............................. 88

n. INVOICES ARE EVIDENCE OF CONTRACT TERMS........................................... 88

o. NEGATIVE INFERENCES – TEMPERATURE TAPE............................................. 89

p. NEGATIVE INFERENCE RULE.................................................................................. 89

q. POLYGRAPH TESTS – ADMISSIBILITY.................................................................. 90

r. PREPONDERANCE OF THE EVIDENCE ................................................................. 90

s. PROOF OF MAILING.................................................................................................... 90

t. REPORT OF INVESTIGATION................................................................................... 91

u. SELF-EVIDENT AND CERTAIN................................................................................. 91

v. SELF-SERVING DOCUMENTS ................................................................................... 92

w. STATEMENTS BY PARTY WITHOUT PERSONAL KNOWLEDGE ................... 92

x. STATEMENTS BY PERSON NOT UNDER OATH................................................... 93

y. TAPED PHONE CONVERSATIONS – ADMISSIBILITY........................................ 93

z. TESTIMONIAL EVIDENCE AS TO CONDITION DISCOUNTED........................ 93

aa. UNCONTROVERTED STATEMENTS ....................................................................... 94

bb. UNVERIFIED PLEADINGS.......................................................................................... 94

cc. WEIGHT GIVEN TO DOCUMENTS CONTEMPORARY WITH 

TRANSACTION.............................................................................................................. 94

36. EXPRESS WARRANTY .................................................................................................... 94

37. FEES AND EXPENSES...................................................................................................... 95

a. ALLOCATION WHERE TWO OR MORE HEARINGS HELD AT THE SAME

TIME................................................................................................................................. 95

b. AMOUNT ......................................................................................................................... 95

c. ATTORNEY FEES UNDER SECTION 6e ................................................................... 96

d. CONNECTION WITH ORAL HEARING ................................................................... 96

e. NON-PREVAILING PARTY BANKRUPT.................................................................. 97

f. NOT AWARDED AGAINST GROWER...................................................................... 97

g. PREVAILING PARTY ................................................................................................... 97

h. PROCEDURAL REQUIREMENTS MUST BE FOLLOWED .................................. 99

i. SECRETARY TO DETERMINE WHAT IS REASONABLE.................................... 99

j. SET-OFF AGAINST REPARATION DUE OTHER PARTY .................................. 100

k. SPECIFIC ITEMS ......................................................................................................... 100

l. TIMELY FILING NECESSARY................................................................................. 102

38. F.O.B................................................................................................................................... 102

a. ACCEPTANCE TERMS............................................................................................... 102
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b. ACCEPTANCE FINAL TERMS ................................................................................. 103

c. CONVERSION .............................................................................................................. 104

d. FREIGHT....................................................................................................................... 105

e. RISK OF DELAY DUE TO FAILURE TO MEET IMPORT REQUIREMENTS. 106

f. TERMS ASSUMED....................................................................................................... 106

39. FOREIGN COMMERCE................................................................................................. 106

40. FREIGHT........................................................................................................................... 106

41. GOOD DELIVERY........................................................................................................... 106

a. AVERAGING LOTS TO DETERMINE..................................................................... 107

b. GRADE STANDARDS AS REFERENCE POINT FOR DETERMINING ............ 108

c. COMMODITIES ........................................................................................................... 108

42. GUARANTEE OF PAYMENT BY A THIRD PARTY................................................. 113

43. IMPLIED WARRANTY................................................................................................... 114

a. MERCHANTABILITY – EXCLUSION OF............................................................... 114

b. FITNESS FOR PARTICULAR PURPOSE – EXCLUSION OF.............................. 114

44. INSPECTIONS.................................................................................................................. 115

a. APPEAL INSPECTIONS ............................................................................................. 115

d. BY INSPECTOR CONVICTED OF RECEIVING BRIBES .................................... 115

e. BY NON-EXPERT DISCOUNTED............................................................................. 116

f. BY NON-EXPERT ALLOWED................................................................................... 117

g. COST OF........................................................................................................................ 117

h. DESTINATION INSPECTION.................................................................................... 117

i. FOLLOWING UNLOADING – LOSS OF IDENTITY............................................. 117

j. INADEQUATE SAMPLING........................................................................................ 117

k. OF ONLY A PORTION OF THE LOAD.................................................................... 117

l. OF SEVERAL LOADS LUMPED TOGETHER ....................................................... 118

m. PERCENTAGE OF DEFECTS – FAILURE TO SPECIFY..................................... 118

n. PRIMA FACIE EVIDENCE ........................................................................................ 119

o. PRIVATE INSPECTIONS ........................................................................................... 119

p. RESTRICTED INSPECTIONS ................................................................................... 120

q. SHIPPING POINT – WEIGHT.................................................................................... 121

r. TIMELINESS................................................................................................................. 121

45. INTEREST......................................................................................................................... 123

46. INTERSTATE COMMERCE.......................................................................................... 126

a. BURDEN OF PROOF ................................................................................................... 126

b. CONTEMPLATION OF............................................................................................... 127

c. CURRENT OF COMMERCE...................................................................................... 127

d. MOVEMENT................................................................................................................. 128

e. MOVEMENT IN BOND ............................................................................................... 130

47. JOINT ACCOUNT TRANSACTIONS........................................................................... 131

a. ADEQUACY OF ACCOUNTING ............................................................................... 133

b. DAMAGES ..................................................................................................................... 133

c. DUMPING...................................................................................................................... 133

48. JURISDICTION................................................................................................................ 133

a. COMPULSORY COUNTERCLAIM.......................................................................... 134

b. CONSENT INJUNCTION – FAILURE TO NOTIFY............................................... 134
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c. CONTEMPLATION OF INTERSTATE COMMERCE .......................................... 134

d. COUNTERCLAIMS...................................................................................................... 134

e. COVERED COMMODITIES ...................................................................................... 135

f. CROSS-CLAIMS........................................................................................................... 136

g. DEALERS - RETAIL EXEMPTION........................................................................... 136

h. DEFINITION OF DEALER AND TRANSACTION ................................................. 137

i. FOREIGN COMMERCE ............................................................................................. 137

j. HANDLING FEE........................................................................................................... 137

k. INFORMAL COMPLAINT – WITHDRAWAL OF ................................................. 137

l. INTERSTATE COMMERCE ...................................................................................... 138

m. LOSS OF CHARACTER AS PRODUCE ................................................................... 139

n. LOSS OF, 30 DAYS AFTER THE ISSUANCE OF AN ORDER ............................. 139

o. NECESSITY THAT PRODUCE BE INVOLVED ..................................................... 140

p. NINE-MONTH STATUTE OF LIMITATIONS ........................................................ 141

q. NON-PRODUCE COUNTERCLAIMS....................................................................... 142

r. OFFSETS........................................................................................................................ 142

s. OVER IMPLIED DUTY ARISING OUT OF UNDERTAKING.............................. 142

t. PROMISES TO PAY OR NOTES ............................................................................... 143

u. RESPONDENT NOT SUBJECT TO LICENSE ........................................................ 143

v. RESPONDENT UNLICENSED BUT OPERATING SUBJECT TO LICENSE..... 144

w. TRANSACTION NECESSARY................................................................................... 144

x. TRANSPORTATION AS PART OF A PRODUCE CONTRACT........................... 145

y. TRANSPORTATION CONTRACT............................................................................ 145

z. TRUST ............................................................................................................................ 147

49. MERCHANTABILITY – WARRANTY OF .................................................................. 147

a. APPLICABLE ONLY AT SHIPPING POINT UNDER COMMON LAW............. 147

b. QUALITY DEFECTS.................................................................................................... 148

c. MEANING OF ............................................................................................................... 149

d. WARRANTY’S APPLICABILITY TO LATENT DEFECTS.................................. 149

50. MISREPRESENTATION AND MISTAKE ................................................................... 150

51. NOTICE OF BREACH..................................................................................................... 152

52. NOTICE OF REJECTION............................................................................................... 155

a. MUST BE CLEAR......................................................................................................... 155

b. REASONABLE TIME .................................................................................................. 156

53. NOTICE TO BROKER .................................................................................................... 157

54. NOTICE WITHIN AN ORGANIZATION..................................................................... 157

55. OFFICIAL NOTICE......................................................................................................... 157

56. OFFSETS ........................................................................................................................... 158

a. AGAINST AN UNPAID REPARATION AWARD.................................................... 158

b. DEDUCTIONS FOR ANOTHER TRANSACTION.................................................. 158

c. THIRD PARTY.............................................................................................................. 158

57. OPEN PRICE..................................................................................................................... 159

a. ABSENT AGREEMENT .............................................................................................. 160

b. BUYER’S DUTY TO SELLER .................................................................................... 160

c. DUTY TO ASSIGN LOT NUMBERS ......................................................................... 160

d. COMPUTATION OF REASONABLE PRICE IN OPEN SALE WHERE 
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PARTIES FAIL TO AGREE............................................................................................... 160

58. PRACTICE AND PROCEDURE .................................................................................... 162

a. ALTERNATIVE PLEADING ...................................................................................... 162

b. AMOUNT AWARDED LIMITED BY PLEADING.................................................. 162

c. AUTOMATIC STAY PROVISION OF § 47.24 OF RULES..................................... 162

d. BONDING REQUIREMENT FOR FOREIGN COMPLAINANTS –

JURISDICTIONAL .............................................................................................................. 163

e. CONFLICTS OF INTEREST....................................................................................... 163

f. COUNTERCLAIMS...................................................................................................... 163

g. COUNTERCLAIM – WHERE COMPLAINANT NOT LICENSED OR 

SUBJECT TO LICENSE...................................................................................................... 163

h. CROSS-CLAIM AGAINST CO-RESPONDENT ...................................................... 164

i. DEATH OF INDIVIDUAL RESPONDENT............................................................... 165

j. DEFAULT ...................................................................................................................... 165

k. DE NOVO TRIAL IN DISTRICT COURT ................................................................ 165

l. ELECTION OF REMEDIES........................................................................................ 165

m. EXTENSIONS OF TIME.............................................................................................. 166

n. INFORMAL COMPLAINTS ....................................................................................... 166

o. LATE FILING ............................................................................................................... 167

p. HANDLING AND FILING FEES................................................................................ 167

q. HEARING CASE – ADMISSIBILITY OF PLEADINGS......................................... 167

r. HEARINGS – WHEN ALLOWED.............................................................................. 167

s. NECESSARY PARTIES ............................................................................................... 167

t. PAY-WHEN-PAID AGREEMENT............................................................................. 168

u. PLACE OF HEARING ................................................................................................. 168

v. PLEADINGS – TECHNICAL PERFECTION NOT REQUIRED........................... 168

w. PLEADINGS – VERIFICATION – NOT NECESSARY UNLESS PLEADING 

TO BE CONSIDERED IN EVIDENCE UNDER DOCUMENTARY PROCEDURE... 168

x. PROPER PARTY .......................................................................................................... 169

y. RECONSIDERATION.................................................................................................. 169

z. REHEARING – RIGHT OF NON-PARTY TO REQUEST ..................................... 170

aa. REOPENING ................................................................................................................. 170

bb. REOPENING AFTER DEFAULT............................................................................... 171

cc. RECOVERY OF UNPAID OBLIGATIONS ALLOWED......................................... 171

dd. REPLY............................................................................................................................ 171

ee. SET-OFF......................................................................................................................... 171

ff. TIME FOR PAYMENT ................................................................................................ 171

59. PRICE AFTER SALE....................................................................................................... 172

60. PRICE ARRIVAL............................................................................................................. 172

61. PROFITS............................................................................................................................ 173

62. PROMISSORY NOTES.................................................................................................... 173

63. PROTECTION .................................................................................................................. 173

a. AGAINST LOSS ............................................................................................................ 173

b. DISTINGUISHED FROM CONSIGNMENT............................................................. 174

c. FAILURE TO KEEP RECORDS VOIDS................................................................... 174

d. PROFIT & HANDLING NOT ALLOWED; FREIGHT ALLOWED ..................... 175
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64. PURCHASE AFTER INSPECTION............................................................................... 176

a. FAILURE TO USE TERM IN CONTRACT NEGOTIATIONS SIGNIFICANT.. 176

b. INSPECTION OF SPECIFIC COMMODITY VOIDS IMPLIED WARRANTY.. 177

c. MORE THAN INSPECTION OF GENERAL RUN OF GOODS REQUIRED...... 178

65. QUALITY AND CONDITION ........................................................................................ 178

66. REAL PARTY IN INTEREST......................................................................................... 178

67. REJECTION...................................................................................................................... 179

a. IN GENERAL ............................................................................................................... 179

b. DIFFERENT TYPES..................................................................................................... 180

c. DUTIES OF RECEIVER AFTER................................................................................ 180

d. GROUNDS...................................................................................................................... 180

e. MUST BE CLEARLY STATED .................................................................................. 181

f. NOTICE.......................................................................................................................... 181

g. PARTIAL LOAD........................................................................................................... 182

h. PRECLUDED BY ACCEPTANCE DOWN THE CHAIN, BUT NOT UP THE 

CHAIN.................................................................................................................................... 182

i. SELLER’S DIVERSION OF LOAD TO ANOTHER MARKET FOLLOWING

REJECTION.......................................................................................................................... 182

j. SELLER’S DUTY TO TAKE POSSESSION AFTER REJECTION....................... 183

k. TITLE ............................................................................................................................. 183

l. WITHOUT REASONABLE CAUSE........................................................................... 184

68. RESCISSION OF CONTRACT....................................................................................... 184

69. RES JUDICATA................................................................................................................ 185

70. REVOCATION OF ACCEPTANCE............................................................................... 186

71. STANDING AND PRIVITY OF CONTRACT .............................................................. 187

a. BROKERS...................................................................................................................... 187

b. COOPERATIVE ASSOCIATIONS............................................................................. 188

c. FACTORING COMPANY ........................................................................................... 189

d. INTERVENING PARTY .............................................................................................. 189

72. STATUTE OF FRAUDS................................................................................................... 189

a. APPLICATION OF STATE LAW............................................................................... 190

b. WRITTEN CONFIRMATION..................................................................................... 191

73. STATUTE OF LIMITATIONS........................................................................................ 191

74. SUITABLE SHIPPING CONDITION ............................................................................ 191

a. ABNORMAL DETERIORATION .............................................................................. 191

b. CONTRACTUAL EXCLUSION OF A DESTINATION .......................................... 192

c. DEFINED........................................................................................................................ 192

d. DELAY IN SHIPMENT................................................................................................ 193

e. DETERMINING CONTRACT DESTINATION ....................................................... 194

f. DIVERSION................................................................................................................... 196

g. EXCEPTION TO NORMAL TRANSPORTATION REQUIREMENT.................. 196

h. HELD TO BE AN EXPRESS WARRANTY............................................................... 197

i. INHERENT DEFECT................................................................................................... 198

j. INSPECTION BY BUYER ........................................................................................... 199

k. RELATIONSHIP TO GRADE STANDARDS............................................................ 199

l. VOID WHEN FINAL DESTINATION NOT SPECIFIED ....................................... 199
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m. WHEN APPLICABLE AT A SECONDARY DESTINATION................................. 199

n. WHEN TRANSPORTATION NOT NORMAL.......................................................... 203

75. SUSPENSION AGREEMENT......................................................................................... 203

76. TRANSPORTATION ....................................................................................................... 204

a. ABNORMALITY........................................................................................................... 205

b. NORMALITY ................................................................................................................ 206

c. RISK OF LOSS .............................................................................................................. 206

d. TEMPERATURES ........................................................................................................ 207

e. TEMPERATURES – DISCREPANCY BETWEEN AIR AND TAPE .................... 208

f. TEMPERATURE TAPES............................................................................................. 209

g. WHEN SHIPPER RESPONSIBLE.............................................................................. 209

77. TRUST, CONSTRUCTIVE.............................................................................................. 210

78. TRUST FUND.................................................................................................................... 210

a. LIABILITY OF SALES AGENT................................................................................. 210

b. PAYMENT OF REPARATION NOT BARRED ....................................................... 211

79. UNIFORM COMMERCIAL CODE – SECTION INDEX ........................................... 211

a. § 1-102(3)......................................................................................................................... 211

b. § 1-201(20)....................................................................................................................... 211

c. § 1-105 ............................................................................................................................. 211

d. § 1-106 ............................................................................................................................. 212

e. § 1-201(15)....................................................................................................................... 212

f. § 1-202(f) ......................................................................................................................... 212

g. § 1-207 ............................................................................................................................. 212

h. § 2-103(1)(b).................................................................................................................... 212

i. § 2-103(4)......................................................................................................................... 212

j. § 2-105(6)......................................................................................................................... 212

k. § 2-207 ............................................................................................................................. 212

l. § 2-305 ............................................................................................................................. 212

m. § 2-314 ............................................................................................................................. 213

n. § 2-316(2)......................................................................................................................... 213

o. § 2-316(3)(b).................................................................................................................... 213

p. § 2-319 ............................................................................................................................. 213

q. § 2-401 ............................................................................................................................. 213

r. § 2-401(4)......................................................................................................................... 213

s. § 2-503(1)(a).................................................................................................................... 213

t. § 2-504 ............................................................................................................................. 213

u. § 2-601 ............................................................................................................................. 213

v. § 2-601(c)......................................................................................................................... 214

w. § 2-602 ............................................................................................................................. 214

x. §§ 2-602, 2-603, and 2-703 ............................................................................................. 214

y. § 2-603(1)......................................................................................................................... 214

z. § 2-607(2)......................................................................................................................... 214

aa. § 2-608 ............................................................................................................................. 214

bb. § 2-609 ............................................................................................................................. 214

cc. § 2-609(3)......................................................................................................................... 215

dd. § 2-610 ............................................................................................................................. 215
13

ee. § 2-612 ............................................................................................................................. 215

ff. § 2-615 ............................................................................................................................. 215

gg. §§ 2-703, 2-706, and 2-710 ............................................................................................. 215

hh. §§ 2-703(d), 2-706, 2-708, and 2-710............................................................................. 215

ii. §§ 2-706 and 2-708 ......................................................................................................... 215

jj. §§ 2-711 and 2-713 ......................................................................................................... 215

kk. § 2-712 ............................................................................................................................. 215

ll. § 2-714(1)......................................................................................................................... 216

mm. § 2-715............................................................................................................................ 216

nn. § 2-722 ............................................................................................................................. 216

oo. § 2-723 ............................................................................................................................. 216

pp. § 2-723(2)......................................................................................................................... 217

qq. § 3-311 ............................................................................................................................. 217

rr. § 3-408 ............................................................................................................................. 217

80. VERIFICATION ............................................................................................................... 217
14

1. ABANDONMENT

The current state of the law simply does not allow for any situation in which a perishable

commodity, which still retains commercial value, can be abandoned by the parties. The

ultimate responsibility for not allowing such abandonment falls upon the receiver as the party in 

closest proximity to such commodity.” Dew-Gro, Inc. v. First Nat’l Supermarkets, Inc., 42

Agric. Dec. 2020, 2025-26 (1983).

2. ACCEPTANCE OF PRODUCE

A buyer who accepts produce becomes liable to the seller for the full purchase price thereof,

less any damages resulting from any breach of contract by the seller. Ocean Breeze Exp., Inc.

v. Rialto Distrib., Inc., 60 Agric. Dec. 840, 903 (2001); World Wide Imp-Exp., Inc. v. Jerome

Brokerage Distrib., Co., 47 Agric. Dec. 353, 355 (1988); Matthews v. Quong Yuen Shing &

Co., 46 Agric. Dec. 1681, 1683 (1987).

In a “delivered Miami” sale, where the airline took possession of the product after completion 

of the shipper’s contract to deliver the product to the Miami airport, the airline was in effect

acting as the buyer’s agent and effectuated a legal acceptance of the product. Pass Farm, Inc. v.

Gouda, 40 Agric. Dec. 824-25 (1980).

a. DIVERSION

Acceptance means any act by the consignee signifying acceptance of the shipment, including 

diversion or unloading. 7 C.F.R. § 46.2(dd)(1).

Diversion of a shipment by the buyer while shipment is in transit constitutes acceptance

thereof. Salinas Mktg. Coop. v. Tom Lange Co., 46 Agric. Dec. 1593, 1597 (1987); Magic

Valley Potato Shippers, Inc. v. C.B. Marchant & Co., 42 Agric. Dec. 1602, 1606 (1983);

Lindemann Farms, Inc. v. Food Fair Stores, 36 Agric. Dec. 92, 95 (1977); Peller v. Bonnie Bee

Super Food Mart, Inc., 16 Agric. Dec. 1018 (1957).

Where strawberries were billed to intermediate destination for consolidation with other produce

and accepted at such destination by buyer, but invoice and bill of lading stated more distant

destination in addition to the intermediate destination, it was held that the acceptance at the 

intermediate point did not void the suitable shipping condition rule and that such rule was 

applicable to the more distant destination. Breach found on basis of inspection at ultimate 

destination which was three thousand miles removed from intermediate acceptance point. Bud

Antle, Inc. v. Pac. Shore Mktg. Corp., 50 Agric. Dec. 954, 958 (1991).

b. FAILURE TO REJECT IN A REASONABLETIME

Failure to reject produce in a reasonable time is an act of acceptance.

U.C.C. § 2-602(1)

7 C.F.R. § 46.2(dd)(3)
15

Pac. Lettuce Co. v. M & C Produce Co., 24 Agric. Dec. 532, 534 (1965); Conn & Scalise Co.

v. Frank J. Crivella & Co., 20 Agric. Dec. 415, 419 (1961).

c. UNLOADING OR PARTIAL UNLOADING

The unloading or partial unloading of the transport is an act signifying acceptance. 7 C.F.R §

46.2(dd)(1); U.C.C. § 2-606(1)(c).

M.J. Duer & Co. v. J.F. Sanson & Sons Co., 49 Agric. Dec. 620, 623 (1990); Jim Hronis &

Sons v. M. Pagano & Sons, Inc., 46 Agric. Dec. 1010, 1011 (1987); Harvest Fresh Produce,

Inc. v. Clark-Ehre Produce Co., 39 Agric. Dec. 703, 706 (1980); Crown Orchard Co. v. MidValley Prod. Corp., 34 Agric. Dec. 1381, 1385 (1975); Theron Hooker Co. v. Ben Gatz Co., 30 

Agric. Dec. 1109, 1112 (1971); Conn & Scalise Co. v. Frank J. Crivella & Co., 20 Agric. Dec. 

415, 419 (1961); Charles P. Tatt Fruit Co. v. Mac’s Produce, 9 Agric. Dec. 802, 805 (1950).

Where tomatoes were unloaded prior to inspection, and respondent, after seeing the results of

the inspection, notified complainant that the load was being rejected, it was held that

respondent’s attempted rejection was illegal and ineffective because the unloading of the

tomatoes amounted to an acceptance. J & J Produce Co. v. Weis-Buy Serv., Inc., 58 Agric.

Dec. 1095, 1099 (1999).

Where respondent gave notice of rejection following the unloading of produce the rejection

was ineffective, and the load was deemed to have been accepted. Lionheart Group, Inc. v. Sy

Katz Produce, Inc., 59 Agric. Dec. 449, 456 (2000).

Where truckload of perishables was unloaded at several locations, first act of unloading

constituted acceptance. Inspection two days after acceptance did not show condition at time of

delivery. Veg-A-Mix v. Tom Lange Co., 46 Agric. Dec. 1171, 1173 (1987).

See below: WHEN UNLOADING IS NOT AN ACCEPTANCE

d. PLACING ON CONSIGNMENT

Placing purchased goods on consignment constitutes acceptance. Berks-LeHigh Co-Op v.

Adams, 15 Agric. Dec. 677, 679-80 (1956).

e. PRELUDES SUBSEQUENT REJECTION

Where A sold to B, B sold to C, and C sold to D, a rejection by D to C was effective even

though it occurred following C’s acceptance of the lot of produce, because lot was accepted by

unloading at C’s warehouse, and D was on hand to reject when the lot was unloaded.

However, following C’s acceptance C could not reject to B, nor could B reject to A. It was

found that in fact no such rejection had been attempted, but that C and B had merely

communicated the fact that D had rejected to C. A’s subsequent repossession of three-fourths 

of the lot of produce was wrongful, and precluded A from entitlement to the contract price as to 

more than the one-fourth of a lot in C’s possession even though the entire lot had been

accepted. Phoenix Vegetable Distrib. v. Randy Wilson Co., 55 Agric. Dec. 1345, 1348-49
16

(1996); Hawman v. G & T Terminal Packing Co., 46 Agric. Dec. 1544, 1552 (1987).

f. RESALE

When a buyer consigns or resells produce, absent other considerations, such action is an act of

dominion constituting acceptance. See Dave Walsh Co. v. Tom Lange Co., 42 Agric. Dec.

2085, 2088 (1983).

g. REVOCATION

Where Complainant delivered onions to Respondent that were grown in fields treated with the

pesticide Furadan after it expressly warranted that the onions sold to Respondent would be

Furadan-free, Complainant materially breached the contract. Respondent’s subsequent

communication to Complainant concerning the unfitness of the onions, its refusal to pay

Complainant’s invoices, and its demand for a refund of the sums it had already paid,

constituted a revocation of acceptance. As the nonconformity of the onions, which was both

difficult to discover and obscured by Complainant’s assurances, substantially impaired the

onions’ value to Respondent, and the revocation was communicated to Complainant within a

reasonable time after the breach was discovered, Respondent’s revocation was held 

permissible. Froerer Farms, Inc. v. Select Onion LLC, 71 Agric. Dec. xxxiv, l (USDA 2012),

published in 72 Agric. Dec. xxxiv, l (USDA 2013).

h. UNLOADING INTO WAREHOUSE OR COLD STORAGE

Transfer of produce from a trailer into cold storage is an act of acceptance. Dunlap v. Israel

Klein Co., 17 Agric. Dec. 992, 1000 (1958); Peller v. Bonnie Bee Super Food Mart, Inc., 16

Agric. Dec. 1018, 1021-22 (1957).

i. WHEN UNLOADING IS NOT ACCEPTANCE

Where complainant was notified prior to unloading and specifically requested an unrestricted

inspection. Under limited circumstances such as unloading for the purpose of inspection or to

retrieve other produce from the nose of the truck, and where the product is then placed back on 

the truck within a reasonable time, unloading will not be deemed an acceptance. Pope Packing 

& Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101, 104 (1979).

3. ACCEPTANCE OF REJECTION

A seller can refuse to “accept a rejection” (that is, a seller may refuse to retake possession of

purportedly rejected produce) when the rejection is ineffective (but not when it is effective but

wrongful). An offer to conditionally accept an ineffective rejection does not impose a positive 

duty on the seller to retake possession of produce unless the terms of the conditional offer are 

accepted. Fresh W. Mktg., Inc. v. McDonnell & Blankfard, Inc., 53 Agric. Dec. 1869, 1875

(1994).

Where buyer made an effective rejection of load of strawberries the title automatically reverted 

to seller, and seller had burden of proving contractual warranty inapplicable. Seller’s refusal to 

accept rejection was meaningless, and seller had a primary duty to dispose of goods. Where 
17

seller did not dispose of goods, buyer’s duty to dispose of goods was contingent upon seller 

having no agent or place of business in market of rejection, and burden of proof was on seller 

to establish that it had no such agent or place of business. However, where buyer assumed duty 

of resale, it was assumed that duty did rest on buyer, but buyer was held only to good faith 

standards in making resale. Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 681 (1996).

Tomatoes were unloaded prior to inspection, and respondent, after seeing the results of the

inspection, notified complainant that the load was being rejected. Complainant refused to

accept the rejection. Respondent’s attempted rejection was held to be illegal and ineffective.

Complainant’s refusal to accept the rejection amounted merely to notice that the rejection was

not deemed to be effective, and that complainant would not accede to it in such manner as to

constitute a modification of the contract. J & J Produce Co. v. Weis-Buy Serv., Inc., 58 Agric.

Dec. 1095, 1099 (1999).

4. ACCORD AND SATISFACTION

Accord and satisfaction requires a bona fide dispute, plus tender which is clearly made as

payment in full. 1 Am. Jur. Accord & Satisfaction, § 22 et. seq. See also Louis Caric & Sons

v. Ben Gatz Co., 38 Agric. Dec. 1486, 1498 (1979); Mendelson-Zeller Co. v. Michael J.

Navilio, Inc., 34 Agric. Dec. 903, 907-08 (1975); Kelman Farms, Inc. v. Bushman Brokerage,

Inc., 34 Agric. Dec. 1146, 1152-53 (1975); Mendelson-Zeller Co. v. Season Produce Co., 31

Agric. Dec. 1288, 1290-92 (1972).

“To constitute an accord and satisfaction it is necessary that the money be offered in full

satisfaction of the demand, and be accompanied by such acts and declarations as amount to a

condition that the money, if accepted, is accepted in satisfaction and it must be such that the

party to whom it is offered is bound to understand therefrom that, if he takes it, he takes it

subject to such conditions. The mere fact that the creditor receives less than the amount of his

claim, with knowledge that the debtor claims to be indebted to him only to the extent of the

payment made, does not necessarily establish an accord and satisfaction.” Spada Distrib. Co.

v. Frank Kenworthy Co., 17 Agric. Dec. 347, 355-56 (1958). Quoted in Mendelson-Zeller Co.

v. Season Produce Co., 31 Agric. Dec. 1288, 1290-92 (1972).

a. BANK WAS AGENT FOR ACCEPTANCE OF CHECK

Creditor was deemed to have appointed bank its agent for purpose of accepting full payment

check, where bank’s address was placed on creditor’s invoices underneath creditor’s name.

Accord and satisfaction resulted from bank’s deposit of check. Bank had apparent authority.

Apparent authority was defined as “authority ‘which, though not actually granted, the principal 

knowingly permits the agent to exercise, or which he holds the agent out as possessing.’” GulfWestern Food Prod. Co. v. Prevor-Mayrsohn Int’l Inc., 34 Agric. Dec. 1911, 1915 (1975). The 

holding was the same in Unifrutti of America, Inc. v. William Rosenstein & Sons Co., 48 Agric. 

Dec. 717, 719-720 (1989), where the remittance address onthe invoices was simply the name of 

complainant, a P.O. Box number, and the city, but, unknown to respondent, the P.O. box was 

that of complainant’s bank. (The harshness of this rule is mitigated by U.C.C. § 3-311(c)(2).

See 4i, RETURN OF CHECK.)
18

b. CONDITIONAL TENDER NECESSARY

Words: “This check is in settlement of the following invoices . . .” and words, “This check is in 

settlement of the following. If incorrect please return.” did not constitute clearly conditional 

tender. Half Moon Fruit & Produce Co. v. N. Am. Produce Distrib., Inc., 40 Agric. Dec. 1610, 

1612-13 (1981); Horvitz Bros. v. Goldsamt, 20 Agric. Dec. 391, 401 (1961).

Words: “Payment in Full” or “similar words” held effective. Kelman Farms, Inc. v. Bushman

Brokerage, Inc., 34 Agric. Dec. 1146, 1152-53 (1975); Southmost Vegetable Coop. v. M & G

Tomato, 28 Agric. Dec. 966-68 (1969); Johnson & Allen v. Fernandez Bros., 27 Agric. Dec.

1127, 1129-30 (1968); Zinno v. Marvin, 24 Agric. Dec. 396, 398-99 (1965); Nat’l Produce

Distrib., Inc. v. Stewart Produce Co., 21 Agric. Dec. 955, 959 (1962). (Transaction lacked bona 

fide dispute, and check was not offered in good faith where accord language was pre-printed on 

the check).

In C.H. Robinson Co. v. Trademark Produce, Inc., 53 Agric. Dec. 1861, 1867-68 (1994), the

words, “Full and Final Payment” were pre-printed on all of respondent’s checks in very small

type. Referencing Official Comment 4 to U.C.C. § 3-311, it was held that clear notice that the

payment was being offered as full settlement of the disputed claim had not been given, and

there was no accord and satisfaction.

c. GOOD FAITH DISPUTE NECESSARY

Although respondent’s partial payment checks stated that the checks were tendered as payment

in full, it was found that no accord and satisfaction existed as to several transactions because 

respondent had not proven that a dispute existed between the parties as to such transactions.

Eustis Fruit Co. v. Auster Co., 51 Agric. Dec. 865, 884-86 (1992).

Where a respondent presented evidence of a breach by the complainant, this was not enough to

show that there had been a dispute. Ruiz v. Pac. Sun Produce Co., 48 Agric. Dec. 1105-06

(1989). (In context of a one load claim, the remainder of the decision is highly questionable in 

finding that the conditional tender was insufficient because it failed to specify what transaction

it concerned.)

d. GOOD FAITH TENDER NECESSARY

Debtor tendered payment in one check for six produce transactions. Four of the transactions

were undisputed, and the check covered these transactions in their full amount. The remaining 

two transactions were disputed and as to these, the check tendered only partial payment. The 

creditor negotiated the check and then sought to recover the balance alleged due on the 

disputed transactions. The debtor pled accord and satisfaction. It was held that the good faith

tender requirement of U.C.C. § 3-311 would not be met by such a check, especiallyin view of 

the “full payment promptly” requirement of the PACA and Regulations [Requirements]. The 

situation was distinguished from that in which the parties maintain a running account. 

Lindemann Produce, Inc. v. ABC Fresh Mktg., Inc., 57 Agric. Dec. 739, 743 (1998).

In C.H. Robinson Co. v. Trademark Produce, Inc., 53 Agric. Dec. 1861, 1867-68 (1994), the
19

words “Full and Final Payment” were pre-printed on all of respondent’s checks in very small

type. Referencing Official Comment 4 to U.C.C. § 3-311, it was held that the requirements of

“good faith tender” had not been met, and there was no accord and satisfaction.

Respondent’s tender of partial payment with a check bearing the handwritten notation “Full &

Final Pymnt Inv 366881” on its face, which was issued approximately 30 days after the

payment was due, did not accomplish an accord and satisfaction where there was no evidence

of any disagreement over the quality and condition of the product upon delivery or at any time

prior to the issuance of the check, i.e., there was no bona fide dispute between the parties. It

was stated that the late payment, without any prior notice of any issue with the product, did not 

meet the good faith tender requirement of U.C.C. § 3-311. Interfresh, Inc. v. B. Sayers, Inc., 71

Agric. Dec. a, g (USDA 2012), published in 72 Agric. Dec. a, g (USDA 2013).

e. MUST BE PLEADED

Accord and satisfaction must be pleaded. James Macchiaroli Fruit Co. v. Ben Gatz Co., 38

Agric. Dec. 565, 570 (1979).

f. MUST BE TENDERED AS PAYMENT IN FULL

Although respondent’s partial payment checks stated that the checks were tendered as payment 

in full, it was found that no accord and satisfaction existed as to one transaction because there 

was no manifested intent that the payment should apply to all the items on the invoice where 

respondent paid in full for one of the types of fruit. Eustis Fruit Co. v. Auster Co., 51 Agric. 

Dec. 865, 882-83 (1992).

Where Respondent’s letter accompanying its payment did not clearly state that the amount 

being paid was intended as full satisfaction of the amount owing, there was no accord and 

satisfaction. Esch Farm v. Packers Canning Co., 50 Agric. Dec. 930, 934 (1991).

g. RETENTION OF CHECK

Retention of a settlement check for a substantial period of time without negotiation thereof

amounts to an acceptance of such check and constitutes an accord and satisfaction when all

other necessary elements of an accord and satisfaction have been met. Dixon Tom-A-Toe

Produce v. Kaleck, 37 Agric. Dec. 1794, 1797 (1978).

Retention of check not somehow marked as full payment does not effect accord and

satisfaction. Branix Trucking v. Cumberland Produce Co., 41 Agric. Dec. 1814, 1816 (1982).

h. RETURN OF CHECK

Under U.C.C. § 3-311, the return within 90 days of an amount paid in full satisfaction of a

claim disputed in good faith precludes the discharge of the claim unless the person against

whom the claim is asserted proves that within a reasonable time before collection of the

instrument was initiated, the claimant, or an agent of the claimant having direct responsibility
20

with respect to the disputed obligation, knew that the instrument was tendered in full

satisfaction of the claim. Pac. Tomato Growers v. Am. Banana Co., 60 Agric. Dec. 352, 370-71

(2001).

i. TENDER BY INSTRUMENT NECESSARY

U.C.C. section 3-311(a) requires good faith tender of an instrument to the claimant as full 

satisfaction of the claim. “Instrument” under the U.C.C. means “negotiable instrument.” U.C.C. 

§ 3-104(b). The official comments to U.C.C. section 3-104 state that “the term ‘negotiable 

instrument’ is limited to a signed writing that orders or promises payment of money.” U.C.C. § 

3-104, Official Comment 1. The ACH payments issued by Respondent were electronic, not 

written, and they were not signed. In addition, the transfer of funds through ACH payment is 

instantaneous and involves no promise or order to pay. The ACH payments issued by 

Respondent therefore cannot be considered a “tender of an instrument.” Finally, neither the 

ACH payments nor any accompanying written communications contained the requisite 

conspicuous statement to the effect that the instrument was tendered as full satisfaction of the 

claim. U.C.C. § 3-311(a). As a result, the accord and satisfaction provisions of the U.C.C. 

cannot be applied to those payments. See Ayco Farms, Inc. v. Benny’s Farm Fresh Dist. Co., 

Inc., 79 Agric. Dec. A (U.S.D.A. 2019).

j. UNLIQUIDATED AMOUNT

Where, following a poor arrival, the parties entered into a modification of the contract to price

after sale, the acceptance of the tender of a check offered in full accord, accompanied by an

accounting of the sales, accomplished an accord and satisfaction. Friedrich Enter., Inc. v.

Benny’s Farm Fresh Distrib., 57 Agric. Dec. 1695, 1702 (1998).

k. VERBAL COUNTERMAND OF EFFECTIVE

All necessary elements for accord and satisfaction present, but after receipt of the check, the

creditor contacted the debtor by phone and was told to go ahead and deposit the check and the

balance would be paid in full. Held no accord and satisfaction. Apple Jack Orchards v. M.

Offutt Brokerage Co., 41 Agric. Dec. 2265, 2267 (1982).

l. VOIDING OF

When accord is entered on basis of misrepresentation of material fact, it may be voided.

Central Farms v. Ag-West Growers, 38 Agric. Dec. 889, 891 (1979).

m. WHERE PAYMENT DID NOT SPECIFY ACCOUNT FOR APPLICATION

Where a partial payment check was tendered on the condition that it be accepted as payment in

full, but the debtor did not specify to what debt it was to be applied, and there were several 

open accounts at the time of tender, the creditor was within its rights when it applied the

payment to an open freight bill, and no accord and satisfaction of the produce debt was

accomplished. DeSomma v. All World Farms, Inc., 61 Agric. Dec. 821, 833 (2002). See

APPLICATION OF PAYMENTS, this Index.
21

5. ACCOUNTS STATED

Not present. No evidence to show that parties struck a balance. No evidence statements actually 

rendered. Anthony Gagliano & Co. v. Jennaro, 27 Agric. Dec. 1343, 1346-47 (1968).

6. ACCOUNTS OF SALE

a. ASSIGNMENT OF LOT NUMBERS

“The rendering of an accounting implies that records have been kept such as would enable an

accurate accounting to be rendered. That is, that records must be kept in such a way that the

commodity which is the subject of dispute may be identified and distinguished from other lots

or shipments of the same commodity.” Bonanza Farms, Inc. v. Tom Lange Co., 51 Agric.

Dec. 839, 847-48 (1992).

b. FAILURE TO SHOW DATES OF RESALE

Where accounting failed to show when the product was sold, the accounting was held not to

furnish adequate proof of the value of the produce. Elggren & Sons Co. v. Wood Co., 11 Agric.

Dec. 1032, 1038 (1952).

In a later case, it was stated, “Although the resale date of the apricots is unknown, there has

been no contention that such resale was unreasonable in light of the amount of decay present, or 

that complainant did not use due diligence in reselling the apricots. Accordingly, we accept the

results of such resale.” Frank Gaglione & Son v. Theron Hooker Co., 30 Agric. Dec. 528, 532

(1971).

Where the other party objected to the absence of dates, the accounting has been held

inadequate. Sunkist Growers v. Fishman Produce Co., 41 Agric. Dec. 133, 136 (1982); Mut.

Vegetable Sales v. Joseph Notarianni & Co., 29 Agric. Dec. 1049, 1054 (1970).

Where no individual resale dates were shown and the other party objected, but the resales were 

otherwise shown to have occurred within a reasonable time, the accounting was allowed.

Stoops & Wilson v. Wholesale Produce Exch., 41 Agric. Dec. 290, 293 (1982).

c. MUST BE MORE THAN SUMMARY STATEMENT

To be accepted as an accurate reflection of the price received for produce, the statement

rendered must be more than a summary statement. Supreme Berries, Inc. v. McEntire, 49 Agric.

Dec. 1210, 1217 (1990).

Accountings that show only an average price are commonly not used to show the value of

consigned goods or the value of damaged goods resold by a buyer. However, where the

accounting showed that the average price realized was the same as the current market price and 

the amount of goods lost on repacking was less, as a percentage, than the condition defects 

shown on the arrival federal inspection, an exception was made, and the accounting was used to

show the proper returns under a consignment contract. Great Am. Farms, Inc. v. William P. 
22

Hearne Produce Co., 59 Agric. Dec. 466, 469-70 (2000).

See DAMAGES – ACCEPTED GOODS – Paragraph B, subparagraphs (a), (b), and (c) – this

index.

7. ACT OF GOD

See CONTRACTS – IMPOSSIBILITY OF PERFORMANCE – this index.

8. ADMINISTRATIVE PROCEDURE ACT

“5 U.S.C. § 554. Adjudications

(a) This section applies, according to the provisions thereof, in every case of adjudication

required by statute to be determined on the record after opportunity for an agency hearing,

except to the extent that there is involved – (1) a matter subject to a subsequent trial of the law

and the facts de novo in a court; . . .”

Some sections held not applicable to PACA reparation proceedings. Eady v. Eady & Assoc., 37

Agric. Dec. 1765, 1766 (1978).

Although “. . . proceedings under the Act are excepted from certain provisions of the APA ...

many of the provisions of the APA ... are based upon fundamental principles of due process 

enunciated long before the passage of the APA.” – citing cases. “. . . we do not believe we can 

lightly dismiss the general principles of due process expressed (in such cases).” James

Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 1477, 1484-85 (1979).

9. AGENCY

See BROKERS – this index.

a. APPARENT AUTHORITY

Receipt of Complainant’s invoices by Respondent’s authorized agent constituted Respondent’s

receipt of Complainant’s invoices. Coliman Pac. Corp. v. Sun Produce Specialties LLC, 73 

Agric. Dec. 639, 645 (2014).

When a party acts in a manner which creates apparent authority in an agent it may be bound by 

the acts of the agent. It is a maxim of agency law that a principal is responsible for its agent’s

actions, even where the agent exceeds the scope of its actual authority. La Valenciana

Avocados Corp. v. Tomato Specialties, LLC, 74 Agric. Dec. 503, 511 (2015); L & M

Companies, Inc. v. Panama Banana Distrib. Co., 71 Agric. Dec. i, x-v (USDA 2012),

published in 72 Agric. Dec. i, x-v (USDA 2013).

When a party acts in a manner which creates apparent authority in an agent, it may be bound by 

the acts of the agent. A.P.S. Mktg. v. M. Degaro Co., 59 Agric. Dec. 416, 420 (2000); Joe

Phillips, Inc. v. City Wide Distrib., Inc., 44 Agric. Dec. 468, 474 (1985); W. Cold Storage v.
23

Schons, 38 Agric. Dec. 903, 906 (1979); Johnson Produce, Inc. v. R.L. Burnett Brokerage Co.,

37 Agric. Dec. 1743, 1746 (1978); George Arakelian Farms, Inc. v. Leonard O’Day Co., 31

Agric. Dec. 1395, 1401 (1972); G. Fava Co. v. Parkhill Produce Co., 19 Agric. Dec. 928,

933 (1960); Johnson v. Fritchey, 16 Agric. Dec. 1082, 1085 (1957); Tri-State Sales Agency v.

Palmetto Fruit & Produce Co., 14 Agric. Dec. 1140, 1143 (1955).

It is the maxim of agency law that principal is responsible for its agent’s actions even where the 

agent exceeds the scope of its actual authority. Westside Produce Co. v. E.L. Kempf & Sons, 39 

Agric. Dec. 727, 733-34 (1980).

It was held that the manager of a cold storage facility of the PACA licensed firm, had the

apparent authority to accept and sell consigned produce from the cold storage facility. The firm 

provided insufficient notice to the consignor that the manager did not have the actual authority 

to a handle produce on consignment. Therefore, the firm was liable for the manager’s actions,

even though it was unaware of the consignment and did not authorize the manager to handle 

produce on consignment. Magallon v. Pac. Sun Distrib., Inc., 69 Agric. Dec. 848, 861 (2010).

Respondent not liable where firm using its name did not have apparent authority to do so even

though it had made purchases at respondent’s old address. Bud Antle, Inc. v. Spruton, Inc., 47

Agric. Dec. 1619, 1622-23 (1988).

Where the buyer had given the broker authority to order produce in his name and terminated the 

grant of authority without notifying the produce industry, the buyer was estopped from denying 

the apparent authority of the broker to purchase further shipments of produce. Sun Valley

Packing Co. v. Guinta, 45 Agric. Dec. 768, 774-75 (1986).

It is the act and control of the principal, and not those of the agent, that must be relied upon to

show apparent authority or the scope of authority generally. Louis Caric & Sons v. Garden

Fresh Mkt., Inc., 35 Agric. Dec. 412, 415 (1976); Gulf W. Food Prod. Co. v. Prevor- Mayrsohn 

Int’l Inc., 34 Agric. Dec. 1911, 1915 (1975); Cent. & S. Am. Imports Co. v. W. Indies Foods &

Importing, Inc., 34 Agric. Dec. 1015, 1019-20 (1975); Hunter Produce v. L.A. Potato Distrib., 

Inc., 31 Agric. Dec. 1415, 1418 (1972); Martin Produce, Inc. v. Basil Co., 30 Agric. Dec. 836,

843-44 (1971); Paramount Citrus v. Cent. Wash. Produce, 23 Agric. Dec. 256, 261-62 (1964); 

Senini v. Fruit Supply Co., 19 Agric. Dec. 394, 397 (1960); and Nash DeCamp Co. v. Albertson

Co., 13 Agric. Dec. 283, 287-89 (1954).

The burden of any necessary diligence to ascertain the agent’s authority rests upon the party

dealing with the agent. Cal-Mex Distribs., Inc. v. Delray Produce Corp., 47 Agric. Dec. 470,

473 (1988); Pasco County Peach Ass’n v. J. F. Solly & Co., 146 F.2d 880 (4th Cir. 1945).

Mere negotiation of contracts is inadequate to support agent’s claims for commission against its 

principals. Agent must first demonstrate that the principal authorized the agent to act on the 

principal’s behalf. Pearl Ranch Produce LLC v. Desert Springs Produce LLC, 67 Agric. Dec.

1465, 1474-75 (2008).

b. BAILMENT
24

Where Respondent took possession of product sold by Complainant to a third party, Kingston, 

solely for the purpose of “cross-docking,” i.e., segregating the product into smaller lots so that 

it could be shipped following consolidation with product from other shippers to Kingston, 

found that Respondent and Kingston were engaged in a bailment. Although Respondent agreed 

to take billing for the commodities, the sales prices were negotiated between Complainant and 

Kingston, with Respondent billing Kingston an additional $0.25 per carton for its crossdocking fee. Since Kingston was the true purchaser of the commodities, found that Respondent, 

as part of the bailment arrangement, was acting as agent for Kingston, its disclosed principal, 

when it agreed to taking billing, and that Respondent did not incur any liability under the 

contracts absent any indication that it specifically agreed to pay for the commodities in the 

event that Kingston did not pay. Metz Fresh LLC v. D’Arrigo Bros. Co. of Cal., 69 Agric. Dec.

906, 914 (2010).

c. DISCLOSURE OF PRINCIPAL

Broker in a sale to an undisclosed or partially disclosed buyer (seller did not know buyer’s

identity) is liable as a principal on the contract. A.R.Z. Potato v. Frank Donia Co., 39 Agric.

Dec. 961, 962 (1980); Ucon Produce v. Jimmy Shmon Produce Broker, 37 Agric. Dec. 1747,

1749 (1978), where we quoted Mawer-Gulden-Annis, Inc. v. Brazilian & Columbian Coffee

Co., 49 Ill. App. 2d 400, 199 N.E.2d 222 (1964):

It is a settled rule in verbal contracts, if the agent does not disclose his agency and

name his principal, he binds himself and becomes subject to all liabilities, express

and implied, created by the contract and transaction, in the same manner as if he

were the principal in interest . . . And the fact that the agent is known to be a

commission merchant, auctioneer, or other professional agent, makes no

difference. The duty is upon the agent, who wishes to avoid liability, to disclose

the name or identity of his principal clearly and in such a manner as to bring such

adequately to the actual notice of the other party, and it is not sufficient that the

third person has knowledge of the facts and circumstances which would, if

reasonably followed by inquiry, disclose the identity of the principal.

An agent who acted on behalf of a disclosed principal subjected the other party to liability to

the same extent as if the principal had conducted the transaction. Big Apple Pineapple Corp.

v. Fashion Fruit Co., 58 Agric. Dec. 1106, 1112 (1999).

Buyer undisclosed in Lake Region Packing Ass’n v. A.J. Sales Co., 50 Agric. Dec. 1034, 1036

(1991). See also J. Schaller Co. v. J. Schlanger & Sons, 35 Agric. Dec. 153, 156 (1976).

Seller undisclosed to buyer by collect and remit broker in Mountain River Produce, Inc. v.

Potato Specialties, Inc., 56 Agric. Dec. 959, 962-63 (1997). Broker negotiated a partial

payment check marked payment in full, and seller was bound. Broker was held liable to seller

for purchase price less damages flowing from seller’s breach as to condition of produce

because it failed to issue confirmation of sale.

Although a collect and remit broker for an undisclosed seller can bind the seller by acceptance

of a partial payment check (as in Mountain River Produce, above), once the principal is
25

disclosed, such a broker does not have standing to bring a legal action to collect on the debt

incurred when the sale was brokered. Produce Serv. & Procurement, Inc. v. Vestal, 55 Agric.

Dec. 1284, 1286 (1996).

Where a complainant sought reparation against an agent for an undisclosed principal, and

complainant had, in a previous case, counterclaimed based on the same transactions and legal

theory against the undisclosed principal, and lost, complainant is deemed to have lost his claim 

against the agent under the principles of the law of agency, and mutuality of parties is not 

necessary for the doctrine of collateral estoppels to also bar the claim. Wholesale Produce

Supply Co. v. Sam Relan Sales, 50 Agric. Dec. 1933, 1937-38 (1991).

When a principal is undisclosed, payment to a third party may be justified. Cook Sales Co. v.

Triangle Produce Co., 42 Agric. Dec. 1241, 1243-44 (1983); Fowler Packing Co. v. Assoc.

Grocers Co. of St. Louis, 36 Agric. Dec. 87, 90 (1977).

An undisclosed principal may sue in its own name to collect the contract price. Waverly

Growers Coop. v. Mitchell, 24 Agric. Dec. 967, 970 (1965).

A transaction between an agent intending to act for an undisclosed principal and acting within

his power to bind the principal, subjects the other party to liability to the principal takes the

contract subject to all the defenses that would be available against the agent. See W. Seavey,

Handbook of the Law of Agency, § 111, p. 198 (1964). See Diazteca Co. v. Players Sales, Inc.,

53 Agric. Dec. 909, 912 (1994), where this rule was applied.

In Sunshine State Produce v. Mackey, 50 Agric. Dec. 1860, 1864 (1991), the situation was

characterized as “not the usual case of an agent for an undisclosed principal, but rather what

might be characterized as a principal with an undisclosed agent.” It was stated, quoting W.

Seavey, Handbook of the Law of Agency § 136A (1964):

An agent who makes a contract for a disclosed principal is normally not a party to

it and his right to compensation does not give him such an interest in its

performance, that he can maintain an action in his own name. A Fortiori, a

principal cannot, except by assigning the claim, authorize an agent who has no

connection with the transaction to bring an action in his own name.

See STANDING AND PRIVITY OF CONTRACT – this index.

d. EMERGENCY POWER OF AGENT AFTER TERMINATION OF AUTHORITY

A broker can have emergency power to adjust price or sell produce after termination of his

authority if conditions warrant. However, he must make effort to contact principal. Kirk

Produce, Inc. v. Dispoto, 40 Agric. Dec. 1371, 1375-76 (1981).

Burden on broker in such situation to show effort to contact principal. Blue Anchor, Inc. v. S.

Central Brokerage, Inc., 43 Agric. Dec. 1312, 1315 (1984).

e. EMPLOYEE OR AGENT OF PRINCIPAL
26

According to section 16 of the PACA (7 U.S.C. § 499p), the “act, omission, or failure of any

agent, officer, or other person acting for or employed by any commission merchant, dealer, or

broker, within the scope of his employment or office, shall in every case be deemed the act,

omission, or failure of such commission merchant, dealer, or broker as that of such agent,

officer, or other person.” Valenciana Avocados Corp. v. Tomato Specialties, LLC, 74 Agric.

Dec. 503, 510 (2015); L & M Companies, Inc. v. Panama Banana Distrib. Co., 71 Agric. Dec.i,

x-xi (USDA 2012), published in 72 Agric. Dec. i, x-xi (USDA 2013).

f. FIDUCIARY DUTIES

Duty to disclose actual cost of freight. Pappas & Co., v. Papazian Distrib. Co., 46 Agric. Dec.

1882, 1885 (1987); In re Ben Gatz Co., 38 Agric. Dec. 1038, 1039-40 (1979); See F.O.B. –

FREIGHT – this index.

Sales agent has duty to file trust notice and failure to do so in timely fashion is a violation of 

the PACA. Griffin-Holder Co. v. Smith, 49 Agric. Dec. 607, 609 (1990).

The fiduciary duty of an agent who sells to “pool buyers” is treated in Mission Shippers, Inc.v.

Hall, 32 Agric. Dec. 1849, 1851-52 (1973).

“An agent, who to promote the sale of his principal’s goods and hence to increase his

commission, pays the obligation of the buyer to his principal, is not entitled to indemnity if the 

buyer later becomes insolvent.” Restatement, Second, Agency, § 440(a). Mission Shippers, Inc. 

v. Hall, 32 Agric. Dec. 1849, 1851-52 (1973).

Where an intermediary, Mr. Chaseley, was an employee of both parties to a series of produce

transactions, something happened that caused him to begin embezzling funds, and misdirecting 

checks that were entrusted to him. This was not discovered until the end of the series of 

transactions. As a part of this behavior pattern, he failed to disclose to either of the parties to 

the proceeding that he was employed by the other. It was stated that:

Such employment, of course, hopelessly compromised his loyalty to both

employers as far as transactions between the two firms. Since the negotiations in

regard to this transaction were all carried on through Mr. Chaseley, such

negotiations cannot be viewed to have been in good faith, and are tainted by

fraud. Due to the ignorance of both Complainant and Respondent as to Mr.

Chaseley’s unethical conduct, they cannot be deemed to be tainted by Mr.

Chaseley’s fraud, but nevertheless, the transactions themselves are so tainted that

it would be improper to find that a contract resulted from negotiations so

compromised, unless the parties themselves, independent of Mr. Chaseley, clearly

acquiesced in the contract or a modification thereof. Such is not the case with this

transaction, and we conclude that Respondent is liable to Complainant only for

the reasonable value of the grapes.

A.P.S. Mktg. v. R.S. Hanline & Co., 59 Agric. Dec. 407, 412-13 (2000).

g. GROWER’S AGENT
27

A grower’s agent may be held liable for extremely low returns remitted to its principal on

consignment when it fails to provide justification for unauthorized adjustments, dumping, and

sale for “process.” Rogers Bros. Farms, Inc. v. Skyline Potato Co., 69 Agric. Dec. 1599, 1616

(2010).

In the absence of accounts of sale from ultimate receivers or timely, impartial inspections,

grower’s agent’s performance of its duty to the grower is measured against USDA Market 

News price reports. Rogers Bros. Farms, Inc. v. Skyline Potato Co., 69 Agric. Dec. 1599, 1616 

(2010).

Responsibilities of, and liability for failure to perform responsibilities. Lozano v. Whizpac, Inc.,

46 Agric. Dec. 658, 660-61 (1987).

Where respondent claimed to be acting as a grower’s agent but was actually involved in two

separate purchase and sale arrangements, first between respondent and complainant, and

second between respondent and its customer, there was no grower’s agent relationship in spite

of respondent’s effort to show that a written grower’s agent agreement had been submitted to

complainant. Schulist v. Wysocki Sales, Inc., 46 Agric. Dec. 694, 700 (1987).

Grower’s agent who failed to secure evidence in the form of inspection certificates to back up

allowances was liable to grower for amounts of the allowances. Also, where the parties had

previous dealings covered by written contracts, the terms of those contracts, which were

identical, were held to be in effect here where they did not formalize a written contract.

Previous written contracts contained the wording, “Shipper is authorized to make whatever

adjustment or to grant any allowances that in shipper’s opinion are justifiable or necessary in

order that sales be consummated at destination and car or truck lots be accepted by buyers.”

Held that this wording did not relieve the agent of liability for negligent actions such as failure 

to obtain inspections to establish problems with the product. Sousa Farms v. San Joaquin

Tomato Growers, Inc., 46 Agric. Dec. 709, 715-16 (1987).

Where a grower’s agent failed to enter into a written agreement with the grower or furnish a

written statement of the terms under which it would handle grower’s potatoes, allowances

granted by the grower’s agent were disallowed. However, the fact that the agent was not

authorized to make allowances, and nevertheless made allowances, was said to not render the

agent liable for the allowances made if, and to the extent that, the allowances were found to

coincide with deductions from invoice cost which were supported by damages resulting from

breaches of the contract of the sale on the part of complainant. Big Sky v. S & H, Inc., 55 Agric.

Dec. 1312, 1323 (1996).

While the terms of the written marketing agreement between Complainant grower and

Respondent, the grower’s agent, gave Respondent broad discretion to sell Complainant’s

peppers, Respondent was held to have acted negligently by making large price concessions

purportedly based on condition problems without obtaining federal inspections. Regarding

those sales in which Respondent did not act negligently, Respondent was held not to be

required to obtain the prevailing market price for Complainant’s peppers. Mayoli, Inc. v. Weis-
28

Buy Services, Inc., 65 Agric. Dec. 648, 665 (2006).

h. LACK OF AUTHORITY

When one deals through a broker, he runs risk of lack of authority in the broker. Martin

Produce, Inc. v. Basil Co., 30 Agric. Dec. 836, 843-44 (1971); Pasco Cnty. Peach Ass’n v.

J.F. Solley & Co., Inc., 146 F. 2d 880 (1945).

Actions of the principal are the focus of inquiry when determining the existence of apparent

authority in an agent. Fowler Packing Co. v. Associated Grocers Co. of St. Louis, 36 Agric.

Dec. 87, 91 (1977).

Authority to bring reparation action not included in agency contract authorizing party to

invoice, collect and remit. PurePac Brokers, Inc. v. Procacci Bros. Sales Corp., 54 Agric. Dec.

734, 736-37 (1995). See STANDING – this index.

i. LIABILITY OF AGENT OR OTHER PARTY TOPRINCIPAL

See PAYMENT – PROPER PARTY FOR – this topic.

Where the other party bought produce from the principal through the agent, and paid the agent

who was not authorized to receive payment, and such payment was over the objection of the

principal, the other party was liable to the principal for the full value of the produce. The agent

who took payment and did not forward it to its principal was liable jointly and severally with 

the purchaser to the principal for the amount received from the purchaser. Such agent was also

not entitled to brokerage fees where it acted without authority in accepting payment for the 

produce. Big Apple Pineapple Corp. v. Fashion Fruit Co., 58 Agric. Dec. 1106, 1112 (1999).

j. PAYMENT - PROPER PARTY FOR

See LIABILITY OF AGENT OR OTHER PARTY TO PRINCIPAL – this topic. See

STANDING AND PRIVITY OF CONTRACT – this index.

Complainant sold to respondent through the broker and proved that invoice was mailed to

respondent the next day. The broker also invoiced respondent, and respondent paid the broker. 

Respondent proved that in prior transactions with other sellers through the broker, respondent 

had paid the broker. Held: respondent failed to prove that complainant authorized the broker to

collect and remit. The broker was not entitled to funds received from respondent and became 

constructive trustee of such funds with duty to pay them to complainant. Joint and several

award in complainant’s favor against the broker and respondent. Alexander Mktg. v. Gram &

Sons, 30 Agric. Dec. 439, 441 (1971).

Complainant acted as marketing agent for a shipper, advanced the shipper funds, and was listed 

in the Redbook as salesman for the shipper. Complainant, in order to balance out accounts with 

the shipper, was given a load of grapes by the shipper which complainant then sold through a 

broker to respondent. The broker issued a proper memo showing complainant as seller and 

served such on complainant and respondent. After respondent received the grapes, respondent 
29

was telephoned by the shipper and was told to send its payment to the shipper. Respondent 

noted that the shipper appeared as shipper on bill of lading and then paid the shipper.

Respondent was held to have paid the wrong party and reparation was awarded to complainant

against respondent. Adam v. Perma, 31 Agric. Dec. 431, 433-35 (1972).

Respondent buyer paid the broker after issuance of confirmation showing complainant was

seller. Held respondent liable to pay complainant as to accepted goods. John Livacich Produce, 

Inc. v. DiGiacomo, 46 Agric. Dec. 1020, 1022-23 (1987); Sun World Int’l v. Corgan & Sons, 

45 Agric. Dec. 742, 744-45(1986).

Where a buyer of a partial load paid the trucker for the balance of the load, the buyer was held

liable to the seller for the reasonable market value of the balance of the load. Woods Co. v.

Boyd, 47 Agric. Dec. 1087 (1988).

k. PRIOR COURSE OF DEALING

Agency may be implied from prior, similar dealings. Hawman v. G & T Terminal Packing Co.,

46 Agric. Dec. 1544, 1552 (1987); Woodrow Johns Co. v. Sikeston Fruit & Produce, 19

Agric. Dec. 547, 551-52 (1960); Nash DeCamp Co. v. Albertson Co., 13 Agric. Dec. 283,

287-89 (1954).

However, even though the seller had allowed the broker to collect and remit in the past, the

broker had issued memoranda of sale to that effect. In the instant case, the broker did not issue 

confirmations of sale, and both broker and shipper invoiced the buyer. After making inquiry of

the broker, the buyer paid the broker. Held that buyer paid the wrong party and was still liable 

to the seller. Louis Caric & Sons v. Garden Fresh Mkt., Inc., 35 Agric. Dec. 412, 415 (1976).

l. PROOF OF CONTRACT

When evidence showed that a licensed grower and its former agent failed to reach an

agreement on a grower’s agent contract negotiated during the fall of 2005 for the 2006 growing 

season, evidence of prior course of dealing from 2000-2005, the grower’s publication of the 

agent’s name in association with the grower’s entries in the Bluebook and the Redbook in the 

spring and fall of 2006, and written contracts with third parties that did not identify the agent as 

an agent for grower, were inadequate to show that grower contracted with agent for the 2006 

growing season. Pearl Ranch Produce LLC v. Desert Springs Produce LLC, 67 Agric. Dec. 

1465, 1472-74 (2008).

m. PROOF OF EQUITABLE RELIEF

An agent’s mere assertion that his principal had promised to compensate him for principal’s

decision to contract with a different agent was inadequate to support the first agent’s claims for

equitable relief. Pearl Ranch Produce LLC v. Desert Springs Produce LLC, 67 Agric. Dec.

1465, 1472-74 (2008).

n. RATIFICATION
30

The silence of a principal after learning that his agent has changed the terms of a contract will

constitute a ratification by that principal. Hawman v. G & T Terminal Packaging Co., 46 Agric. 

Dec. 1544, 1552 (1987). In Sanders v. Greenberg Fruit Co., 32 Agric. Dec. 1856, 1859-60

(1973), it was held that a modification of the original contract, though negotiated by a broker 

whose authority had terminated at the conclusion of the original contract, was ratified by the 

seller. This comports with the statement in H. Reuschlein and W. Gregory, The Law of Agency 

and Partnerships, § 27, p. 72 (second ed. 1989), that ratification “. . . is the affirmance of an act 

done originally without authority.” See Id., Chapter 3 on Ratification, § 30 of which

summarizes the conditions necessary for ratification to take place asfollows:

In order for ratification to operate effectively at least five general requirements are

invariably noted: (a) The contract or act for which ratification is sought must be

one which would be valid if the agent had been authorized at the time it was

executed or performed; (b) The purported principal must have been in existence

when the act was done and he must be legally competent at the time he attempts

to ratify; (c) The contract or act must have been executed or performed on behalf

of the particular individual later seeking to ratify; (d) The ratification must be

effected with the same formalities required for an authorization to execute the

contract or perform the act in the first instance; and (e) At the time of ratification,

the purported principal must have knowledge of all material facts concerning the

transaction.

Although Respondent failed to establish the collection agent was bestowed by Complainant

with either actual or apparent authority to negotiate a settlement on Complainant’s behalf,

Complainant’s acceptance of funds the collection agent received from Respondent raised the

question as to whether Complainant ratified the settlement agreement the collection agent

negotiated with Respondent. It was, however, determined that all the necessary elements of

ratification had not been met, as there was no indication Complainant intended to ratify the

settlement agreement, nor did it appear Complainant had full knowledge of the terms of the

agreement at the time it accepted the funds from the collection agent. New Generation Produce

Corp. v. Rossi Foods, Inc., 70 Agric. Dec. 474, 488 (2011).

10. ALLOCATION OF PAYMENTS

Where complainant sold 17 loads of produce to respondent, and it was determined that five

were in interstate commerce and 12 were not, a $7,000.00 partial payment not tendered by

respondent in payment of any specific invoice was allocated by us to the intrastate shipments. It 

was stated that in the absence of respondent specifying how the payments should be applied, 

complainant had a right to allocate the payments to the intrastate shipments, and that“[i]t is a 

general rule of law that where a debtor does not exercise his power to apply a payment to one 

of several debts, the law will apply the payments in a way most beneficial to the creditor.” 

Produce Distrib., Inc. v. Michael Bros., 45 Agric. Dec. 814, 817 (1986); Mendelson-Zeller Co. 

v. Bleier, 34 Agric. Dec. 683 (1975). See J. Segari & Co. v. Farace, 23 Agric. Dec. 495-96

(1964).

When payment application not specified by parties, it will be applied in manner most beneficial

to creditor. Conway, Inc. v. Ben F. Line, 16 Agric. Dec. 387, 389 (1957).
31

Where the debtor does not exercise his power to apply a payment to one of several debts, the

law will apply the payments in a way most beneficial to the creditor. Mendelson-Zeller Co. v.

Bleier, 34 Agric. Dec. 683, 686 (1975).

Where a partial payment check was tendered on the condition that it be accepted as payment in 

full, but debtor did not specify to what debt it was to be applied, and there were several open

accounts at the time of tender, creditor was within its rights when it applied the payment to an 

open freight bill, and no accord and satisfaction of the produce debt was accomplished.

DeSomma v. All World Farms, Inc., 61 Agric. Dec. 821, 833 (2002).

11. ARBITRATION

Grower and grower’s agent entered into written “Distribution Agreement” defining terms under 

which the agent would market grower’s garlic, and such Agreement included a paragraph

requiring submission of disputes under the Agreement to binding arbitration. The agent, after 

marketing some of the garlic, refused to market the garlic any further due to alleged quality

problems. Thereafter, according to the allegation of the grower, the agent agreed to purchase a 

quantity of the garlic, and grower brought a reparation complaint for failure to pay according to

the terms of the alleged purchase agreement. It was held that under the Federal Arbitration Act 

the reparation forum was bound to respect the arbitration agreement. It was also stated that the 

question of whether the Agreement allowed a sale of garlic outside the Agreement to take place 

between the parties would be a question that could be decided only by an arbitration forum 

under the Agreement. However, it was stated that if such question were answered in the 

affirmative, the question of whether there was in fact a sale could not be answered by the 

arbitration forum since the sale would fall outside the scopeof the Agreement between the 

parties. Therefore, in order to promote efficiency in the administration of justice, the limited 

factual question of whether a sale of the garlic took placebetween the grower and agent was 

considered and decided in the negative by the reparation forum. Green Acres Turf Farms, Inc. 

v. Kelly Distrib., Inc., 55 Agric. Dec. 1298, 1304-07 (1996).

Perry v. Thomas, 482 U.S. 483, 490 (1987):

An agreement to arbitrate is valid, irrevocable, and enforceable, as a matter of

federal law, ‘save upon such grounds as exist at law or in equity for the

revocation of any contract.’ Thus state law, whether of legislative or judicial

origin, is applicable if that law arose to govern issues concerning the validity,

revocability, and enforceability of contracts generally.

12. ASSIGNMENT FOR BENEFIT OF CREDITORS NOT ADEFENSE

Assignment for the benefit of creditors is not a defense in reparation proceedings. Braman v.

B.G. Mktg. Co., 46 Agric. Dec. 511, 512 (1987); Fruit Salad, Inc. v. M. Egan Co., 42 Agric.

Dec. 664, 665 (1983); Arbittier Farms v. Top Banana Farmers Mkt., Inc., 42 Agric. Dec. 1272,

1274 (1983).

13. BOND REQUIREMENT FOR FOREIGN RESIDENTS
32

Extensive discussion of requirement and of legislative history in Provincial Fruit Co. v.

Brewster Heights Packing, Inc., 39 Agric. Dec. 1514-16 (1980).

H.R. Rep. No. 915, 75th Cong., 1st Sess. (1937), in commenting upon the waiver proviso,

subsequently adopted that year, stated:

The act now requires non-residents of the United States to furnish a bond in

double the amount of their claim to take care of costs and attorney’s fees of the

respondent if he prevails. This amendment also makes the bond cover any

reparation award which may be issued against such complainant on any

counterclaim by the respondent. The amendment also allows the Department to

waive a bond by a complainant who is resident of a country which permits

residents of the United States to file complaints in that country without furnishing

bond. Canada has a law similar to this act which does not require bonds from

residents of the United States who may file complaints against residents of

Canada. Canadian officials have protested this unequal treatment, and this

amendment will permit the same requirements in both countries. (Comment on

Section 9 of the bill, at page 3.)

See also show cause order and subsequent order, in Blue Anchor, Inc. v. E.M. Mallet, Inc., 39

Agric. Dec. 739, 742 (1980), wherein the Judicial Officer refused to allow a PACA

complainant which was an American assignee of a foreign firm to avoid a counterclaim filed by 

the American respondent by a claim of lack of privity of contract. The orders comment on the 

intent of the bonding requirement. The 1982 amendment included American assignees of

foreign firms in the bonding requirement.

14. BREACH OF CONTRACT

See CONTRACTS – this index.

a. ANTICIPATORY REPUDIATION

See White & Summers, § 6-2, p. 170.

Where subject matter (unharvested bok choy) of repudiation contract was destroyed through no 

fault of either party shortly after repudiation by seller, buyer was not entitled to damages.

Under U.C.C. § 2-713, “learned of the breach” was found to mean “time of [for] performance.” 

– Extensive discussion. V.V. Vogel & Sons Farms v. Cont’l Farms, 44 Agric. Dec. 886, 895-96

(1985).

Where the buyer repudiates with respect to a part or the whole, the seller may resell the goods

concerned, and if such resale is made in a commercially reasonable manner and in good faith,

may recover the difference between the resale price and contract price plus any incidental

damages incurred. Washburn Potato Co. v. Rex E. Sparks Produce, 42 Agric. Dec. 955, 958

(1983); Ashley v. Cyr Bros. Meat Packing Co., 36 Agric. Dec. 401, 409-410 (1977).
33

Where the buyer, prior to shipment, notified the seller that it would not accept the contract air

shipment of strawberries, its rejection (repudiation) was wrongful. However, the shipper’s legal 

remedies at that time did not include going ahead with shipment. Coastal Berry Corp. v.

Hoverson & Sons, 44 Agric. Dec. 1300, 1303 (1985).

Strawberries under contract were scheduled for delivery in early June. “Frequent inquiry was

made by complainant of respondent as to when the berries would be ready for delivery. When it 

became apparent that respondent would not make delivery or assure complainant of a definite

shipment date, complainant, in order to take care of its commitment, purchased on the open 

market at a higher price.” Held: complainant awarded the difference in cost. Pierce- YoungAngel Co. v. Turlock Frozen Foods, Inc., 18 Agric. Dec. 43, 48-49 (1959).

b. BY REASON OF BRAND

Failure to ship correct brand is a breach of contract, but proof of damages is usually not

accomplished. See Van Buren Cnty. Fruit Exch. of FL. v. B.F. Roberts Farms, Inc., 28 Agric.

Dec. 1365, 1368 (1969).

Where seller shipped 533 crates of correct brand and 75 crates of wrong brand, it was held that 

rejection of the entire load was justified. Garin Co. v. Mitchell, 30 Agric. Dec. 1534, 1538-39

(1971).

c. BY REASON OF GOVERNMENT STOP SALE ORDER

Government stop sale order issued against Chilean grapes two weeks after their acceptance by

buyer was not, in itself, evidence of breach of contract by seller. Pandol Bros., Inc. v. Burnett

Produce Co., 49 Agric. Dec. 1207, 1209 (1990).

Where respondent received and accepted watermelons and began sales. When an embargo was

placed on the sale of California watermelons due to a possible Aldicarb contamination 18 days 

later, it was held that the respondent had the duty to show the saleable condition of the

remaining melons in order to be relieved of the duty to pay for the entire load. Myco v. Boise

Farmers Mkt., Inc., 46 Agric. Dec. 1579, 1581 (1987).

d. MATERIAL BREACH

A material breach, as the term is used in the Regulations [Requirements] (7 C.F.R. § 

46.43(1)(m) and (t)), refers to all substantial breaches of contract other than a breach of the 

warranty of suitableshipping condition. Martori v. Hous. Fruitland, Inc., 55 Agric. Dec. 1331,

1335 (1996).

Where the shipper failed to properly load the lettuce, it suffered freezing injury. Held that

shipper was responsible for the condition of the lettuce upon arrival and was liable to the

receiver for damages. Cal-Veg Sales, Inc. v. Sears-Schuman Co., 40 Agric. Dec. 476, 478

(1981). See MERCHANTABILITY – WARRANTY OF – this index.

A timely inspection of green cabbage, showing 35% quality defects (ranging 15% - 61%), and 
34

3% yellowing, and 2% insect damage, for a checksum of 40% damage by quality and condition 

defects, including 8% serious damage by quality defects, was held to show a breach of the 

implied warranty of merchantability (U.C.C. § 2-314). Conner v. McBryde Produce LLC, 69 

Agric. Dec. 798, 815 (2010).

Where contract terms were f.o.b. acceptance final, the supply of vine ripe tomatoes when the

contract specified gassed green tomatoes was a material breach. DeSomma v. All World Farms,

Inc., 61 Agric. Dec. 821, 833-34 (2002).

Where the seller’s change of billing from “open” to “advise” in an f.o.b. acceptance final

contract, it was held to be a material breach of contract causing the buyer to be at liberty to

consider the agreement repudiated and free to reject the product. Schumann Co. v. Nelson, 219

F.2d 627 (1955).

Where the contract called for apples to be 80% to full color and the shipping point inspection

stated the color range to be from 66% to full red color, it was held that there was no proof of a

material breach of contract since the statement in the federal inspection was a statement of the

requirements of the applicable grade and not a determination that the subject apples contained

samples with only 66% full red color. Raymond “Mickey” Cohen & Son, Inc. v. Great Lakes

Fruit & Produce, Inc., 52 Agric. Dec. 1686, 1699-700 (1993).

In a no grade contract for the delivery of lettuce, the weight of the cartons is not a factor in

determining whether the load made good delivery. Growers Exch., Inc. v. Cumberland Produce

Co., 42 Agric. Dec. 1547, 1548 (1983).

Where the contract calls for a specific size of product, failure to ship product meeting that

specification constitutes a material breach of contract. E.M. Mallet, Inc. v. Amigo Foods Corp.,

37 Agric. Dec. 1584, 1588 (1978); Gronostalski Produce Corp. v. Ernie Johnson & Son, 37 

Agric. Dec. 1600, 1603 (1978).

e. MISBRANDING

Tomatoes were sold by complainant to respondent. A federal inspection at destination showed 

that some of the tomatoes were misbranded, some were the wrong brand, and some were

shipped with the wrong color. All of these failings were held to constitute breaches of contract 

by complainant. J & J Produce Co. v. Weis-Buy Serv., Inc., 58 Agric. Dec. 1095, 1100 (1999).

f. OPEN SALE – BUYER’S BREACH BY SALE TO THIRD PARTY

In an “open” sale, the seller usually expects that the buyer and seller will agree on a price at

some point following delivery, often following resale by the buyer. It is therefore implicit in

such a contract that the seller expects to be dealing with a particular receiver, namely the

receiver disclosed to the seller at the time of sale. For a buyer in such a sale to convey the

goods to a third party for resale without the permission of the seller is a breach of the contract

between seller and buyer. Growers Mktg. Serv., Inc. v. J & J Distrib. Co., 53 Agric. Dec.

892, 895 (1994).
35

g. PART PERFORMANCE

“Complainant was under no obligation to accept part performance, and it had the right to refuse

tender of a part of the shipment and to maintain an action for the breach of the entire contract.”

Pearce-Young-Angel Co. v. Turlock, 18 Agric. Dec. 43, 48 (1959).

Delivery of 381 cartons where contract called for delivery of “approximately 463” was a breach

of contract. Bearman v. Taplett, 24 Agric. Dec. 365, 367 (1965).

h. TIMELY NOTICE REQUIRED

Where Respondent waited four days to look at onions received via railcar from Complainant,

and upon discovery of a breach at that time gave notice to Complainant through the broker,

found that such notice was not timely. We also noted, however, that the load remained intact in 

the railcar under constant refrigeration between the time of arrival and the time the car was

opened. Moreover, after a U.S.D.A. inspection was performed on the onions the following day, 

Complainant had the opportunity, if the results of the inspection were in question, to request an 

appeal. Since the timeliness of the notice provided by Respondent therefore did not appear to 

have prejudiced Complainant’s rights with respect to securing its own evidence of the condition

of the onions following arrival, found the untimely notice of breach provided by Respondent 

should not bar Respondent’s recovery of damages resulting from the breach. Four Rivers

Packing Co. v. Sam Wang Produce, Inc., 76 Agric. Dec. A (U.S.D.A. 2009).

To claim damages, a receiver must give the shipper timely notice of a breach of contract. See

U.C.C. § 2-607(3). See also Produce Specialists of Ariz., Inc. v. Gulfport Tomatoes, Inc., 42

Agric. Dec. 1194, 1197-98 (1983); Spudco, Inc. v. Yick Lung Co., 36 Agric. Dec. 715-16

(1977).

See NOTICE OF BREACH – this index.

15. BROKERS

See AGENCY – this index.

See major topic NOTICE TO BROKER – this index.

a. ACCOMMODATION BROKERS

Complainant shipped forty-four loads of citrus to two buyers. All negotiations were through a

broker, who was found to have purchased only one of the loads for the broker’s own account.

Complainant alleged that the broker made an oral agreement to guarantee the payment of the

buyers. However, where the broker’s memorandums of sale disclosed that the buyers were

being accommodation invoiced by the broker, it was stated that a guarantee would have to be

proven by the most forceful evidence. Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric.

Dec. 1766, 1789 (1994).

Where the broker advanced funds to the seller but was unable to recover payment from the
36

buyer, it was entitled to recover the advanced monies from the seller. Tom Lange Co. v.

Salinas Lettuce Farmers Coop., 35 Agric. Dec. 401, 404-07 (1976).

b. ACTS INCONSISTENT WITH AGENCY RELATIONSHIP

Where middleman with apparent knowledge of seller but not of receiver, negotiated a $.25 per

cwt. markup plus an additional markup, he was held to be the buyer of the produce in spite of

the fact that he issued a broker’s memorandum of sale and held himself out as a broker to both

of the other parties to the transactions. It was stated that “respondent negotiated for himself a

financial stake in the . . . transactions inconsistent with his professed position as broker.”

Mountain Valley, Inc. v. Zambito, 49 Agric. Dec. 613, 614-15 (1990).

c. APPARENT AUTHORITY

The failure to withdraw a previous grant of authority may result in the broker still having

apparent authority to act on behalf of its principal. Antle Bros. & Tanimura Bros. v.

Albertson’s, Inc., 45 Agric. Dec. 2507, 2509 (1986); Jacobsen Produce, Inc. v. R.L. Burnette

Brokerage Co., 37 Agric. Dec. 1743, 1745 (1978); George Arakelian Farms, Inc. v. Leonard

O’Day Co., 31 Agric. Dec. 1395, 1401 (1972).

Although a broker was found to be a special agent rather than a general agent, such broker was 

nevertheless clothed with apparent authority by complainant to conclude modifications of

contracts with the buyer, and where such modifications were not specifically authorized by

complainant, the broker was found to be in breach of its duty to complainant, and liable for

damages. Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1841 (1994).

d. AUTHORITY

A broker’s authority normally terminates when the parties have negotiated a contract so that all

it can do is relay messages between the buyer and the seller. Frank Minardo, Inc. v. Finest

Fruits, Inc., 47 Agric. Dec. 1784-86 (1988); Kirk Produce, Inc. v. Dispoto, 40 Agric. Dec.

1371, 1374-76 (1981); John Livacich Produce, Inc. v. M-K Sons Produce Co., 37 Agric. Dec.

1798, 1801 (1978); Fowler Packing Co. v. United Fruit & Produce, 37 Agric. Dec. 1915,

1919 (1978); Gonzales Packing v. Price, 25 Agric. Dec. 390, 397 (1966).

Where broker sold potatoes under “deferred billing” terms rather than obtaining prevailing

market prices as agreed with the shipper, broker was held to have exceeded its authority and

was held liable for the difference between the lower quotes of the Market News and the

proceeds received from the purchasers. Zoller Distrib. v. Tom Lange Co., 36 Agric. Dec. 428,

436 (1977).

e. BREACH OF DUTY

Where Respondent A, a broker, was in violation of the Regulations [Requirements] for hiring a 

second brokerwithout authority from Complainant to do so, Respondent A was held liable to 

Complainant for the difference between the original contract price of the produce, and the 

reduced price paid by the buyer, Respondent B, in accordance with a revised confirmation
37

received from the second broker. Complaint dismissed against Respondent B. Kinzer v. Nathel 

& Nathel, Inc., 66 Agric. Dec. 876, 879-80 (2007).

A broker may be found liable if it breaches its duty as fiduciary. See 7 C.F.R. § 46.28(a). See

also N. Am. Produce Buyers v. Source Produce Distrib. Co., 48 Agric. Dec. 1101-04 (1989);

Baker Produce, Inc. v. Ball Brokerage Co., 48 Agric. Dec. 689, 692 (1989).

Broker held liable for failure to communicate rejection of proposed contract terms and

counteroffer. Mid-Valley Prod. Corp. v. Valley Packing Serv., 33 Agric. Dec. 1431, 1436-37

(1974).

Broker held liable for failure to quote price correctly. Applewood Orchards, Inc. v. C.L.

Contreras and Bench Mark Brokerage, Inc., 46 Agric. Dec. 94, 96 (1987); A. Arena & Co. v.

George Turner Co., 10 Agric. Dec. 1258, 1260 (1951).

Where the product was shipped with virtually no decay, broker held liable for damages

resulting from his failure to inform the shipper of the destination of the product. Fred A. Ross

Potato & Onion Co. v. Chi. Potato Co., 38 Agric. Dec. 435, 438-39 (1979).

Where a broker issued an accommodation invoice to a buyer, without authority from the seller,

in a fraudulent and successful attempt to collect the proceeds from the buyer and apply them to 

an indebtedness owed to the broker by the seller from previous transactions, it was held that the

broker was liable jointly with the buyer to the seller for the contract price. Shelton v. J.A.

Besteman Co., 50 Agric. Dec. 1854, 1859 (1991); Shelton v. Mazzola, 50 Agric. Dec. 918, 928

(1991).

Where a broker was given possession of complainant’s plantains for the purpose of selling

them and instead turned them over to a third party to sell, it ran afoul of the Requirements

which state:

A broker employed to negotiate the sale of produce may not employ another

broker or selling agent, including auction companies, without the specific prior

approval of his principal. 7 C.F.R. § 46.28(b).

It was stated that the broker was in very much the same position as a commission merchant

(See 7 C.F.R. § 46.29(a)), and the rationale for the decision was stated as follows:

The reason for these regulations is based upon the legal relationship in view, and

should be obvious. The broker or commission merchant is an agent selected to

perform a specific task. Such agent does not buy produce, but is employed by the

owner to sell the owner’s produce on the owner’s behalf. Until the agent makes

the sale the owner retains title to the goods, and following the sale the owner is

entitled to the proceeds of the sale less a commission and agreed upon, or

reasonable, expenses. The owner selects the person or firm that he or she deems

best capable of performing the task, often taking into consideration the clientele to

which the broker or commission merchant has access. When an agent is given

authority to sell, there is no implied authority for such agent to employ someone
38

else to do the selling. Selling agents are not fungible, but are possessed of

differing skills, differing client lists, and access to different markets.

Triton Imports, Inc. v. S.C. Distrib. Co., 52 Agric. Dec. 1678, 1684 (1993). See TRUST FUND

– LIABILITY OF SALES AGENT – this index.

f. COMMISSION

A broker is entitled to a reasonable commission as its compensation. See Am. Jur. 2d, Brokers, 

§§ 99-100; 7 C.F.R. § 46.27; 7 C.F.R. § 46.28; A.G. Shore Co. v. Four Seasons Wholesale 

Produce, 41 Agric. Dec. 1225, 1232 (1982).

Broker entitled to fee upon negotiation of contract. Subsequent breach by a party thereto does

not furnish excuse for not paying such fee. Victor D. Bendel Co. v. A. Peltz & Sons, 39 Agric.

Dec. 311, 313 (1980); Clement Jones Co., Inc. v. Cherry Foods, Inc., 34 Agric. Dec. 677,

679-80 (1975).

g. CONFIRMATION OF SALE

A broker’s confirmation of sale usually receives considerable weight as evidence of the

contract terms. Del Rio Growers, Inc. v. Anthony Gagliano & Co., 47 Agric. Dec. 476, 478

(1988).

It is true that confirmations of sale and invoices . . . do not constitute the contracts between the 

parties. Such documents, however, are considered as evidencing the understanding between the

parties when no prompt objection is made to their contents, and are particularly significant if a 

term such as “inspection and acceptance at destination” is claimed to have been a part of the 

contract. J.R. Simplot Co. v. Red L. Foods Corp., 17 Agric. Dec. 384, 389(1958).

Prompt objection to a broker’s confirmation of sale usually is given great weight. Kaiser

Diversified Enter., Inc. v. Wallace Fruit & Vegetable Co., 32 Agric. Dec. 1523, 1526 (1973).

Confirmation is not the contract between the parties but merely evidence of the contract. L.S.

Taube & Co. v. Palmer, 38 Agric. Dec. 731, 733 (1979).

A confirmation is not a manifestation of assent to a contract, but rather a memo of assent, or of 

a contract already in being. It cannot serve as a manifestation of assent. Brady Farms v. New

Era Mktg., 37 Agric. Dec. 1962, 1967 (1978).

h. DUTIES

A broker does not have a duty to assure performance on the part of the parties. H.Y. Minami & 

Sons v. Shippers Serv. Co., 32 Agric. Dec. 892, 894 (1973); Higgins Potato Co. v. Holmes &

Barnes Ltd., 20 Agric. Dec. 636, 640-41 (1961).

Absent a showing of negligence, a broker cannot be found liable because the buyer rescinds the 

contract. Cal. Artichoke and Vegetable Growers Corp. v. Lowell J. Schy Brokerage, 47 Agric. 
39

Dec. 1324, 1326 (1988). Here, the broker was negligent in that he failed to issue a

memorandum of sale; however, it was held that the failure to issue a broker’s memorandum 

was not the causative factor of the damages suffered by complainant.

A broker’s undertaking to “take responsibility if in the event of any problems with collections,” 

could not be interpreted as a guarantee of payment, and the words of the broker could simply 

mean that the broker was agreeing to attempt to collect if there was any difficulty in collection. 

Mollenberg v. Custom Fruit Sales, Inc., 50 Agric. Dec. 942, 943 (1991).

Duty to disclose financial condition of buyer to seller discussed and ruled on in Frank Donia

Co. v. Hous. Produce Distrib. Co., 38 Agric. Dec. 848, 850-51 (1979); T.J. Power & Co. v.

C.H. Robinson Co., 36 Agric. Dec. 460, 466-67 (1977).

See also Mission Shippers, Inc. v. Hall, 32 Agric. Dec. 1849, 1851-52 (1973), which was

distinguished in Eckel Produce v. C.H. Robinson Co., 40 Agric. Dec. 1785, 1788 (1981).

i. STATEMENTS OF

Broker’s statements are entitled to great weight. Homestead Tomato Packing Co. v. Mim’s

Produce, Inc., 43 Agric. Dec. 173, 177 (1984).

The broker’s sworn affidavit stating that only green and breaker tomatoes were to be shipped

was sufficient proof to show that contract specification even though it did not appear on the

broker’s confirmation. B & L Produce, Inc. v. Procacci Bros. Sales Corp., 37 Agric. Dec.

1243, 1246 (1978).

In the absence of the required statement on the broker’s memorandum of sale as to who

engaged the broker, a broker is presumed to have been engaged by the buyer. This fact should 

be weighed carefully in regard to the credibility of a broker’s statements. In a case where the

broker was found to have been engaged by the respondent, the broker’s statements in 

respondent’s favor were nevertheless given credence. Charles Johnson Co. v. Hoversen, 57

Agric. Dec. 756, 759-60 (1998).

16. BURDEN OF PROOF

a. ACCEPTANCE

Burden on complainant to prove receipt and acceptance where the respondent denies the same.

Failure to prove receipt and acceptance held to be a failure to establish a prima facie case.

Nobles v. Peraino, 46 Agric. Dec. 683 (1987).

b. AFFIRMATIVE DEFENSE

Burden on respondent to establish by a preponderance of the evidence. Jules Produce Co. v.

Quality Melon Sales, Inc., 40 Agric. Dec. 152, 154 (1981); Newmiller Farms, Inc. v. Nicolls, 36 

Agric. Dec. 1230, 1232 (1977); Walker & Hagan Packing House v. Amato Bros. Tomato

Distrib., Inc., 27 Agric. Dec. 1543, 1545 (1968).
40

Respondent, who provided evidence from the informal and formal stages of the proceeding that 

Complainant did not own or have any rights to the grapes that made up the 30 transactions in 

this proceeding, and that Respondent had already paid the actual grower and rightful owner of 

the grapes identified in each transaction, in full, met its burden of establishing through a 

preponderance of the evidence an affirmative defense to Complainant’s claims that it was owed

money from Respondent for the 30 transactions. Evans Sales, Inc. v. W. Coast Distrib., Inc., 67

Agric. Dec. 1441, 1452 (2008).

c. AGENCY

A party which relies on the statements of an agent has the burden to show that the agent had the

authority to make the statements or the commitments on which it relied. Fowler Packing Co. v. 

Associated Grocers Co. of St. Louis, 36 Agric. Dec. 87, 91 (1977); Martin Produce, Inc. v.

Basil Co., 30 Agric. Dec. 836, 843-44 (1971); Gonzales Packing v. Price, 25 Agric. Dec. 390,

397 (1966).

d. BREACH OF CONTRACT

Burden on buyer to establish breach as to accepted goods. See U.C.C. § 2-607(4). See also

Ocean Breeze Exp., Inc. v. Rialto Distrib., Inc., 60 Agric. Dec. 840, 903 (2001); GrowerShipper Potato Co. v. Sw. Produce Co., 28 Agric. Dec. 511, 514 (1969).

Where goods are accepted the buyer has the burden of proof to establish a breach of contract.

See U.C.C. § 2-607(4). See also Grower-Shipper Potato Co. v. Sw. Produce Co., 28 Agric. Dec. 

511, 514 (1969).

e. COMMERCIAL VALUE

All produce is assumed to have commercial value until otherwise shown. Milton J. Mark, Inc.

v. Maunawili Produce, Inc., 37 Agric. Dec. 918, 921 (1978).

The receiver has the burden to show that produce has no commercial value. Homestead Pole

Bean Coop., Inc. v. Jones, 43 Agric. Dec. 1216, 1218 (1984); Growers Produce v. Star

Produce, 33 Agric. Dec. 693, 696 (1974).

f. CONDITION OF REJECTED GOODS

An effective rejection places the burden of proof as to condition upon the seller. When produce 

has been rejected by a receiver as not meeting contract specifications the shipper has the burden 

to show that it was in suitable shipping condition when it was loaded at shipping point. 

Heggeblade-Marguleas-Tenneco, Inc. v. Fisher Foods, Inc., 33 Agric. Dec. 1443, 1447-50

(1974).

Complainant, as the party alleging rejection without reasonable cause, has the burden of

proving the contract terms and its compliance therewith. Horwath & Co. v. Mim’s Produce,
41

Inc., 47 Agric. Dec. 332, 334 (1988); Lipoma v. C.H. Robinson Co., 29 Agric. Dec. 499, 508

(1970).

g. CONFLICTING ALLEGATIONS AS TO CONTRACTTERMS

Where the parties put forth affirmative but conflicting allegations with respect to the terms of

the contract, the burden rests upon each to establish his allegation by a preponderance of the

evidence. Justice v. E. Potato Dealers of Me., Inc., 30 Agric. Dec. 1352, 1356 (1971); Harland

W. Chidsey Farms v. Geurin, 27 Agric. Dec. 384, 386 (1968).

h. CONTRACT

Complainant, who submitted invoices for grapes from Complainant to Respondent,

corresponding bills of lading, and corresponding work orders for 30 grape transactions

occurring between August 20, 2002 and November 26, 2002, as prima facie evidence of a sale

between Complainant and Respondent as to the 30 grape transactions, failed to rebut evidence

from Respondent that Complainant did not own or have any rights to the grapes that made up

the 30 transactions in this proceeding, and that Respondent had already paid the actual grower

and rightful owner of the grapes identified in each transaction, in full. Accordingly,

Complainant did not meet its burden of proving by a preponderance of the evidence all of the

material allegations of its complaint, including the existence of a contract. Evans Sales, Inc.

v. W. Coast Distrib., Inc., 67 Agric. Dec. 1441, 1450 (2008).

Seller has the burden of proving purchase agreement with buyer. Jones v. Barrage, 16 Agric.

Dec. 1142-1143 (1957).

Complainant’s unilateral email proposals to Respondent did not prove the existence of a sales

contract for 150 containers of Italian oranges where neither parties’ conduct adhered to the

terms of the proposed agreement and the oranges were not received or accepted by Respondent. 

The sender of a written confirmation of an oral agreement must prove that a contract was in 

fact made orally prior to the sending of the written confirmation. Paganini Foods LLC v.

Westlake Distributors, Inc., 69 Agric. Dec. 868, 892 (2010).

i. CONTRACT MODIFICATION

Party which claims the contract was modified has the burden of proof. Regency Packing Co.

v. Auster Co., 42 Agric. Dec. 2042, 2045 (1983); F.H. Hogue Produce Co. v. Singer’s Sons, 33

Agric. Dec. 451, 454 (1974).

Where respondent testified that a consignment agreement was reached and complainant

testified that such did not happen, confirming wires sent by respondent and not objected to by

complainant decided issue in favor of respondent. Dan Hart & Son v. Pellegrino & Son, 28

Agric. Dec. 211, 216 (1969).
42

Failure to prove poor arrival so as to show motive for seller to modify contracts is a factor to be 

considered as to whether burden of proof has been met. E.H. Glueck & Co. v. Franklin

Produce, 16 Agric. Dec. 947-49 (1957).

j. DAMAGES

After receipt and acceptance of produce, burden to prove breach and/or damages is on

respondent. Perez Ranches, Inc. v. Pawel Distrib. Co., 48 Agric. Dec. 725-26 (1989); Santa

Clara Produce, Inc., v. Caruso Produce, Inc., 41 Agric. Dec. 2279, 2283 (1982); Theron

Hooker Co. v. Ben Gatz Co., 30 Agric. Dec. 1109, 1112 (1971).

k. DELIVERY

See this heading – RECEIPT OF GOODS

l. FOB – NORMAL TRANSPORTATION

In the absence of the issue of abnormality of transportation service and conditions being raised, 

either by the evidence on the face of the record or by a party, such transportation is assumed to 

be normal. Veg-A-Mix v. Wholesale Produce Supply, 37 Agric. Dec. 1296, 1299 (1978); R.C.

Walter & Sons v. Gatz, 31 Agric. Dec. 655 (1972); James Macchiaroli Fruit Co. v. Thomas

Caito Sons, 21 Agric. Dec. 525 (1962).

However, where the issue is raised as stated above, the burden of proof of normal

transportation in f.o.b. transactions is on the buyer if he accepted. Dave Walsh Co. v. Rozak’s,

39 Agric. Dec. 281, 284 (1980); U.C.C. § 2-607(4).

On the other hand, if the buyer made an effective rejection, then the burden is on the seller to

prove that transportation was abnormal. (This becomes important where the rejected goods are 

shown to have arrived in poor condition, and the seller wishes to show that abnormal

transportation voided the warranty of suitable shipping condition so as to show the effective

rejection to have been wrongful.) Bud Antle, Inc. v. J.M. Fields, Inc., 38 Agric. Dec. 844, 847

(1979); Tenneco W., Inc. v. Gilbert Distrib. Co., 38 Agric. Dec. 488, 493 (1979); Bud Antle,

Inc. v. Bohack, 32 Agric. Dec. 1589, 1591-92 (1973).

Two loads of tomatoes, part of a lot federally inspected on the day of shipment and found to be 

free of insect infestation, were sold f.o.b., and shipped from Florida with a California

destination. One load proceeded to destination without incident, and the other load was refused 

entrance into California by state officials at the border due to an infestation of fire ants, and was 

caused to be fumigated, which led to subsequent abnormal decay in the tomatoes. It was held 

that since the California buyer accepted the tomatoes, it had the burden of proving that

transportation service and conditions were normal in order to avail itself of thesuitable shipping 

condition warranty, and since the seller submitted evidence showing the tomatoes were not 

insect infested when inspected on the day of shipment, and it was entirely possible that the 

truck became infested after leaving the seller’s packing facility, the buyer failed to meet its

burden of proving that transportation services and conditions were normal, and the suitable

shipping condition warranty did not apply. Mecca Farms, Inc. v. Bianchi Pre-Pack, Inc., 50
43

Agric. Dec. 1929, 1932 (1991). See also 4 Star Tomato v. REM Brokerage Co., 47 Agric. Dec.

787, 790 (1988).

See SUITABLE SHIPPING CONDITION – VOID WHEN TRANSPORTATION NOT

NORMAL, and topic TRANSPORTATION.

m. IDENTITY OF GOODS SHIPPED

A claimant who asserts that goods subjected to inspection by a receiver were not the goods

shipped has the burden of showing what goods were shipped. Great Am. Farms, Inc. v.

William P. Hearne Produce Co., 59 Agric. Dec. 466, 469 (2000).

n. JURISDICTION

Complainant had burden of proving the interstate nature of a transaction so as to establish

jurisdiction in the Secretary to hear the matter. Wide World of Foods v. Trinity Valley Foods

Co., 34 Agric. Dec. 423, 426-27 (1975).

o. NOTICE OF BREACH

See major topic NOTICE OF BREACH – this index.

Burden to prove giving of prompt notice rests on buyer who claims breach by seller. Hunts

Point Tomato Co. v. Md. Fresh Tomato Co., 47 Agric. Dec. 773, 778 (1988).

In order to establish its claim buyer must prove “that notice of the breach of promise or

warranty was given the seller within a reasonable time after the buyer knew or ought to have

known of such breach . . .” Welchel Produce Co. v. Rosenberg, 15 Agric. Dec. 452, 455 (1956).

Complainant sold and shipped a load of vine ripe tomatoes and a load of roma tomatoes to

respondent, who distributed the tomatoes from each load among three or four customers on the 

Hunts Point Market. Complainant claimed that no notice of a breach of contract was given as to

either load. It was held that since respondent accepted the loads, it had the burden of proof as to 

notice and had met the burden. Oceanside Produce, Inc. v. JSG Trading Corp., PACA R-00-

031, slip op (June 19, 2000).

p. NOTICE OF REJECTION

A rejection is not effective unless the buyer seasonably notifies the seller, and the burden of

proving seasonable notice rests upon the buyer. San Tan Tillage Co. v. Kaps Foods, Inc., 38

Agric. Dec. 867, 871 (1979).

q. PROPONENT OF CLAIM
44

The proponent of the contract has the burden to prove the elements of contract, whether

established by a writing, an oral agreement, or through a course of dealing. Even where

enforcement of an agreement does not require that the agreement be written, a written

agreement is strong evidence of both a contract and the contract terms. Pearl Ranch Produce

LLC v. Desert Springs Produce LLC, 67 Agric. Dec. 1465, 1470 (2008).

The proponent of a claim has the burden of proof. Sun World Int’l v. J. Nichols Produce Co.,

46 Agric. Dec. 893-95 (1987); W.W. Rodgers & Sons v. Cal. Produce Distrib., 34 Agric. Dec.

914, 919 (1975); N.Y. Trade Ass’n v. Sidney Sandler, Inc., 32 Agric. Dec. 702, 705 (1973).

(This is a very general rule which should be thought of as applying to the overall claim of a

moving party. It will be found to be unworkable in some specific situations. For instance, in

case where goods were rejected, the seller may seek reparation and claim [among other things] 

that no prompt notice of rejection was given. As to the issue of notice of rejection the

respondent, not complainant [who is the proponent of the claim that respondent failed to give

prompt rejection notice], has the burden of proving that rejection notice was given. Again,

where a complainant alleges that it has not been paid by the respondent, the complainant, as the

proponent of the claim that it has not been paid does NOT have the burden of proof. Rather, the

respondent would have the burden of proving payment.)

Complainant has the burden of proving by a preponderance of the evidence all of the material

allegations of its complaint, including the existence of a contract, the terms thereof, a breach by 

respondent, and damages resulting from that breach. Haywood Cnty. Coop. Fruit & Vegetable

Ass’n, Inc. v. Orlando Tomato, Inc., 47 Agric. Dec. 581, 583 (1988); Justice v. Milford Packing

Co., 34 Agric. Dec. 533, 535 (1975).

When Respondent’s claim that it was impossible for Complainant to have repacked U.S. No. 2 

limes to obtain a quantity of U.S. No. 1 limes was rejected and Respondent failed to provide 

evidence that Complainant actually shipped U.S. No. 2 limes, and Respondent’s claim that the

contract was breached because the limes were not of a uniform size was also rejected as the

contract did not specify that the limes were to be of one particular size but only that they be of 

uniform shape and that each bag contain 25 pieces of fruit, Respondent’s counterclaim and setoff was denied. Progreso Produce Ltd. LP v. Fresh Group Ltd., 66 Agric. Dec. 1492, 1517 

(2007).

r. RECEIPT OF GOODS

Burden on shipper to show that a shipment is received by the buyer at destination. Commodity 

Mktg. Co. v. Randles Produce, 33 Agric. Dec. 862, 865 (1974); Glendale Produce Co. v. Zeiter 

Food Corp., 33 Agric. Dec. 236, 238 (1974). However, in Sun World Int’l, Inc. v. Sa-So 

Poultry Sales Co., Inc., 43 Agric. Dec. 234 (1984), where the complainant submitted both its 

invoice, which was not objected to by the respondent, and a shipping document showing the 

railroad took possession of the van and that the van was consigned to the respondent, held that 

it was unnecessary to determine whether the lettuce was received by the respondent at 

destination since the respondent would bear the loss under the f.o.b. terms of the contract even 

assuming that the lettuce failed to reach the contract destination in Philadelphia. Id. at 236.
45

Where complainant submitted an invoice, a point of origin inspection certificate, and a shipping 

manifest as proof that respondent received goods, and respondent denied any contract or receipt

of the goods, it was held that complainant’s proof was insufficient. It was stated that in the 

“face of respondent’s denial of the existence of a contract or receipt of the load of tomatoes, 

complainant had to do more . . . An affidavit from the trucker would have constituted

independent evidence...” Nobles v. Peraino, 46 Agric. Dec. 683-85 (1987).

s. REJECTED GOODS

Where an effective rejection is made of a commodity, the burden is on the seller to show that

such rejection was wrongful. McKay v. Lusk Onion, Inc., 54 Agric. Dec. 721, 724 (1995); Bud 

Antle, Inc. v. J.M. Fields, Inc., 38 Agric. Dec. 844, 847 (1979); Heggeblade-MarguleasTenneco, Inc. v. Fisher Foods, Inc., 33 Agric. Dec. 1443, 1447-49 (1974).

Where a load of produce is effectively rejected, the seller has the burden of proving that it

complied with contract. Bud Antle, Inc. v. Bohack, 32 Agric. Dec. 1589, 1592 (1973).

When effectively rejected produce was sold f.o.b., the seller had the burden to show

transportation service and conditions were not normal. Sunset Strawberry Growers v. Luna Co., 

46 Agric. Dec. 1701, 1703 (1987); Bud Antle, Inc. v. J.M. Fields, Inc., 38 Agric. Dec. 844, 847

(1979). The burden on a seller where there is an effective rejection extends to proof of 

compliance with f.o.b. terms of the contract including burden of proving transit abnormal.

Tenneco W., Inc. v. Gilbert Distrib. Co., 38 Agric. Dec. 488, 493 (1979). However, the rule

placing the burden of proof on the seller where there is an effective rejection does not extend to 

proof of the contract terms where existence of the contract was not in dispute. Buyer was held 

to have burden of proof as to special terms. World Wide Brokerage, Inc. v. Calhoun Fruit & 

Produce, 49 Agric. Dec. 615, 619 (1990).

Where buyer made an effective rejection of load of strawberries, the title automatically reverted 

to seller, and seller had burden of proving contractual warranty inapplicable. Seller’s refusal to 

accept rejection was meaningless, and seller had a primary duty to dispose of goods. Where 

seller did not dispose of goods, buyer’s duty to dispose of goods was contingent upon seller 

having no agent or place of business in market of rejection, and burden of proof was on seller 

to establish that it had no such agent or place of business. However, where buyer assumed duty 

of resale, it was assumed that duty did rest on buyer, but buyer was held only to good faith 

standards in making resale. Crowley & Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 

681 (1996).

17. CAUSE OF ACTION

A cause of action accrues when a person in whose favor it arises is first entitled to institute a

judicial proceeding for the enforcement of his rights. See Louisville Cement Co. v. I.C.C., 246

U.S. 638, 62 L.ed. 914, 38 S.Ct. 408 (1918), where speaking of the similar jurisdiction statute 

of limitations applicable to reparation proceedings before the Interstate Commerce Commission

the Court said:

[w]hen the statute was enacted the time when a cause of action accrues had been

settled by repeated decisions of this court to be when a suit may first be legally
46

instituted upon it [citing cases]; and, since no clearly controlling language to the

contrary is used, it must be assumed that Congress intended that this familiar

expression should be given the well understood meaning which had been given to

it by this court . . . (at p. 644).

“The general rule is that [a cause of action] accrues when the right to institute and maintain a

suit arises, and not before.” Boler Fruit & Veg. Co. v. Kenworthy, 19 Agric. Dec. 226, 229

(1960).

“Contrary to complainant’s assertion that a cause of action does not accrue until the facts are

known to a complainant, it is well settled that a cause of action accrues at the time that an event 

occurs and not at the time when a party discovers the facts or learns of his rights thereunder.” 

(Citing cases) Calavo Growers of Cal. v. Int’l Food Mktg., Inc., 40 Agric. Dec. 972, 974 

(1981).

a. ACCOUNTING

Accounting – when accounting was made. Wuszke v. Fruit Pak, Inc., 42 Agric. Dec. 1207, 

1211 (1983); Tatum v. Harrisburg Daily Mkt., 23 Agric. Dec. 1272, 1277 (1964).

A cause of action accrues when suit may first be brought upon it. In the case of an accounting

this usually occurs when the accounting is rendered. However, where the accounting is not

timely rendered a complainant knows that an action may be brought for an accounting. In such 

cases the cause of action accrues when the complainant could first bring an action, that is, at the 

time the accounting was due but not rendered. In this case, the respondent actually paid 

complainant without rendering an accounting, and complainant was put on notice at that point 

that something was amiss under the consignment contract and could have brought an action for

an accounting at that. Prime Commodities, Inc. v. J.V. Campisi, Inc., 59 Agric. Dec. 461, 464-

65 (2000).

b. AS TO FREIGHT CHARGES

Cause of action to sue for freight charges paid to the freight company on respondent’s behalf.

Sawyer & Co. v. Rothstein & Sons, 15 Agric. Dec. 693, 696 (1956). See also Frank Kenworthy

Co. v. D.L. Piazza Co., 16 Agric. Dec. 844, 849 (1957).

c. COUNTERCLAIM AS TO FOREIGN COMPLAINANT

Cause of action in counterclaim against foreign complainant did not accrue at time of filing of

compliant. Suit could have been brought in foreign forum prior to such time. Bar-Well Foods

Ltd. v. Valley Packing Serv. Int’l, 39 Agric. Dec. 1200, 1204 (1980).

d. COUNTERCLAIM BASED ON DIFFERENT CAUSE OFACTION

Counterclaim dismissed for want of jurisdiction because it was based on different transactions

than those involved in complaint and was filed more than nine months after causes of action

relative to such counterclaim accrued. Prime Commodities, Inc. v. J.V. Campisi, Inc., 59 Agric.
47

Dec. 461, 464-65 (2000); Se. Farms, Inc. v. Weinstein Produce Sales, Inc., 46 Agric.

Dec. 97-99 (1987); Seald-Sweet Growers, Inc. v. Superior Produce, Inc., 43 Agric. Dec. 1227,

1229 (1984); Bar-Well Foods Ltd. v. Valley Packing Serv. Int’l, 39 Agric. Dec. 1200, 1204

(1980); B & K Produce Co. v. Shipper’s Service Co., 33 Agric. Dec. 701, 706 (1974); Sanders

& Drake v. Gardner Bros., 31 Agric. Dec. 128, 131-32 (1972); Hirn v. Sol Fetterman Produce 

Co., 25 Agric. Dec. 258, 263 (1966), petition for reconsideration dismissed 420; I. Meltzer & 

Son v. J. Lerner & Son, 21 Agric. Dec. 685, 690 (1962); Cardoso Bros. v. Unanue & Son, 20 

Agric. Dec. 1188, 1192 (1961); R. Dixon & Co. v. Spagnola, 17 Agric. Dec. 1057,

1061-62 (1958); Rick’s Fertilizer Co. v. M. Dunn & Co., 5 Agric. Dec. 194, 197 (1946).

Where A was alleged to have provided consulting services from 1991 to 1996 as to how to

grow oriental vegetables to B, in exchange for a portion of the commission B was to paid by

the grower of the vegetables, and B was paid each year by the grower, but A did not request

payment until April of 1996, and did not file a reparation counterclaim until January of 1997, it

was held that the Secretary did not have jurisdiction due to lack of a timely complaint.

Although A alleged that there was no agreed time for payment, it was held that A had a cause 

of action for payment that accrued at the times when B was paid by the grower. E. Produce,

Inc. v. Seven Seas Trading Co., 59 Agric. Dec. 853, 863 (2000).

e. FAILURE OF AGENT TO FILE TRUST NOTICE

Cause of action was held to have accrued “in this case” on the date when seller would have

learned that the trust filing by the agent was late and that its interests were not protected. “In 

this case, that date would be the first day after the trust filing was due . . .” i.e., the first day

after the last day on which it could have been filed. Griffin-Holder Co. v. Smith, 49 Agric. Dec.

607, 612 (1990).

f. RUNNING ACCOUNT

The cause of action accrues at the time of the last transaction in the case of a running account.

Where complainant and respondent entered into a joint account agreement for handling of

potatoes and sweet potatoes, and complainant paid respondent one-half the profits on every car 

showing a profit and one-half of the losses were charged against respondent in a running

account, and respondent was forwarded a statement of the balance due at the end of the

transaction period, it was held that the cause of action on the losses did not accrue until the

rendition of the statement. Knaebel v. Young, 1 Agric. Dec. 611, 614 (1942). In Jolivette v.

J.J. Distrib. Co., 41 Agric. Dec. 141, 144-45 (1982), the issue was said to be determined by

whether the contract was divisible or entire, and Williston on Contracts (Third Edition, section 

862 at 272) was quoted, “Where, however, payment of a separate sum is to be made for several 

articles to be used independently of one another the contract generally will be considered 

divisible or the transaction held to create several contracts. If payment of a lump sum is to be 

made on several articles, the contract is necessarily indivisible.” The parties engaged in 29 

shipments of potatoes, and a separate sum was paid for nineteen shipments, but lump sums 

were paid covering the remaining nine shipments, and the contract was said to be divisible and 

not a running account. See Kenworthy v. Lewis D. Goldstein Fruit & Produce Corp., 15 Agric. 

Dec. 42, 47-48 (1956) where one party argued, “The transactions were of such nature as not to 

be compatible with a running account, in that some purchases by me, as a broker, for Goldstein, 
48

some were sales by me, as a broker, for Goldstein and some involved carloads shipped to me to 

handle for our joint account. Each transaction was handled and invoiced separately. At no time

did respondent send me a statement showing charges and credits to a running account. Rather, 

it invoiced me separately on each car load or truckload and I remitted separately as to each 

account. Neither party treated the transactions as a running account.” It was held that the parties

did not have a running account.

18. COLLATERAL ATTACK ON STATE COURTJUDGEMENT

Where a reparation respondent brought an action in state court against an out of state reparation 

complainant, and the reparation complainant was served with process under the forum state’s

long-arm statute, the judgment of the state court was subject to collateral attack in the 

reparation forum if minimal contracts were not present between the reparation complainant and 

the state where the civil suit was brought. DeSomma v. All World Farms, Inc., 61 Agric. Dec. 

821, 832 (2002).

19. COLLATERAL ESTOPPEL

The term now generally used to cover this subject area is issue preclusion.

A party which has received a judgment in a state court may be collaterally stopped from

pursuing the same cause of action in this forum. Parkland Hosiery Co. v. Shore, 429 U.S. 322

(1979).

See M.S. Thigpen Produce Co. v. Park River Growers, Inc., 48 Agric. Dec. 695, 699 (1989).

Where a complainant sought reparation against an agent for an undisclosed principal, and

complainant had counterclaimed based on the same transactions and legal theory in a previous

action against the undisclosed principal and lost, complainant is deemed to have lost his claim

against the agent under the principles of the law of agency, and mutuality of parties is not

necessary for the doctrine of collateral estoppel to also bar the claim. Wholesale Produce

Supply Co. v. Sam Relan Sales, 50 Agric. Dec. 1933, 1937-38 (1991). We made the following

statement:

The doctrine of collateral estoppel historically was applied only where there was a

mutuality of parties.

1 However, in recent years the mutuality requirement has

been rejected by many state and federal courts, “especially where the prior

judgment was invoked defensively in a second action against a plaintiff bringing

suit on an issue he litigated and lost as plaintiff in a prior action.”2

Limited jurisdiction of Colorado forum in prior decision concerning same parties and subject

matter viewed as allowing subsequent decision by Secretary as to same subject matter and

parties. Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 304-05 (1980).

20. COMMERCIAL UNIT

1 Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, (1971). 2 Id.
49

A commercial unit is all produce delivered in a single shipment under a single contract. See 7

C.F.R. § 46.43 (ii). The underlying rationale for the regulation was the representation of the

PACA Division that allows a partial acceptance of a load would have a materially adverse

effect on the remainder. See U.C.C. § 2-601, comment 1, last sentence. See also Salinas Lettuce

Farmers Coop. v. Larry Ober Co., 39 Agric. Dec. 65 (1980).

In an f.o.b. sale of a truckload of lettuce from California which had, in turn, been sold in

smaller lots by the buyer to several customers at different drop points at destinations in the

East, the buyer alleged and failed to prove a price adjustment. Two of the buyer’s customers at 

the first two drop points were accepted, and the customer at the third drop point had the

remainder of the load inspected, and rejected to buyer on basis of such inspection. Buyer then

rejected to the seller and the seller refused to accept rejection, but consigned lettuce to

commission merchant to preserve value. It was held that under Regulations [Requirements] 

defining “commercial unit,” the buyer’s customer could reject to the buyer, but the buyer could 

not reject to the seller following acceptance of the other lots. Salinas Lettuce Farmers Coop. v.

Ag-West Growers, Inc., 50 Agric. Dec. 984, 989 (1991).

Rejection of a partial truckload was allowed where remainder of produce on truck was shipped

by a different shipper. Horwath & Co. v. Mim’s Produce, Inc., 47 Agric. Dec. 332, 334 (1988); 

Senini Ariz., Inc. v. Carnival Fruit Co., 38 Agric. Dec. 1602 (1979).

After analysis of the definition of “commercial unit” in the Regulations [Requirements], and of 

prior cases holding that lots of similar produce on a load should be averaged to determine if the 

load as a whole made good delivery, it was held that there is no reasonable basis for continuing 

to require that a breach pertain to a load as a whole. It was stated that “[t]here is nothing to

prohibit rejection of a shipment when the breach exists only as to a portion of the load, and

there is no prohibition of finding a breach and damages as to only a portion of a load when the

whole load is accepted.” The portions of a load which will be considered as subject to a finding 

of a breach of contract were stated to be those which are distinguished in federal inspections.

Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 984-85 (1997).

A load of roma tomatoes, which were all the same brand and size and shipped from the same

packing house, was distributed to four of respondent’s customers, but only one lot was subject

to federal inspection. This inspection showed 20% soft tomatoes, and respondent asserted that 

the tomatoes delivered to the other three customers were in good condition. Although under 

recent precedent, the Commercial Unit Regulation does not generally require that damaged 

portions of a load be lumped with portions of the load that have no, or less, damage, there is an 

exception for homogeneous loads which contain no differing lots such as are required to be 

distinguished in federal inspections. Considering the load as a whole, the roma tomatoes were 

found to not exceed the amount of condition defects allowed under the suitable shipping 

condition warranty. Oceanside Produce, Inc. v. JSG Trading Corp., PACA R-00-031, slip op 

(June 19, 2000).

21. CONFLICT OF LAWS

See ELECTION OF REMEDIES - this index.
50

In A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1055-65 (1991), a seller 

in New York sold and shipped a load of cabbage to a District of Columbia buyer and, following 

a good faith dispute, the buyer sent the seller a check for less than the original purchase price 

marked in full payment, and the seller cashed the check after endorsing it with words of protest 

and filed a complaint for the balance. Where New York’s interpretation of U.C.C. § 1-207 

would treat the seller’s words of protest as a reservation under such section of any right to go 

against the buyer for the balance of the original price, and District of Columbia law was 

assumed to agree with the vast majority of states which have held that U.C.C. § 1-207 does not 

apply to the negotiation of a conditional payment check where all non-monetary performance 

has been concluded, it was found that the basic applicable law was federal law, that federal law 

subsumed state law, that the reparation forum must select its own choice of law rule to 

determine which jurisdiction’s law is applicable, that the choice of law rule selected would be 

that of U.C.C. § 1-105, that § 1-105 was the equivalent of the significant contacts test of the 

Restatement (Second) on Conflict of Laws, and that under such test it was appropriate to apply 

District of Columbia law.

See also Branch v. Mission Shippers, Inc., 35 Agric. Dec. 726, 731-32 (1976); Nathan’s

Famous, Inc. v. Merberg, 36 Agric. Dec. 243, 251-52 (1977).

See discussion at 10 N. Harl, Agricultural Law § 72.10[3].

22. CONSIGNMENTS

a. ADEQUACY OF ACCOUNTING

Complainant sold a truckload of table grapes to respondent on an f.o.b. basis. Following arrival 

of the grapes, and an inspection showing a breach of warranty by complainant, the parties 

agreed to respondent’s customer handling the grapes on consignment. However, respondent’s 

customer failed to render an accounting. It was held that the percentage of condition defects 

shown by the inspection could be applied to the average market price of good grapes to arrive 

at a reasonable price for the grapes. However, since the market quotations available also listed 

quotations for grapes in only fair condition, such quotations were used as more accurately

reflecting the reasonable value of the damaged grapes. Shipley v. Tom Lange Co., 52 Agric.

Dec. 679, 683 (1992).

Onions arrived showing breach of delivered sale contract, but were in good enough condition

that they would have made good delivery if sale had been f.o.b. As a result of breach, the

parties agreed to the receiver handling the onions on a consignment basis. The accounting

disclosed that the onions were sorted, and then sold in one lot which contained the same

number of sacks as were shipped. Gross proceeds of the resale were less than half of the current 

market price, but this was stated to not be sufficient cause, in and of itself, to find the

accounting improper. The accounting also lumped together as one charge the cost of storage,

sorting and commission. It was stated that the sale of the onions in one lot, though not fatal to

the accounting, was unusual, and was more questionable when the price appears markedly low 

relative to market price. The accounting was found to be improper in that it showed no
51

wastage resulting from the sorting, and in that it failed to break out the charges for commission,

sorting and storage. The charge for storage was also stated to be improper. The shipper was 

awarded reasonable value based on the low price shown by market reports and less the 

percentage of condition defects shown by the arrival inspection. DeBruyn Produce Co. v. 

Lopez, 56 Agric. Dec. 992, 996 (1997).

Where the consignee’s records failed to disclose the full disposition of the consigned goods, the 

USDA investigator’s use of average sales price for the missing cartons was the only course

available. U.S. Gateways, Inc. v. Finest Fruit, Inc., 45 Agric. Dec. 2430, 2435 (1986).

b. BREACH OF CONSIGNMENT CONTRACT

Where consignee claimed damages from consignor because 500 cartons out of 1,280 cartons of 

consigned grapes had to be dumped, and there was no evidence that grapes were agreed to be of

good quality, but consignee knew that there was a prior rejection of the load, it was held that no

breach of the consignment contract had been proven. Procacci Bros. Sales Corp. v. B.T.

Produce Co., 60 Agric. Dec. 341, 346 (2001).

c. CONSIGNOR BOUND BY ACTS OF ITS CONSIGNEE

Absent fraud, or some other breach of its fiduciary obligations, a consignee is not liable to a

consignor merely because the goods fetched less on resale than the market price or the amount

the consignor expected. Tex-Sun Produce v. Int’l Produce Distrib., Inc., 48 Agric. Dec. 1111,

1114-15 (1989); Pac. Fruit & Produce Co. v. Wm. C. Denny, Inc., 31 Agric. Dec. 1420, 1422-

23 (1972); Monash v. Pearl, 15 Agric. Dec. 1250, 1254 (1956); Haven Citrus Sales v. R.H.

Dietz & Co., 15 Agric. Dec. 1091, 1094-95 (1956).

d. CONSIGNEE’S - DUTIES OF

A consignee has the duty to prompt and properly resell the goods, render an accounting and pay

the net proceeds. Stoops & Wilson v. Wholesale Produce Exch., 41 Agric. Dec. 290, 292 

(1982); Collins Bros. Produce Co. v. Dixieland Produce, 38 Agric. Dec. 1031, 1034 (1979)

(sales of perishable fruit begun eight days after arrival not prompt).

A consignee has the duty of keeping the consignor informed of developments and of any

inability to make a satisfactory disposition of the goods. Any failure in performing this duty

constitutes a breach of duty by the agent to its principal, and the agent is liable for any loss

resulting therefrom. Alford v. Produce Prod., Inc., 39 Agric. Dec. 474, 478-79 (1980); Jobb

Packing Co. v. Peter Condakes Co., 30 Agric. Dec. 1076, 1083 (1971). See also A.B. Cohen

Co. v. Schley Bros., 6 Agric. Dec. 830, 836 (1947), where we quoted Mechem on Agency, 2nd

Ed, Section 2532:

It is the duty of the factor to inform his principal of every fact in relation to his

agency which comes to his knowledge, and which may reasonably be deemed

important for the principal to know in order to the protection or promotion of his

interest; and a factor who negligently omits to give such information will be

liablefor a resulting loss.
52

A consignee in a consignment transaction has the duty to secure evidence of dumping for all

produce dumped in excess of 5%, and any dumped produce in excess of 5% must be brought

back into the accounting at the average price realized for the produce that was not dumped.

Carmack v. Selvidge, 51 Agric. Dec. 892, 901 (1992).

e. DUTY TO SELL IN CONSIGNEE’S MARKET AREA

Unless the consignor permits otherwise, the consignee must sell the produce in the market area

in which the consignee is located. See 7 C.F.R. § 46.29. See also Wholesale Produce v. Auster

Co., 29 Agric. Dec. 1314, 1317-18 (1970).

Where a consignment contract expressly called for the consignee to handle two carloads of

potatoes on consignment, charge a 12% commission, and a $0.25 per box handling charge, and 

consignee also charged cartage for delivery to somewhat distant buyers, it was held that the 

charges were proper. The consignor did not complain about the sales to distant buyers or

dispute that they were incurred, but only that the cartage charges were not a part of the

agreement as to what charges would be made. It was said that when the charges are “a

legitimate part of the way a particular commission merchant operates, and are reasonably

necessary to enable the sales of the goods to take place,” such expenses should be allowed. A

case was cited in which “it was indicated (though not decided) that the consignor probably

knew, or had reason to know, of the nature of the commission merchant’s business, and that

sales would be made to a surrounding area.” However, we said, “the principle applies beyond

such circumstances.” Joe Phillips, Inc. v. McDonnell & Blankford, Inc., 50 Agric. Dec. 1005, 

1008 (1991). (It seems to me that the expectation of the parties should control in these

circumstances. It should be presumed that a consignee will sell only within the reasonable 

confines of its municipal area, unless it is shown that it is generally known in the industry that 

its normal practice is otherwise, or that the consignor had specific knowledge that its custom 

was to sell beyond those areas.)

In a case that dealt with a broker who was given possession of produce to sell on complainant’s 

behalf, it was stated that the broker was in much the same position as a commission merchant 

and could not use a third party to effectuate the sales. The rationale for this requirement was 

explained as follows:

The reason for these regulations is based upon the legal relationship in view, and

should be obvious. The broker or commission merchant is an agent selected to

perform a specific task. Such agent does not buy produce, but is employed by the

owner to sell the owner’s produce on the owner’s behalf. Until the agent makes

the sale the owner retains title to the goods, and following the sale the owner is

entitled to the proceeds of the sale less a commission and agreed upon, or

reasonable, expenses. The owner selects the person or firm that he or she deems

best capable of performing the task, often taking into consideration the clientele to

which the broker or commission merchant has access. When an agent is given
53

authority to sell, there is no implied authority for such agent to employ someone

else to do the selling. Selling agents are not fungible, but are possessed of

differing skills, differing client lists, and access to different markets.

Triton Imports, Inc. v. S.C. Distrib. Co., 52 Agric. Dec. 1678, 1684 (1993).

f. LIABILITY OF AGENT FOR ACTS OF SUB-AGENT

Where consignee employed subagents without authority from the consignor to sell consigned

produce, the subagents were not liable to the consignor, and the consignee was liable for the

negligence of the subagents. Lee Wong Farms, Inc. v. Joseph Fierman & Son, Inc., 27 Agric.

Dec. 274, 279 (1968).

g. NEGLIGENCE OF AGENT

Where Complainant sought payment based on its “house average” sales price, and Respondent 

countered that its liability should be limited to the net sales proceeds collected from its 

customer, it was noted that Complainant chose Respondent to sell the lemons on its behalf and 

that, in so doing, Complainant assumed the risk of poor performance on Respondent’s part. 

Accordingly, absent a showing of fraud or other hard evidence of relevant violations of the 

Regulations [Requirements], held that Respondent’s liability to Complainant should be based

on the sales proceeds it collected from its customer, less commission, in accordance with the

parties’ agreement. This is true even in the case where the sales prices reported by Respondent 

fell substantially below the relevant prices reported by U.S.D.A. Market News because, again,

Complainant bore the risk of Respondent’s poor performance. However, in the case where a 

damage claim was asserted by Respondent’s customer, Respondent had a positive duty, as 

Complainant’s agent, to secure evidence that any resulting adjustments granted to the customer 

were warranted. In the absence of such evidence, Respondent was held liable to Complainant 

for the original price negotiated with its customer, less commission. Similarly, where 

Respondent failed to negotiate a sales price with its customer at the time of contracting and 

later agreed to a substantially reduced price, and there was no evidence that Complainant 

authorized Respondent to sell the lemons in this manner, it was found that Respondent was 

liable to Complainant for the fair market value of the lemons as determined based on relevant 

USDA Market News reports. Wildwood Produce Sales, Inc. v. Citrusource, Inc., 67 Agric. Dec. 

704, 803 (2008).

Market circumstances vary widely from time to time and place to place. In addition, perishable

commodities can be merchantable and still vary over a wide range as to quality and as to 

desirability on a given market dependent on many varying characteristics of such produce. [The 

consignee] was a company chosen by complainant to act as complainant’s agent . . . We are 

very reluctant to subject the performance of complainant’s agent to the scrutiny of our

hindsight. La Vern Coop. Citrus Ass’n v. Mendelson-Zeller Co., 46 Agric. Dec. 1673, 1678

(1987).

Respondent realized $3.00 per carton for the first load of potatoes, but put two loads, received

two days later, in storage. Over a month later, they were dumped. Complainant failed to
54

support its contention that dumped potatoes should have been sold for $3.00 by any reference

to market reports. Without using hindsight, there is nothing to show that storing potatoes was

not the best procedure to follow. Pac. Fruit & Produce Co. v. Wm. C. Denny, Inc., 31 Agric.

Dec. 1420, 1422-23 (1972).

Where produce was shown by federal inspection following arrival and acceptance to be

substantially damaged, and parties agreed to change contract from one of sale to consignment,

the consignor failed to prove a failure by consignee to perform its fiduciary duties even though 

the first sale of the produce was made nine days after the agreement was made, and most of the 

produce was finally dumped. The consignee proved by affidavits from the firms to which the 

produce was offered that the goods were offered to the trade on the first two days after the 

consignment agreement and also proved that the consignor participated unsuccessfully in trying

to sell the produce. Premium Valley Produce, Inc. v. Sam Wang Food Corp., 57 Agric. Dec. 

1684, 1688-89 (1998).

Commission allowed even though consignee violated Requirements and failed to account:

Where market prices were between $12.00 and $12.50 for large peppers and between $9.00 and 

$9.50 for medium peppers, and consignee returned $7.89 for large peppers and $6.00 for

medium peppers; and it was “not clear from the record that respondent ever rendered a timely

accounting” and also respondent sold more than half the peppers outside its market area in

violation of the Regulations [Requirements] (7 C.F.R. §46 29(a)), complainant was awarded 

market price, and respondent was allowed a commission based on 13% of market price. Relan 

v. Ga. Vegetable Co., 41 Agric. Dec. 559, 561 (1982).

Wide latitude allowed consignee in Cooney & Korshak, Inc. v. M. Trombetta & Sons, Inc., 19

Agric. Dec. 890, 892-93 (1960); Monash v. Pearl, 15 Agric. Dec. 1250, 1254 (1956); Haven

Citrus Sales v. R.H. Dietz & Co., 15 Agric. Dec. 1091, 1094-95 (1956); Anonymous, 11 Agric.

Dec. 388, 391-92 (1952).

Consignee found liable in Artco v. Mandell, 24 Agric. Dec. 1155, 1158 (1965), a load of no

grade lettuce was consigned to respondent with the understanding that respondent was not to

sell unless the proceeds would exceed expenses. A Railroad Perishable inspection on arrival

showed the lettuce to have an average of 10% damage by tipburn and no decay. This was

confirmed by another private inspection service. Respondent made no sales of the lettuce.

Market News report at the time reported sales of “poorer” quality lettuce at $2.25 to $3.00 per

carton. It was held that respondent failed to act promptly in attempting to dispose of the lettuce. 

The decision stated that the lettuce was properly characterized as being in fair condition and 

awarded complainant the lowest of the prices quoted for fair condition lettuce, or $2.33 per

carton.

In Wolverine Fruit Co. v. Boehmer, 27 Agric. Dec. 1153, 1159 (1968), a load of two varieties

of apples was federally inspected on arrival and one of the varieties was found to have bruising 

and quality defects totaling 14%, whereas only 10% is allowed under the grade standards. The 

parties agreed to the entire load being handled on consignment. Respondent sold the apples at 

$0.50 per carton. Testimony at the hearing indicated the market value of the apples, considering

the bruising, would have been over twice what respondent realized, and it was held that

Respondent failed to make a prompt and proper resale of the apples.
55

The consignee was found to have not promptly and properly resold the produce where the

consignee’s summary accounting did not list individual sales, and the consignor was held to be

entitled to the reasonable value of produce as shown by applicable market reports, less

expenses. Idaho Bonded Produce & Supply Co. v. Farm Mkt. Serv., Inc., 42 Agric. Dec.

1679, 1682 (1983).

Consignee was found negligent where peppers were repacked, a portion sold locally for

positive returns and the balance shipped to Canada, where much lower returns were derived.

E. Vega & Sons Produce v. Alex Bordges Co., 39 Agric. Dec. 750, 752-53 (1980).

h. PERMISSION TO HANDLE

“Think best thing to do is get car handled for our acct. rite [sic] where it is....” “Here is a

definite and unequivocal authorization by complainant to rescind the contract and to have

respondent resell the defective merchandise for complainant’s account.” United Packing Co.v.

D.L. Pizza Co., 18 Agric. Dec. 161, 167-168 (1959).

However:

Use of words such as “work out the load” or “sell the product and we will settle at a later date” 

by the seller are not sufficiently specific to constitute an authorization that the buyer handle the

produce on consignment. Granada Mktg., Inc. v. Jos. Notarianni & Co., 47 Agric Dec. 329,

331 (1988); Royal Packing Co. v. Class, 42 Agric. Dec. 2077, 2080 (1983); B & L Produce of

Ariz. v. Mim’s Produce, Inc., 37 Agric. Dec. 201, 204 (1978).

“Do the best you can” does not constitute permission to handle on consignment. Relan Produce 

Farms v. Rushton & Co., 38 Agric. Dec. 1636, 1639 (1979); B & L Produce, Inc. v. Harry 

Becker Produce Co., 36 Agric. Dec. 913, 919 (1977); Barkley Co. of Ariz. v. Ifsco, Inc., 31

Agric. Dec. 279, 282 (1972).

Nor does:

“the buyer should work it out” – Frank Gaglione & Son v. Theron Hooker Co., 30 Agric. Dec.

528, 531-32 (1971).

or “handle best possible” or “handle to best advantage” – Ralph Samsel Co. v. L. Gillarde Sons 

Co., 19 Agric. Dec. 374, 376-78 (1960).

or “handle” or “open” – Carmack v. Selvidge, 51 Agric. Dec. 892, 896 (1992).

or respondent “should keep the shipment, [and] do with it what respondent could . . .”

Chiquita Brands, Inc. v. Joseph Williams, Jr. Co., 45 Agric. Dec. 374, 376-77 (1986).
56

The phrase “Customer will keep+Work Out” did not signify an agreement that the load could 

be handled on a consignment basis. Lionheart Group, Inc. v. Sy Katz Produce, Inc., 59 Agric.

Dec. 449, 458-59 (2000).

Lionheart Group, Inc. v. Sy Katz Produce, Inc., 59 Agric. Dec. 449, 458-59 (2000) (“Customer 

will keep + Work Out”); Carmack v. Selvidge, 51 Agric. Dec. 892, 896 (1992) (“handle” or 

“open”); Chiquita Brands, Inc. v. Joseph Williams, Jr. Co., 45 Agric. Dec. 374, 376-77 (1986)

(respondent “should keep the shipment, [and] do with it what respondent could . . .”); Relan 

Produce Farms v. Rushton & Co., 38 Agric. Dec. 1636, 1639 (1979) (“do the best you can”); B 

& L Produce of Ariz. v. Mim’s Produce, Inc., 37 Agric. Dec. 201, 204 (1978) (“work out the 

load”); Barkley Co. of Ariz. v. Ifsco, Inc., 31 Agric. Dec. 279, 282 (1972) (“Do the best you

can”); Frank Gaglione & Son v. Theron Hooker Co., 30 Agric. Dec.528, 531-32 (1971) (“the 

buyer should work it out”); Ralph Samsel Co. v. L. Gillarde Sons Co., 19 Agric. Dec. 374, 376-

78 (1960) (“handle best possible” or “handle to best advantage”).

i. REJECTION

No right to reject consigned merchandise absent a breach of the agency contract. Cal-Mex

Distrib., Inc. v. Tom Lange Co., 46 Agric. Dec. 1113, 1120 (1987).

j. SALE ON OPEN BASIS DISTINGUISHED FROM

Bonanza Farms, Inc. v. Tom Lange Co., 51 Agric. Dec. 839, 845-47 (1992).

Cal-Mex Distrib., Inc. v. Tom Lange Co., 46 Agric. Dec. 1113, 1119-20 (1987).

23. CONSTITUTIONALITY OF ACT

The PACA preserves the constitutional right of trial by jury by providing for de novo trial in

District Court on basis of pleadings filed before Secretary of Agriculture. Potato Sales, Inc. v.

Perfection Produce, 38 Agric. Dec. 273, 280 (1979).

“Respondent also asserts as a jurisdictional defense that the Department’s entire proceeding is

unconstitutional, in that it purports to assume common law jurisdiction and render judgment

without affording respondent its constitutional right to a jury trial. We have held on other

occasions that the question of a right to trial by jury is not for our consideration since it is not

the function of an administrative body to pass upon the constitutionality of a statute which the

law-making body has committed to it for administration.” Jebavy-Sorenson Orchard Co. v.

Lynn Foods Corp., 32 Agric. Dec. 529, 531 (1973). To the same effect is Simon Siegal Co. v.

Heaton, 5 Agric. Dec. 915, 918-19 (1946), which cites Panitz et al. v. District of Columbia, 112

F.2d 39 (D.C. Cir. 1940), as well as several early Departmental cases.

24. CONTRACTS

See BREACH OF CONTRACT – this index.
57

a. ABSENCE OF CONTRACT OR BREACH OF CONTRACT

When the parties have failed to enter a contract, the receiver is liable for the reasonable value of 

the produce. S. Pavich & Sons v. Mut. Produce, 31 Agric. Dec. 1296, 1299 (1972).

Where an intermediary, Mr. Chaseley, was an employee of both parties to a series of produce

transactions, something happened that caused him to begin embezzling funds and misdirecting 

checks that were entrusted to him. This was not discovered until the end of the series of 

transactions. As part of this behavior pattern, he failed to disclose to either of the parties to the

proceeding that he was employed by the other. It was stated:

Such employment, of course, hopelessly compromised his loyalty to both

employers as far as transactions between the two firms. Since the negotiations in

regard to this transaction were all carried on through Mr. Chaseley, such

negotiations cannot be viewed to have been in good faith, and are tainted by

fraud. Due to the ignorance of both Complainant and Respondent as to Mr.

Chaseley’s unethical conduct, they cannot be deemed to be tainted by Mr.

Chaseley’s fraud, but, nevertheless, the transactions themselves are so tainted that

it would be improper to find that a contract resulted from negotiations so

compromised, unless the parties themselves, independent of Mr. Chaseley, clearly

acquiesced in the contract or a modification thereof. Such is not the case with this

transaction, and we concluded that Respondent is liable to Complainant only for

the reasonable value of the grapes. A.P.S. Mktg. v. R.S. Hanline & Co., 59 Agric.

Dec. 407, 412-13 (2000).

Where a purchase and sale contract called for numerous bulk loads to contain a specific number 

of pumpkins and for payment to be made on the basis of a per pound price for the total weight 

of the loads but limited to the total poundage assuming a 15 pound per pumpkin average, the 

delivery of loads containing pumpkins which average more than 15 pounds was not a breach of 

contract, and no notice of breach was required. The inventory count performed by the receiving 

retail stores was accepted as adequate evidence of the number of pumpkins delivered where

such count was adequately documented, and no federal inspectionwas necessary to prove the 

count received. PSM Produce, Inc. v. Boyer Produce, Inc., 60 Agric. Dec. 809, 826 (2001).

b. AGENT

When determining the contractual relationship between principals and their agents, the

principles of apparent agency do not apply. Pearl Ranch Produce, LLC v. Desert Springs

Produce LLC, 67 Agric. Dec. 1465, 1474 (2008).

c. ASSIGNMENTS

Respondent could have effectively assigned his right to receive the shipment of potatoes to an

assignee. Respondent could also assign the duty to pay for the potatoes to the assignee, and if

tender of payment were made, complainant was bound to accept. If, however, the assignee
58

failed to make payment as required by the contract, complainant remained liable for the

contract price of the potatoes.” Washburn Potato Co. v. Elsesser, 36 Agric. Dec. 927, 929-30

(1977).

d. CONDITION PRECEDENT

Words “Subject to being approved by USDA, we have berries available at 32 cents” interpreted 

as constituting a condition precedent to formation of a contract. Brady Farms v. New Era Mktg., 

37 Agric. Dec. 1962, 1966 (1978).

e. CONTRARY TO PUBLIC POLICY

Contract terms requiring indemnification for PACA fines are void as against public policy.

Misbranding violations under the PACA are satisfied under a graduated regulatory scheme,

starting with notice, then fines are levied that increase with the number of violations, and

finally formal disciplinary action is taken if the violations are repeated and/or flagrant.

Innocence of mind is not a factor in finding a violation because a showing of intent is not

required. The violation and attendant fines attach to the violator and cannot be passed back to

the prior seller. Contract terms cannot be used to defeat the purpose of the PACA. Mountain

Valley, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1879, 1883-89 (1994).

Where contract for chipping potatoes agreed that the buyer’s duty to accept was expressly

conditioned on its satisfaction that the potatoes were of good chipping quality, the buyer cannot 

use arbitrary or unreasonable standards in determining whether the potatoes met contract terms,

since this would be unconscionable and against public policy. W.T. Holland & Son. v. C.K. 

Sensenig Potatoes, 52 Agric. Dec. 1705, 1709 (1993).

f. DIVISIBLE OR ENTIRE

Substantial breach of entire contract by non-conformity of two installments. Discussion. See

Subercaseaux v. Murlas Bros. Co., 24 Agric. Dec. 509, 517 (1965).

g. EXCUSED PERFORMANCE – DURATION OFEXCUSE

Contract calling for shipment of two loads of seed potatoes provided, “TIME OF MAKING

SHIPMENT – Feb. shipment 1978, buyer’s option, trucks available, weather permitting.”

Trucks were not available excusing one shipment in February. Thereafter, seller sought

damages for buyer’s failure to take delivery of load in March. Held: no contract existed calling 

for buyer to accept shipment in March. L.S. Taube & Co. v. Palmer, 38 Agric. Dec. 731, 733-

34 (1979).

h. FAILURE TO ENFORCE TERMS

We found that the payment and interest charge provisions in Complainant’s invoices were

incorporated into the parties’ sales contracts. In addition, we found that Respondent’s late

payments over many years and Complainant’s failure to charge interest during those years did
59

not modify the parties’ contracts, but that Complainant had waived its right to recover interest

charges for late payments that it accepted prior to giving Respondent reasonable notice that the 

service charge provision in the parties’ contracts would be enforced. Johnston v. Ag Grower

Sales LLC, 69 Agric. Dec. 1569, 1587 (2010).

i. FORUM SELECTION CLAUSES

Good discussion. See Hernandez v. R. & L. Produce Co., 37 Agric. Dec. 1975, 1981 (1978).

In Orix Credit Alliance, Inc. v. Robert A. Brown, d/b/a Process One, Process One of Little

Rock, a/k/a Process One of Memphis and Nancy A. Brown, 1994 WL 392240 (U.S. Dist. Ct. for

S.D.N.Y. 1994), the court gave the following summary statement of the law:

Federal law is well settled that parties may contract to submit to jurisdiction in a

given forum, and that forum selection clauses will be enforced. See Jones v.

Weibrecht, 901 F.2d 17, 18 (2d Cir. 1990) (recognizing that a contractual forum

selection clause should be enforced “unless it is clearly shown that enforcement

would be unreasonable and unjust or that the clause was obtained through fraud or

overreaching.”); Bense v. Interstate Battery Sys. of Am., Inc., 683 F.2d 718, 721

(2d Cir. 1982) (any “‘general hostility’ towards forum-selection clauses is today

simply a vestigial remainder of an outmoded doctrine”); Ultracashmere House

Ltd. v. Madison’s of Columbus, Inc., 534 F.Supp. 542, 545 (S.D.N.Y. 1982)

(“forum selection clause alone . . . constitute[s] consent to personal jurisdiction”).

New York courts also recognize that forum selection clauses are prima facie

valid, and that, absent some compelling reason, should be honored by the parties

and enforced by the courts. See, e.g., Leasing Serv. Corp. v. Scott Crane Co., 83

Civ. 9379, 1984 WL 1004, at *2 (S.D.N.Y. Oct. 11, 1984) (noting that New York

law permits parties to a contract to agree in advance to jurisdiction in a given

court); British West Indies Guar. Trust Co., Ltd. v. Banque Internationale A.

Luxembourg, 172 A.D. 2d. 234, 567 N.Y.S. 2d 731, 732 (1st Dep’t 1991) (holding

that a forum selection clause can only be set aside where enforcement would be

“so gravely difficult and inconvenient that the challenging party would, for all

practical purposes, be deprived of his or her day in court.”).

See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L.Ed.2d 513 (1972),

which is the leading case.

j. FRAUD – EFFECT ON CONTRACT

On appeal from the Secretary’s decision and order, where produce was sold “f.o.b. shipping

point acceptance final” (see 7 C.F.R. § 46.43(m) which states that under this term, the buyer

accepts at shipping point, has no right of rejection, and only has recourse for a material breach

provided shipment is not rejected) and, before discovered fraudulent misrepresentation of

produce buyer rejected, it was stated that under either the Common Law or the Uniform Sales

Act, a purchaser who had been induced to enter into a contract by fraud has the right to avoid

the contract. The buyer was stated to have done so by the rejection. If the buyer has a right of
60

rejection because of fraud, it does not lose that right because of rejection before it discovered

fraud. “This is for the reason that fraud in the inception of a contract, although it does not

render the contract void, renders it voidable at the election of the person defrauded, with the

result that if the defrauded party to a contract breaks it before he discovers the fraud, he may

nevertheless assert the fraud as a defense as soon as he discovers it, and demands rescission on 

that account when sued for breach of contract.” Joseph Martinelli & Co. v. Simon Siegel Co.,

176 F.2d. 98, 13 A.L.R.2d 1243 (1st Cir. 1949).

k. IMPOSSIBILITY OF PERFORMANCE

See U.C.C. §§ 2-613, 2-615, and 2-616.

Uniform Commercial Code terminology is “Excuse by Failure of Presupposed conditions.”

See U.C.C. § 2-615.

Under the PACA, an Act of God clause may be invoked when the contract designates the land

upon which the produce is to be grown. In cases where the contract designates the land where

the crops are to be grown, the party seeking protection of the Act of God clause must

demonstrate that performance under the contract has been made impracticable by the

occurrence of an unforeseen contingency. DiMare Fresh, Inc. v. Sun Pac. Mktg. Coop., Inc.,

PACA Docket R-07-054, decided August 22, 2008 (unpublished decision), aff’d, No. 12-

17378 (Ninth Cir., E. Dist. of Cali. February 24, 2015).

In G. & H. Sales Corp. v. C.J. Vitner Co., 50 Agric. Dec. 1892, 1897-99 (1991), the parties

entered into a contract calling for the future shipment of potatoes f.o.b. Florida, and potato

production in the state of Florida was affected in varying degrees by a freeze. It was found that 

the potatoes had not been shown to have been “identified goods” within the meaning of U.C.C.

§ 2-613 at the time of the freeze, and that the potatoes were not contracted to be grown on 

designated land so as to come within the category of “excuse by failure of presupposed

conditions” as contemplated by U.C.C. § 2-615. In addition, it was held that effect could not be

given to an “act of God” clause in the contract because, even if the clause were deemed to

apply to the entire state, the seller did not show any rational way to implement its provisions.

An alleged commitment by the buyer, following part performance under the contract to pay the

entire contract price for potatoes received, was found not to have the meaning ascribed by the 

seller. Interpretation of a document requires that component parts of the document be read

within the context of the whole document.

In Bliss Produce Co. v. A.E. Albert & Sons, 35 Agric. Dec. 742, 746 (1976), we stated, “[The

text of U.C.C. section 2-615] must be jointly read with comment No. 9 which states that ‘a

farmer who has contracted to sell crops to be grown on designated land (emphasis added)’ is

excused under this section when there is a failure of the specific crop. Most cases adhere to this 

principle. Harrell Bros. Canning Co. v. Olen Price Farm Supply, 31 A.D. 331, 334 (1972); 

Thomas J. Holt Co. v. Shipley Sales Serv., 25 Agric. Dec. 436, 438 (1966). The impossibility -

act of God exemption should have its widest application to farmers, the berth narrowing as one 

moves in middlemen degrees towards the ultimate consumer. Hence, if designation of the land

upon which crops will be grown is contractually mandatory before a farmer will fall within the

U.C.C. section 2-615 exemption, it is even more necessary that land designation apply to 
61

dealers before exemption be legally allowed.”

It has been established that where a party to a contract is expressly excused from full

performance if its production is reduced because of adverse weather conditions and such party

fairly allocates production among its customers, such party is not in breach of contract upon the

occurrence of the contingency stated in the contract. Premium Elkton Potatoes, Inc. v.

Process Supply Co., 40 Agric. Dec. 436, 440 (1981); S.P. Lipoma Co. v. K & R, Inc., 27 Agric. 

Dec. 643, 649 (1968).

Where complainant was obligated under a requirements contract to ship five loads of bin

lettuce per week to respondent for the period of one year, a claim that no supplies were

available was insufficient to furnish an excuse not to ship under U.C.C. § 2-615. Respondent’s

late payments also did not furnish an excuse not to ship under the contract, but were grounds

for insecurity and a demand for assurance of respondent’s ability to perform under the contract. 

Furthermore, under U.C.C. § 2-609(3), complainant’s right to demand assurance was not 

prejudiced by its delay in making the demand, and complainant was justified in withholding

performance under the supply contract while it awaited a response to its demand for assurance 

and following respondent’s failure to respond to its demand. Respondent was found to be 

entitled to make purchases to cover complainant’s failure to ship under the contract for the 

period prior to the demand for assurance and was entitled to credit for cover as to purchases 

made under a substitute supply contract insofar as that contract was concluded prior to the 

demand for assurance, but not as to purchases made under a modification of that contract made 

after the demand for assurance. R & R Produce, Inc. v. Fresh Unlimited, Inc., 56 Agric. Dec. 

997, 1108-09 (1997).

In Harrell Bros. Canning Co. v. Olen Price Farm Supply, 31 Agric. Dec. 331, 334 (1972), we

found that where there was no “act of God” clause in a contract calling for the growing of one

million pounds of squash, but testimony of witnesses at the hearing disclosed that the buyer

knew that the seller had contracts for the growing of the squash with farmers in two specific

Georgia counties, and the contract discussed planting acreage sufficient to yield one million

pounds of squash, it was held that the contract dealt with the purchase of squash from a specific

acreage.

See also Al Campisano Fruit Co. v. Shelton, 50 Agric. Dec. 1875, 1881-82 (1991).

In Myco v. Boise Farmers Mkt., Inc., 48 Agric. Dec. 679, 681 (1989), the questions of

impossibility through governmental intervention and of material breach by pesticide

contamination were found not ripe for decision. The buyer of watermelons had accepted the

melons and resold over a period of 19 days when further sale was embargoed by a

governmental agency due to possible pesticide contamination. The melons were dumped three 

days later. It was found that the keeping period of watermelons was only two to three weeks, 

and that the buyer had not shown that the melons were in saleable condition at the time of the

embargo. The buyer was liable for the purchase price.
62

Tomatoes to be provided under a supply contract were not goods “identified to the contract”

because the contract did not refer to specified acreage. Therefore, when the distributor failed to 

deliver tomatoes as required by the contract, its default was not excused under U.C.C. § 2-613 

or 2-615, and the buyer was entitled to cover damages. DiMare Fresh, Inc. v. Castro Produce

LLC, 72 Agric. Dec. 460, 473-74 (2013).

In the case of agricultural commodities, destruction of part of a seller’s crop does not excuse

performance where the commodity is identified in the contract only by kind and amount,

without reference to the specific acreage where the commodity would be produced. Bunge

Corp. v. Recker, 519 F.2d 449, (8th Cir.), 1975. See also R.S. Hanline Co. v. Golden West

Produce LLC and Prosource, Inc. v. R.S. Hanline Co., 75 Agric. Dec. 724, 751 (2016).

l. INSTALLMENT

See U.C.C., under subheading §§ 2-612, 2-609 – this index.

Parties entered into a written installment contract whereby respondent was to supply

complainant with 22 loads of onions that were to have no more than 20% double hearts above

one inch in diameter. Respondent cancelled the contract after complainant made late payments 

as to several loads. It was found that although the late payments were a violation of the 

contract, the Regulations [Requirements] and the PACA, they did not furnish grounds for 

cancellation of the contract. Respondent, under § 2-609 of the U.C.C. could have taken the late 

payments as reasonable grounds for insecurity, asked for adequate assurance of due 

performance, and suspended performance until receipt of such assurance, but cancellation prior 

to a failure to receive requested assurance was not an option. Rich-SeaPak Corp. v. Pro-Ag, 

Inc., 56 Agric. Dec. 1958, 1965-67 (1997).

In an installment contract for potatoes from two distinct growing areas, where one portion of 

the contract failed to meet contract terms, this failure in no way rendered the total contract null 

and void. Complainant sold the remainder of the product and recovered damages from

respondent’s failure to give shipping instructions for the balance of the contract. Gilbar Potato 

Sales v. Commodity Mktg. Co., 43 Agric. Dec. 1250, 1253 (1984). See also U.C.C. § 2-612.

m. INTENT OF THE PARTIES

In all contractual interpretation, the intent of the parties where it can be reasonably discerned,

should be paramount except in those rare instances where public policy is thereby contravened.

Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 980 at n. 18 (1997).

“Protection of the justified expectations of the parties is the basic policy underlying the field of 

contracts.” Quoting the comments to § 188 of the Restatement (Second) of Conflicts of Laws, 

in A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1064 at n. 39 (1991).
63

Where the parties to a contract covering tomatoes imported from Mexico agreed, following

their arrival at destination, to the tomatoes being handled pursuant to the May 2, 1997,

Clarification of the October 28, 1996 Suspension Agreement on Fresh Tomatoes from Mexico

(termed the “Commerce Dept. Rules”), it was held that, although such rules used portions of

the accustomed terminology of the Uniform Commercial Code, this Department’s Regulations 

[Requirements] and decisions under the PACA in a way that is foreign to the usual meaning 

accorded those terms, the Secretary would seek to give effect to the intent of the parties as 

evidenced by their agreement to abide by such rules. Accordingly, the “Commerce Dept.

Rules” were interpreted in a manner deemed to be consistent with the intended meaning of such

rules rather than in accord with the meaning usually accorded to the terms used therein. Ta-De

Distrib. Co. v. R.S. Hanline & Co., 58 Agric. Dec. 658, 670-71 (1999).

n. JOINT VENTURE

Where parties to an agreement agreed to share profits, and committed time, effort, and money,

to the growing of Napa cabbage, the agreement was held to be a joint venture. L & M Farms,

Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 955 (2010).

Where one party to an agreement only marketed the cabbage from a joint venture, and took on

no risk or control over the venture, that party was held to not be a part of a joint venture. L & M

Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 955 (2010).

Where the counterclaim submitted by Respondent concerned produce that was part of a joint

venture, and one of the joint venture partners had not and could not be joined in the proceeding, 

determined that the counterclaim must be dismissed, as any amount due Complainant or 

Respondent under the venture was dependent, at least in part, upon the contribution of and the 

proceeds due the third party, so an adequate judgment could not be rendered without the 

presence of the third party, (a necessary party to the action), to provide evidence and testimony 

in this regard. Westberry Farms Ltd. v. Sungate Mktg. LLC, 71 Agric. Dec. w, kk (USDA

2012), published in 72 Agric. Dec. w, kk (USDA 2013).

o. LACK OF AGREEMENT AS TO A MATERIAL TERM

Respondent-buyer offset misbranding fine against another payment to complainant-seller,

claiming that printed terms on back of purchase order require indemnification of misbranding

fines levied under the PACA. The contract terms were not enforceable because the form was

sent to the seller after the shipment had arrived and been inspected. The prior course of

dealings between the parties were not enough to show acceptance of the terms in this case.

Each transaction must be viewed separately. Mountain Valley, Inc. v. C.H. Robinson Co., 53

Agric. Dec. 1879, 1883-89 (1994).

p. LIMITATION OF REMEDIES

Where the written contract signed by the parties provided Complainant with a specific remedy

for Respondent’s failure to purchase the subject bulk bin lettuce, but it was not stated in the

contract that this was to be Complainant’s exclusive remedy (see U.C.C. § 2-719), Complainant

was entitled to recover damages for Respondent’s breach as provided in U.C.C. §§ 2-703 and 2-
64

706. Maverick Holdings Group, Inc. v. Community Fruitland, Inc., 66 Agric. Dec. 1452, 1463-

65 (2007).

q. MEETING OF THE MINDS

“It is essential that there be a mutual manifestation of assent, sometimes referred to as a

meeting of the minds, as to the material terms of the contract.” Griffin-Holder Co. v. Joseph

Mercurio Produce Corp., 40 Agric. Dec. 1002, 1005 (1981); Blasé v. Keegan, Inc., 36 Agric.

Dec. 709, 713 (1977); Indep. Grape Distrib. v. Barbera Packing Corp., 25 Agric. Dec. 1144,

1146 (1966).

M. Offutt Co. v. Caruso Produce, Inc., 49 Agric. Dec. 596, 602 (1990).

When the President of Complainant grower signed and faxed back Respondent grower’s

agent’s written marketing agreement authorizing Respondent to sell Complainant’s peppers,

this was deemed to reflect a meeting of the minds regarding the contract terms and the written

marketing agreement was found to constitute the contract between the parties, rather than the

conditions orally conveyed by Complainant’s President to Respondent’s employee several days

earlier. Mayoli, Inc. v. Weis-Buy Services, Inc., 65 Agric. Dec. 648, 661-62 (2006).

r. MISREPRESENTATION AND MISTAKE

See major topic – MISREPRESENTATION AND MISTAKE.

s. MODIFICATION

See BURDEN OF PROOF - CONTRACT MODIFICATION. See also CONSIGNMENTS

– PERMISSION TO HANDLE.

Misrepresentation causes modification to be a nullity. McCabe v. Higgins Potato Co., 17 Agric.

Dec. 1022, 1025 (1958). See MISREPRESENTATION AND MISTAKE for updating of law

in this area.

A modification needs no consideration to be binding. See U.C.C. § 2-209(1).

Where Complainant sought payment of the original contract price for mangoes sold to

Respondent, but the record included evidence that Complainant agreed in writing to accept the 

lesser amounts of $30,000.00 (if payment was received by September 28, 2007), or $35,232.00

(if payment was received after September 28, 2007), it was found that there was a binding

agreement to modify the original contract price of the mangoes to $35,232.00, with no time 

limitation on when payment was due. Respondent was ordered to pay Complainant $35,232.00.

New Mundo Exp. Fruits, Inc. v. San Diego Point Produce, Inc., 67 Agric. Dec. 888, 893 (2008).
65

Agreement to adjustment in price, though not in writing, was ratified by acceptance of reduced 

payment and lack of timely objection. Heggeblade-Marguleas-Tenneco, Inc. v. Mim’s Produce, 

33 Agric. Dec. 1333, 1336 (1974).

Modification of contract voided because of misrepresentation and mistake. Dimare Homestead, 

Inc. v. Koam Produce, Inc., 59 Agric. Dec. 866, 876 (2000). See MISREPRESENTATION

AND MISTAKE – this index.

Where complainant granted protection on the contract, it was held that since complainant was

conscious when it granted protection that temperatures were important but chose to remain

ignorant of such temperatures, the protection agreement could not be set aside. Cal-Shred, Inc.

v. Payton, 46 Agric. Dec. 1125, 1127 (1987).

Where the parties renegotiated the price provision of a contract after arrival of produce, buyer

cannot claim reimbursement from seller after it allows its customer a further price adjustment.

Finucane, Gilson & Foster, Inc. v. Deardorff-Jackson Co., 45 Agric. Dec. 1361-63 (1986).

t. NOVATION

For there to be a novation, it must be clear that it is the intent of both parties to substitute a new 

agreement for the old one. E. Potato Dealers of Me., Inc. v. Commodity Mktg. Co., 36 Agric.

Dec. 2017, 2021 (1977); Morris v. Stutzman, 1 Agric. Dec. 98, 100-01 (1942).

Where buyer accepted grapes which were non-conforming and insisted on a new price, and

seller stated that it would rather take back the grapes, and did, it was held that there was no

modification or rescission of the contract. Shipley v. Peacock Sales Co., 46 Agric. Dec. 702,

705 (1987). See also Cal-Mex Distrib., Inc. v. Jos. Notarianni & Co., 45 Agric. Dec. 2477,

2479-80 (1986), where complainant’s employee agreed with the broker to have a shipment of

damaged melons transshipped from the buyer to a third party so the latter could handle the load

for the shipper’s account.

Where respondent buyer was concluded to have accepted a load of tomatoes because it had

failed to prove that it gave notice of rejection within the time required in the Regulations 

[Requirements], but did convey its complaint about the load to complainant’s seller,

complainant’s repossession of the load with respondent’s permission did not constitute a 

novation of, or rescission of, the contract, and complainant was deemed to have acted as 

respondent’s agent in reselling the tomatoes. Thomas Produce Co. v. Lange Trading Co., 62 

Agric. Dec. 331, 339 (2003).

For a thorough discussion of the elements of novation in an instance where the buyer assigned

the right to receive and pay for a shipment of potatoes to a third party, see Washburn Potato

Co. v. Elsesser, 36 Agric. Dec. 927, 929-30 (1977).

u. PRIVITY

Evidence showed that oranges were sold to a third party by complainant, and by the third party

to respondent. The third party was not a party to the reparation action. Complaint was
66

dismissed. Phila. Fruit Exch., Inc. v. Garden State Farms, Inc., 41 Agric. Dec. 1793, 1796

(1982). See also Staples & Son Fruit Co. v. Monarque Brokerage Co., 38 Agric. Dec. 67, 70

(1979); F.H. Hogue Produce Co. v. Senini Ariz., 32 Agric. Dec. 1206, 1209-10 (1973); Magic

Valley Produce, Inc. v. Nat’l Produce Distrib. Inc., 24 Agric. Dec. 1117, 1120-21 (1965),

where the two respondents had the same president, complainant sold to National, and National

sold to Eastern, and the complaint was dismissed against Eastern, and Eastern’s counterclaim

was also dismissed.

Where a reparation action was brought against a produce receiver involved in bribery of federal 

inspectors on the Hunts Point Market instead of against the firm that purchased the produce

from complainant and negotiated an adjustment with complainant, it was held that there was no 

privity of contract between complainant and respondent, and no jurisdiction under the PACA.

Pac. Tomato Growers v. B.T. Produce Co., 60 Agric. Dec. 348 (2001).

See also Food Sales Co. v. Smeltzer Orchard Co., 18 Agric. Dec. 1209, 1211-12 (1959), and

Arid Zone Farms v. Chas. P. Tatt Fruit Co., 18 Agric. Dec. 1181, 1185 (1959), where the

complainants were determined to have not been the party with whom respondents contracted.

See Lewis D. Goldstein Fruit & Produce Corp. v. E. Coast Distrib., 18 Agric. Dec. 493, 495

(1959), where the sale was found to have been by Indian River to East Coast, and by East Coast 

to complainant, and therefore no privity of contract existed between complainant and Indian

River, and the complaint against Indian River was dismissed.

Where a load of cantaloupes was sold to Complainant Kellerman by Ritter & Post, but latter

firm also had sold load to L. Gillarde and neglected to withdraw that firm’s right to receive the 

load, Complainant was prevented from receiving the load. There was found to be no privity

between Complainant and L. Gillarde. Kellerman v. L. Gillarde Co., 8 Agric. Dec. 1347, 1351

(1949).

See STANDING AND PRIVITY OF CONTRACT – this index.

v. PROVISIONS – CONFORMITY WITH

Where a purchase and sale contract called for numerous bulk loads to contain a specific number 

of pumpkins and for payment to be made on the basis of a per pound price for the total weight 

of the loads but limited to the total poundage assuming a 15 pound per pumpkin average, the

delivery of loads containing pumpkins which averaged more than 15 pounds was not a breach 

of contract, and no notice of breach was required. The inventory count performed by the 

receiving retail stores was accepted as adequate evidence of the number of pumpkins delivered 

where such count was adequately documented, and no federal inspection was necessary to 

prove the count received. PSM Produce, Inc. v. Boyer Produce, Inc., 60 Agric. Dec. 809, 826 

(2001).

w. PURCHASE BY SAMPLE

A contract to purchase by sample is entered upon receipt and acceptance of the sample.

Rudolph v. Spuds, Inc., 28 Agric. Dec. 254, 257 (1969).
67

Where buyer, at seller’s place of business, inquired about availability of green peppers for

purchase, and seller dumped the contents of one carton of peppers in front of buyer, and the

buyer agreed to buy 150 cartons, there was a sale by sample. “Under §2-313 of the Uniform

Commercial Code, any sample or model which is made part of the basis of the bargain creates

an express warranty [by the seller] that the whole of the goods shall conform to the sample or

model.” E.L. Kempf & Son v. Certified Grocers, 27 Agric. Dec. 799, 802 (1968).

x. REQUIREMENTS CONTRACT - DEFINITION

A requirements contract is a contract which calls for one party to furnish materials or goods to

another party to the extent of the latter’s requirements in business. A buyer’s contract to obtain 

its requirements from a seller is enforceable when the seller agrees to provide the buyer with a

quantity based on a stated estimate or based on the prior requirements of the buyer. In a 

requirements contract, it is the seller’s duty to provide the requirements of the buyer and it is 

the buyer’s duty to obtain those requirements in good faith and according to commercial

standards of fair dealing in the trade. G.W. Palmer & Co. v. Sun Valley Potato Growers, Inc.,

65 Agric. Dec. 673, 680 (2006).

A stated minimum is not required to enforce a requirements contract, because U.C.C. § 2-

306(1) allows a buyer to require a seller to provide a good faith quantity that is not

unreasonably disproportionate to stated estimates. Reasonable elasticity in requirements

contracts is permitted, even where a complete discontinuance may occur. G.W. Palmer & Co.

v. Sun Valley Potato Growers, Inc., 65 Agric. Dec. 673, 681 (2006).

y. RIGHT TO ADEQUATE ASSURANCE OFPERFORMANCE

Where complainant was obligated under a requirements contract to ship five loads of bin

lettuce per week to respondent for the period of one year, respondent’s late payments did not

furnish an excuse not to ship under the contract, but were grounds for insecurity and a demand

for assurance of respondent’s ability to perform under the contract. Furthermore, under U.C.C.

§ 2-609(3), complainant’s right to demand assurance was not prejudiced by its delay in making 

the demand, and complainant was justified in withholding performance under the supply 

contract while it awaited a response to its demand for assurance and following respondent’s

failure to respond to its demand. R & R Produce, Inc. v. Fresh Unlimited, Inc., 56 Agric. Dec. 

997, 1108-09 (1997).

z. SALE BY SAMPLE

Where complainant tendered six pallets of grapes to respondent’s agent for examination and

stated that they were from the same lot of grapes that was subsequently shipped to respondent,

the sale was by sample and amounted to an express warranty that the whole lot of grapes would 

conform to the sample. The condition or other characteristics disclosed by a sample are subject 

to subsequent proof in the normal manner. Delano Farms Co. v. Suma Fruit Int’l, 57 Agric.

Dec. 749, 754 (1998).
68

aa. SEVERABILITY

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 304-05 (1980).

bb. TERMS – INTERPRETATION

When interpreting a disputed contract term, the plain language meaning of the term will be

applied. When there is no clear plain-language meaning, extrinsic evidence may be used to give 

meaning to the term. Evidence as to negotiations between the contracting parties is extrinsic 

evidence that may enable meaning to be given to a disputed contract term. DiMare Fresh, Inc. 

v. Sun Pac. Mktg. Coop., Inc., PACA R-07-054, slip op (August 22, 2008), aff’d, No. 12-17378

(Ninth Cir., E. Dist. of Cali. February 24, 2015).

Where the terms used by the parties to describe a commodity are the same or similar to terms

found in the U.S. Grade Standards for the commodity, it is assumed, unless specifically stated

otherwise at the time of contracting, that the term has the same meaning as the meaning given 

to it in the applicable Standard. In the instant case, where Complainant sold navel oranges

which it described as “fancy,” without qualification, we found that the term referenced the

“U.S. Fancy” grade set forth in the U.S. Standards for Grades of Oranges (California and

Arizona). Corona College Heights Orange & Lemon Ass’n v. Cal Zona Distrib., Inc., 68 Agric.

Dec. 1236, 1241 (2008).

Where the parties, in various pleadings submitted during the course of the proceeding,

described the transactions in question as sales, but the parties also stated that it was their intent 

at the formation of the contract that Respondent would sell the lemons on Complainant’s behalf 

and remit the sales proceeds less commission to Complainant, it was found that Respondent 

was acting as Complainant’s agent in selling the lemons. Wildwood Produce Sales, Inc. v.

Citrusource, Inc., 67 Agric. Dec. 704, 797 (2008).

#1 or #2 without qualification held to mean U.S. No.1 or 2. S. Jersey Produce v. Rotella

Produce, 13 Agric. Dec. 566, 579 (1954).

“Typak # 1” held to mean U.S. No. 1. Dimare Bros., Inc. of Cal. v. Phila. Produce Co., 38

Agric. Dec. 752, 755 (1979).

The term “super select” when applied to a contract for the sale of cucumbers held to have no

meaning with regard to the size of the cucumbers. Pope Packing & Sales, Inc. v. Santa Fe

Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101, 104 (1979).

“The term ‘to be priced on next week’s market’ should be given its plain and simple meaning,

that is, the average prices for the following week.” Bonita Packing Co. v. Pete Pappas & Sons,

45 Agric. Dec. 2471, 2473 (1986).

The words, “f.o.b. as to price but delivered as to condition,” fall under the term “f.o.b.

inspection and acceptance arrival,” defined in the Regulations [Requirements] at § 46.43(dd).

Villalobos v. Am. Banana Co., 56 Agric Dec. 1969, 1979 (1997); Nick Delis Co. v. Schmucker,

45 Agric. Dec. 1307, 1310-11 (1986).
69

Where the parties to a contract calling for the sale and shipment of onions destined for Japan

reached an oral agreement that the terms were “U.S. No. 1 Dock Portland, $5.50 per bag,” and 

it was also agreed by the parties that complainant was to be responsible for packing the

containers and arranging for the trucks from complainant’s plant to the container yard, and that 

respondent was to make the booking for the steamship, it was found that the manifest intent of 

the parties called for the onions to be delivered to the dock in Portland, with complainant’s 

responsibility ending at that point. Contrary terms expressed in confirming memoranda were 

not effective under U.C.C. § 2-207 since they materially altered the original accepted terms of 

the contract. Or. Onions, Inc. v. JAC Trading Co., PACA R-97-118, slip op (July 15, 1998).

Where the oral contract called for Respondent to sell “up to” one truckload of 60-count cartons

of Idaho russet potatoes as Complainant required per week at a fixed price per-carton, such 

terms provide the basis of a requirements contract and were not too vague to be enforced. 

Because U.C.C. § 2-306(1) permits all quantities that are not unreasonably disproportionate to 

stated estimates, the lack of a stated minimum quantity in the estimate did not prevent

enforcement of the good faith requirements of the buyer. G.W. Palmer & Co. v. Sun Valley

Potato Growers, Inc., 65 Agric. Dec. 673, 681 (2006).

See SPECIFIC TERM – this index.

cc. TIME – WHETHER OF THE ESSENCE

“It is well settled that a breach of contract as to time of delivery, where time is of the essence, is

grounds for canceling such contract.” Higgins Potato Co. v. Holmes & Barnes Ltd., 20 Agric.

Dec. 636, 640 (1961); Anonymous, 11 Agric. Dec. 455, 459 (1952).

25. CONVERSION

Where a trucker improperly diverted a load of produce from its intended destination to a

destination of its choosing and had the receiver handle the produce for its account, the receiver 

was held liable to the shipper/owner for the reasonable value of the produce even though it had 

paid the trucker. Since respondent knew or should have known the produce did not belong to 

the trucker, it was a bona fide purchaser for value. Pure Gold, Inc. v. B & G Produce, Inc., 47 

Agric. Dec. 1741-42 (1988).

See F.O.B. – CONVERSION – this index.

26. COVER

a. EXPENSES SAVED IN CONSEQUENCE OFBREACH
70

Under U.C.C. § 2-712, when a buyer obtains cover for a seller’s breach, the buyer may recover 

the difference between the cost of cover and the contract price together with any incidental or 

consequential damages but less expenses saved in consequence of the breach. Where 

Complainant purchased potatoes at a delivered price to cover for Respondent’s breach and the 

original contract was made at f.o.b. prices, Complainant’s $2.75 per carton shipping cost for the 

f.o.b. contract was an expense Complainant saved in consequence of the breach. This expense

was deducted from the cost of cover at the delivered price and the f.o.b. contract price. G.W. 

Palmer & Co. v. Sun Valley Potato Growers, Inc., 65 Agric. Dec. 673, 682-84 (2006).

b. NO NEED TO GIVE NOTICE OF INTENT TO COVER

Seller contracted to supply buyer with specific quantity of peaches over period of time and

about a week prior to time for shipments to begin told buyer that it would not be able to supply 

all the quantity called for in the contract. Buyer responded that it would have to seek supplies 

elsewhere, if necessary. After shipment had begun under the contract, buyer made cover 

purchases without informing seller until after such purchases were made. It was held that the 

Uniform Commercial Code does not require notice of intent to cover unless the aggrieved party

has taken some positive action which in good faith requires such notification. DNE Sales, Inc. 

v. Richfood, Inc., 50 Agric. Dec. 1037, 1041-42 (1991). See also Associated Produce Distrib. v.

Kurt Van Engel Comm'n Co., 45 Agric. Dec. 383, 386 (1986).

c. PURCHASES MUST BE TIMELY

Cover purchases must be made without unreasonable delay. Fruit Belt Canning Co. v.

Michibay Fruit, Inc., 48 Agric. Dec. 1116, 1120 (1989); All Foods, Inc. v. Richard A. Shaw,

Inc., 40 Agric. Dec. 1574, 1582 (1981).

d. WHEN BUYER HAS THE RIGHT TO DO SO

A buyer may cover and receive the differential in cost from the seller if the seller fails to

deliver goods contracted to be sold. See U.C.C. §§ 2-610, 2-712. Rich-SeaPak Corp. v. ProAg, Inc., 56 Agric. Dec. 1958, 1968 (1997); G. & H. Sales Corp. v. C. J. Vitner Co., 50 Agric.

Dec. 1892, 1897-99 (1991); Al Campisano Fruit Co. v. Shelton, 50 Agric. Dec. 1875, 1883

(1991); Feldman Bros. Produce Co. v. A. Pellegrino & Sons, 32 Agric. Dec. 1845, 1848-49

(1973).

Respondent was found to be entitled to make purchases to cover complainant’s failure to ship

under a supply contract for the period prior to the demand for assurance, and was also entitled 

to credit for cover as to purchases made under a substitute supply contract insofar as that

contract was concluded prior to the demand for assurance, but not as to purchases made under a 

modification of that contract made after the demand for assurance. R & R Produce, Inc. v.

Fresh Unlimited, Inc., 56 Agric. Dec. 997, 1009 (1997).

A buyer who has accepted non-conforming goods may still be entitled to damages for cover. In

such a case, the buyer’s damages will be measured as the difference between the cost of cover 

and the proceeds collected from the prompt resale of the accepted goods. Sunridge Farms, Inc. 

v. Alphas 1 Co. (Order on Reconsideration), 68 Agric. Dec. 1302, 1305-06 (2009).
71

e. WHEN THERE HAS BEEN AN ACCEPTANCE

The concept of cover following acceptance is not frequently encountered. However, that such 

an avenue is open to an accepting buyer is explicitly stated in comment 1 to U.C.C. § 2-601, “A 

buyer accepting a non-conforming tender is not penalized by the loss of any remedy otherwise

open to him. This policy extends to cover . . .”

In addition, the text of § 2-607 on “Effect of Acceptance” states, in part, “. . . acceptance does

not of itself impair any other remedy provided by this Article for non-conformity.” The

reference in § 2-714 on “Buyer’s Damages for Breach in Regard to Accepted Goods” to the

availability, in a proper case, of consequential damages under § 2-715 makes it clear that such 

is contemplated by the U.C.C. Cover in such circumstances might be more comfortably thought 

of under the heading of a buyer’s duty to minimize damages. Consequential damages are

available only if the buyer has a duty to promptly and properly resell the goods accepted. If he 

covers, his damages are the difference between the cost of cover and what was realized from 

the salvage sale. (All of the above quoted from Pandol Bros., Inc. v. Prevor Mktg. Int’l, Inc., 49 

Agric. Dec. 1193, 1203 (1990), note 11.)

The remedy of cover is not available to a buyer who has accepted the goods and has not

revoked his acceptance. Corona Fruit & Veggies, Inc. v. Produce Alliance LLC, 70 Agric. Dec.

A, R (USDA 2011), published in 72 Agric. Dec. A, R (USDA 2013).

27. CUSTOM AND USAGE

A trade practice may be established through proof of custom and usage. See U.C.C. § 1-205.

See also Coast Mktg. Co. v. World Wide Produce Co., 30 Agric. Dec. 1742, 1747-48 (1971),

confirmed on Petition of Reconsideration, 31 Agric. Dec. 669 (1972). (Decision deals with

definition of terms “select” and “super select” as used in cucumber contracts.)

a. PROOF OF CUSTOM

Custom must be proved by numerous instances of actual practice, not by the opinion of a

witness. Cal. Fruit Exch. v. Spracale Fruit Co., 89 F. Supp. 580 (W.D. PA. 1950); Lookout

Mountain Tomato & Banana Co. v. Case Produce, Inc., 51 Agric. Dec. 1471, 1478-79 (1992);

Woods Co. v. PSL Food Mkt., Inc., 50 Agric. Dec. 976, 982-83 (1991); Coast Mktg. Co. v.

World Wide Produce Co., 30 Agric. Dec. 1742, 1747-48 (1971), confirmed on Petition of

Reconsideration, 31 Agric. Dec. 669 (1972); Michael Santelli & Sons, Inc. v. Rubenstein, 21

Agric. Dec. 1053, 1056 (1962); M.R. Davis & Bros. v. Flynn, 20 Agric. Dec. 1069, 1072

(1961).

28. DAMAGES
72

Doctrine the damages must be calculable with mathematical accuracy rejected. Shriver v.Mkt.

Pre-Pak, Inc., 39 Agric. Dec. 290, 307 (1980).

Long-standing administrative practice favors the assessing of damages where possible. James

Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 1477, 1484 (1979).

a. ACCOUNTINGS

Damages in the amount of the reasonable value of the produce are awarded when a party fails 

to account for produce. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 973

(2010).

A failure to provide a proper accounting may preclude an award of damages to a receiver where 

no alternative method of assessing damages can be found. J & J Produce Co. v. Weis-Buy

Serv., Inc., 58 Agric. Dec. 1095, 1101 (1999).

Accountings that show only an average price are commonly not used to show the value of

consigned goods or the value of damaged goods resold by a buyer. A buyer’s accounting

showing an average sale price for all the produce was deemed inadequate in Supreme Berries,

Inc. v. McEntire, 49 Agric. Dec. 1210, 1217 (1990). However, where the accounting showed

that the average price realized was the same as the current market price, and the amount of

goods lost on repacking was less, as a percentage, than the condition defects shown on the

arrival federal inspection, an exception was made, and the accounting was used to show the

proper returns under a consignment contract. Great Am. Farms, Inc. v. William P. Hearne

Produce Co., 59 Agric. Dec. 466, 470 (2000). See also DeSomma v. All World Farms, Inc., 61

Agric. Dec. 821, 835-36 (2002).

b. BUYER’S FOR NON-DELIVERY WHERE NO COVERMADE

U.C.C. § 2-711 provides, in part, that:

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or 

justifiably revokes acceptance then with respect to any goods involved, and with respect to the 

whole if the breach goes to the whole contract (Section 2-612), the buyer may cancel and

whether or not he has done so may in addition to recovering so much of the price as has been 

paid

(a) “cover” and have damages under the next section as to all the goods affected whether 

or not they have been identified to the contract; or

(b) recover damages for non-delivery as provided in this Article (Section 2-713).

See H. Hall & Co. v. Action Produce, 45 Agric. Dec. 755, 758-59 (1986); and Dennis Produce

Sales, Inc. v. Green Valley Onion Co., 39 Agric. Dec. 1506, 1512-13 (1980).
73

Late delivery of potatoes caused shut down of buyer’s processing plant and overtime operation 

when three loads arrived later, all at one time. Buyer was allowed to prove plant overhead costs 

resulting from shutdown, and overtime costs resulting from the delivery of three loads at one 

time. Both costs were awarded as consequential damages. Process Supply Co. v. Perfect Potato

Chips, Inc., 40 Agric. Dec. 800, 805 (1981).

Under the U.C.C., when a seller fails to deliver, the buyer may cover by purchasing substitute

goods in good faith and without unreasonable delay. Product purchased as cover need not be 

identical to the substituted goods, but such purchases must be commercially reasonable. If the 

buyer, without justification, purchases goods superior to those specified in the contract, the 

purchase amount used to calculate cover damages will be reduced to an amount equal to the 

market price of the kind and quality of product specified in the contract. DiMare Fresh, Inc. v. 

Sun Pac. Mktg. Coop., Inc., PACA R-07-054, slip op (August 22, 2008), aff’d, No. 12-17378 

(Ninth Cir., E. Dist. of Cali. February 24, 2015).

c. ESTIMATION OF

Estimating damages is permissible as long as we do not move into speculation. Where

determination of damages would be speculative (no objective benchmark can be found) they

should not be awarded. Also, in arriving at an estimate, the uncertainty as to value must not be

allowed to benefit the party who caused the uncertainty, or who had the burden of proving

damages but failed to submit adequate evidence. Grasso Foods, Inc. v. Americe, Inc., 69 Agric.

Dec. 1547, 1563 (2010).

We have refused to use an estimate of commercial value made by a foreign surveyor where the 

record did not establish any expertise on the part of the surveyor to make such an estimate. See

Ont. Int’l, Inc. v. Nunes Co., 52 Agric. Dec. 1661, 1673 (1993).

When damages have not been shown the tribunal may, under certain circumstances, estimate

damages in order to do equity. Richard S. Brown, Inc. v. Houlehan, Inc., 47 Agric. Dec. 320

(1988); Ark. Tomato Co. v. M-K & Sons Produce Co., 40 Agric. Dec. 1773, 1778 (1981); C. & 

G. Onion Co. v. Bushman’s, Inc., 40 Agric. Dec. 117, 120 (1981); Brown & Hill v. U.S. Fruit

Co., 20 Agric. Dec. 891, 895 (1961).

Damages need not be calculable with mathematical accuracy. Shriver v. Mkt. Pre-Pak, Inc.,

39 Agric. Dec. 290, 307 (1980).

Respondent buyer and complainant agreed after arrival of an f.o.b. shipment of tomatoes to

respondent’s handling them on a consignment basis. However, respondent failed to account.

Held: “Respondent’s failure to account necessitates our estimating the amount for which

respondent is liable. In arriving at an equitable figure we take into consideration the lack of

proof that the subject tomatoes were abnormally deteriorated together with the fact that the

necessary uncertainty as to the value of the tomatoes must not be allowed to benefit respondent 

over complainant, since respondent’s failure to account is the cause of the uncertainty.” Meyer

v. Hardcastle Produce Co., 40 Agric. Dec. 1172, 1175 (1981).
74

Testimony of buyer allowed as basis of estimation of buyer’s damages. Farmers Sales v.

Tomatoes, Inc., 32 Agric. Dec. 1889, 1892-93 (1973). See also Anderson v. Big Stone Canning

Co., 33 Agric. Dec. 961, 966-67 (1974).

Difference between high and low quotes in Market News reports used. Oneonta Trading Corp.

v. Walter Gailey & Sons, Inc., 41 Agric. Dec. 764, 768 (1982).

Where onions were sold U.S. No. 1 delivered and failed to grade on arrival, the difference

between the mostly price for U.S. No. 1 and the price for fair condition, as shown by Market

News reports was used. I. Kallish & Sons v. Jarosz Produce Farms, Inc., 26 Agric. Dec.

1285, 1291-92 (1967).

Where potatoes failed to meet contract requirements and complainant authorized a consignment 

handling, but respondent failed to make a prompt and proper resale, the market value of the 

potatoes was estimated by deducting the value of 150% of the damaged potatoes as found by 

the federal inspectors, i.e., one and one-half times the defects disclosed by the inspections from 

the contract price specified in the parties’ original agreement. E. Coast Potato Distrib., Inc. v. 

Spriridis, 47 Agric. Dec. 947, 952-53 (1988). It is not stated whether relevant Market News

prices were available, but if they were, the deduction should be applied to the average Market 

News price rather than the contract price.

d. FREIGHT

In Horticulture Producers Federated Ass’n v. A. Sam & Sons Produce Co., 51 Agric. Dec.

1460, 1470 (1992), we stated:

[w]hen resorting to the use of an alternative market under UCC § 2-723(2) we

usually do not make an allowance for the cost of transporting the goods to such

other market. Such an allowance would only be ‘proper’ where the prices in the

alternative market could be deemed to be higher or lower due to such market’s

greater or lesser distance from the source of supply. In this proceeding the

destination of Baxter Springs, Kansas contains no ready market for the resale of

the cabbage, and transportation to another market was necessary in order to resell

the cabbage. The additional freight costs should therefore be viewed as falling

under the consequential damages provisions of UCC § 2-714(3), and not under

the last phrase of UCC § 2-723(2).

The decision determined damages by the difference in price spread between the middle and low

market price for similar produce in good condition.

e. INCIDENTAL AND CONSEQUENTIAL

Damages for lost profits were denied because of respondent’s failure to show that such

damages could not have been prevented by cover purchases. Flanagan & Jones, Inc. v. World

Wide Consultants, Inc., 53 Agric. Dec. 828, 857 (1994).
75

Late delivery of potatoes caused shut down of buyer’s processing plant and overtime operation 

when three loads arrived later, all at one time. Buyer was allowed to prove plant overhead costs

resulting from the shutdown and overtime costs resulting from the delivery of three loads at one 

time. Both costs were awarded as consequential damages. Process Supply Co. v. Perfect Potato

Chips, Inc., 40 Agric. Dec. 800, 805 (1981).

In Stake Tomatoes v. World Wide Consultants, 52 Agric. Dec. 770, 776 (1993), a load of

tomatoes was sold to arrive showing light pink color, but actually arrived showing light red to

red color. Damages for this breach were awarded based upon the difference between the

contract price respondent had negotiated with its customer and the amount respondent actually 

received from its customer. This award of damages was treated as an exception to the normal 

method of awarding damages based on a percentage of defects, but seems to actually fall under

the concept of consequential damages.

Storage fees can be awarded if agreed upon by the parties in a contract involving the sale of

perishable agricultural commodities. Grasso Foods, Inc. v. Americe, Inc., 69 Agric. Dec.

1547, 1564 (2010).

f. MATERIAL BREACH

Where Complainant materially breached the contract by shipping seeded watermelons, rather

than the seedless watermelons called for in the contract of sale, but Respondent’s damages

resulting from the breach could not be measured using the normal method, i.e., the difference

between the value of the watermelons as accepted and the value they would have had if they

had been as warranted, because the account of sales prepared by Respondent’s customer did not 

accurately account for the number of watermelons shipped, we found that the case presented 

special circumstances such that a more appropriate measure of Respondent’s damages was the 

difference at the time of sale between the market value of the seedless watermelons called for

in the contract of sale and the market value of the seeded watermelons actually shipped.

Diamond Fruit & Vegetable Distribs., Inc., v. Muller Trading Co., 66 Agric. Dec. 882, 889 

(2007).

g. MITIGATION

When assessing damages for resold product, it is necessary that Complainant show that its

resale was made in a “commercially reasonable manner.” What constitutes a “commercially 

reasonable manner” depends upon the nature of the goods, the condition of the market, and the

other circumstancesof the case. Where Complainant proved that the product to be resold was a 

“specialty item” with limited buyers, and that the product, once frozen, was not highly 

perishable, holding product in cold storage for several months until it could be resold was 

commercially reasonable. Grasso Foods, Inc. v. Americe, Inc., 69 Agric. Dec. 1547, 1562 

(2010).

Receiver of produce has a duty to mitigate its consequential damages. See U.C.C. § 2-715(2)

and comment 2.
76

Although goods meeting contract requirements were ultimately dumped, buyer failed to show

that seller failed to mitigate damages as to goods accepted by buyer, and then wrongfully

rejected. Seller promptly moved the goods to a third party to be disposed of, and it was said, 

“[t]here is no allegation or evidence that [third party] was a firm unqualified to dispose of the 

disputed goods, or that the firm failed to properly do so. Therefore, it is found that complainant 

made reasonable efforts to mitigate its damages, but to no avail.” Dew-Gro, Inc. v. Mings Imp., 

Inc., 45 Agric. Dec. 739, 741 (1986).

Where shipper breached the contract by shipping potatoes that were not suitable for chipping,

and the buyer received the potatoes, held that receiver’s efforts to place the potatoes elsewhere 

and subsequent donation of the potatoes to charitable groups was justified after the seller failed 

to direct an alternative course. Fisher v. Acton Co., 41 Agric. Dec. 524, 527 (1982).

Where a carload of lettuce sold f.o.b., without reference as to grade, was inspected on arrival in 

Chicago on October 27, and found to contain an average of 2% damage by tipburn, 10%

damage by reddish brown discoloration following bruising affecting outer leaves and three to

five head leaves, and 2% decay respondent rejected. The lettuce was found to have made good 

delivery, and the rejection was found to be wrongful. Notice of rejection was given on October 

27, and on the following day, the parties exchanged telegrams in an unsuccessful effort to reach 

an understanding. On October 29, the seller turned the load over to a third party to resell, and 

the third party diverted the load to New York where it arrived on November 3. The load was 

there determined to be in too deteriorated condition to bring freight charges and was abandoned 

to the carrier. The seller sought to recover the contract price, and the buyer contended that the 

seller failed to use due diligence in mitigating damages following rejection. We said:

There is no evidence of any negligence, delay, or bad judgment in the attempted

resale of this shipment. The diversion of the shipment to another market for resale 

is not shown to have been unreasonable. Complainant testified that it is often 

difficult or impossible to resell a shipment of lettuce on the same market where it 

has been rejected by the original buyer. We have previously held that if, in the 

seller’s judgment, a resale can be made to a better advantage by diverting it to 

another market than that at which it was rejected, and there is no indication of bad 

faith or lack of diligence in so doing, the validity of the seller’s action will be

upheld. S.A. Gerard Co. v. Metzler & Sons, Inc., 12 Agric. Dec. 781, 786 (1953). It 

is concluded that the diversion and attempted resale of this shipment was handled

in a reasonable and diligent manner.

Navajo Mktg. Co. v. Kaiser, 19 Agric. Dec. 894, 898-99 (1960).

h. NOT PROVEN

Where Respondent sought damages for Complainant’s material breach of contract, but failed to

submit adequate evidence of its damages and no objective benchmark for determining damages

could be found (e.g., percentage of condition defects, differential between USDA Market News 

price for product as warranted versus product as accepted), damages were not awarded, and

Respondent was liable for the full contract price less the cost of inspection. Big Chuy Distribs.

& Sons, Inc. v. Muller Trading Co., 66 Agric. Dec. 1445, 1451 (2007).
77

i. OPEN SALES AND CONSIGNMENTS

See CONSIGNMENTS - SALE ON OPEN BASIS DISTINGUISHED FROM - this

index, and OPEN - this index.

j. QUANTUM MERUIT RECOVERY ALLOWED

Where there was no contract proved but goods were received and sold. Pruette v. E. Vega &

Sons Produce, 41 Agric. Dec. 1196, 1200 (1981).

k. SELLER’S FOR NON-ACCEPTANCE OR REPUDIATION

U.C.C. § 2-708 provides that:

(1) Subject to subsection (2) and to the provisions of this Article with respect to proof of 

market price (Section 2-723), the measure of damages for non-acceptance or repudiation 

by the buyer is the difference between the market price at the time and place of tender and 

the unpaid contract price together with any incidental damages provided in this Article 

(section 2-710), but less expenses saved in consequence of the buyer’s breach.

(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in 

as good a position as performance would have done then the measure of damages is the 

profit (including reasonable overhead) which the seller would have made from full 

performance by the buyer, together with any incidental damages provided in this Article 

(Section 2-710), due allowances for costs reasonably incurred and due credit for payments 

or proceeds of resale.

Where buyer repudiated contract and refused to take delivery of frozen strawberries, seller

could not recover difference between contract price and proceeds of a resale made seven and

one-half months after the breach because such resale was not commercially reasonable as to

time under U.C.C. § 2-706. Seller was relegated to recovery of damages under U.C.C. § 2-708

based upon difference between contract price and market price, but seller failed to submit

evidence as to market price, and the data available to the Department showed that there was no

difference between the two prices at the time for tender. The complaint was dismissed. Valley

Pride Sales, Inc. v. Dairy Rich Ice Cream Co., 53 Agric. Dec. 879, 886-87 (1994).

Where the buyer repudiates with respect to a part or the whole, the seller may resell the goods

concerned, and if such resale is made in a commercially reasonable manner and in good faith,

may recover the difference between the resale price and contract price plus any incidental

damages incurred. Washburn Potato Co. v. Rex E. Sparks Produce, 42 Agric. Dec. 955, 958

(1983); Ashley v. Cyr Bros. Meat Packing Co., 36 Agric. Dec. 401, 410 (1977).
78

Complainant failed to prove that it resold the commodities in a commercially reasonable

manner. Damages awarded to Complainant based on the difference between prevailing market

price and the original contract price (U.C.C. § 2-708). D.M. Rothman Corp., Inc. v. Good Luck

Produce, Inc., 66 Agric. Dec. 1472, 1482-83 (2007).

l. SELLER’S FOR WRONGFUL REJECTION

U.C.C. §§ 2-703, 2-706, 2-708.

Merit Packing Co. v. Garden State Farms, Inc., 41 Agric. Dec. 2260, 2263-64 (1982).

Yokoyama Bros. v. Cal-Veg Sales, 41 Agric. Dec. 535, 538 (1982).

Following Complainant’s wrongful rejection of several lots of corn, Respondent could not

recover damages using the measure set forth in U.C.C. § 2-706, i.e., the difference between the

contract price and the resale price, because Respondent did not submit any evidence of the

proceeds collected from the resale of the corn. Respondent was relegated to recovery of

damages under U.C.C. § 2-708, i.e., the difference between the contract price and the market

price. However, since relevant USDA Market News reports showed market prices for similar

corn that were substantially greater than the f.o.b. contract price plus freight, Respondent failed 

to establish it was damaged according to the measure of damages set forth in U.C.C. § 2-

708(1). Rosenthal Foods Corp. v. W-W Produce, Inc., 69 Agric. Dec. 917, 925-26 (2010).

Where buyer rejected two lots of onions and communicated such rejection to seller in timely

fashion, rejections were effective and title was revested in seller. Seller took possession of

onions and had them resold. Damages could not be awarded on the basis of the difference

between resale price and contract price because complainant did not submit an accounting of 

the resale into evidence. Damages were awarded on the basis of the difference between market 

price and contract price. McKay v. Lusk Onion, Inc., 54 Agric. Dec. 721, 725-26 (1995).

U.C.C. § 2-706 is not available if seller’s resale is defective, and seller is relegated to U.C.C. § 

2-708. Mut. Vegetable Sales v. Joseph Notarianni & Co., 29 Agric. Dec. 1049, 1053 (1970). 

See Valley Pride Sales, Inc. v. Dairy Rich Ice Cream Co., 53 Agric. Dec. 879, 886-87 (1994).

Seller may recover expenses incidental to the resale of the wrongfully rejected product. Pope

Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101, 105

(1979).

29. DEFERRED BILLING

This is a subcategory of “Open Price.” See CONSIGNMENTS – SALE DISTINGUISHED

FROM – this index. See also OPEN PRICE – this index.

In Nw. Fruit Sales, Inc. v. Norinsberg Corp., 39 Agric. Dec. 1556, 1560 (1980), we stated, “.

. . the term ‘deferred billing’ is not defined in the Department’s regulations [Requirements] and

has no fixed meaning within the perishable industry . . . one of the meanings sometimes 

assigned to the term . . . conforms with . . . ‘open billing basis, to be priced after sale . . .”
79

See Dennis Produce Sales, Inc. v. Caruso-Ciresi, Inc., 42 Agric. Dec. 178, 184 (1983), where

we quoted the Northwest Fruit Sales case and said,

[s]ince the record as a whole indicates that the term “deferred billing,” however

vague, did contemplate participation by complainant in the pricing of the produce

after its sale, and since complainant was not satisfied with the price unilaterally

set by respondent, it is apparent that the parties never agreed to a price under such

terms.

Deferred billing has been stated to mean that the price will be established after the goods have

arrived at their destination. See Slayman Fruit Co. v. Wholesale Produce Supply, Inc., 30 Agric.

Dec. 1751, 1755 (1971).

Where parties failed to agree on a price under deferred billing terms, the price was held to be a 

reasonable price, and prices shown by market reports from neighboring city, after deductions 

for freight and reasonable profit, were used to arrive at a reasonable price for the potatoes. M.J. 

Duer & Co. v. J.F. Sanson & Sons Co., 49 Agric. Dec. 620, 625 (1990). See also Corky Foods 

Corp. v. S & S Produce Co., 45 Agric. Dec. 844, 846-47 (1986), where the best evidence of the 

market price was found to be prices paid for similar transactions during the same time period

rather than conflicting prices appearing on the Market News reports.

30. DELIVERED SALE

U.C.C. terminology is “F.O.B. the place of destination,” or “destination contract.” See U.C.C. §

2-318(1)(b). A “shipment” or “f.o.b.” contract, in the absence of evidence as to the agreement, 

is presumed. See J. White & R. Summers, Handbook of the Law under the Uniform

Commercial Code, § 5-2, p. 143 (1972).

“‘Delivered’ or ‘delivered sale’ means that the produce is to be delivered by the seller on board 

car, or truck or on dock if delivered by boat, at the market in which the buyer is located, or at

such other market as is agreed upon, free of any and all charges for transportation or protective 

service. The seller assumes all risks of loss and damage in transit not caused by the buyer...” 7 

C.F.R. § 46.43(p).

a. BREACH OF DELIVERED CONTRACT

Under a delivered contract the goods are required to meet contract requirements at the time and 

place specified in the contract for delivery. The suitable shipping condition warranty has no

relevance in a delivered sale (or where, as here, the contract was for fob price and U.S. #1 grade

at destination) contract. Sidney Newman & Co. v. Wallace Fruit & Vegetable Co., 21 Agric. 

Dec. 1048, 1050 (1962). However, something analogous to the suitable shipping condition 

concept may be utilized to ascertain whether goods met contract requirements at time of

delivery. This occurs when inspection is delayed or when goods are diverted from the original 

destination. The evidentiary standard to which a buyer should be held in these situations should 

be that a breach be proven by clear and convincing evidence. The diversion from the original 

destination, or the delay, is attributable to the buyer, and the contractual obligation extends only

to the contract destination point and time. Villalobos v. American Banana Co., 56 Agric. Dec. 
80

1969, 1978-79 (1997).

Condition of produce at a time substantially later than time of delivery and at a different place

from contract destination, may be used to show breach as to a delivered sale. Inspection

showing 15% sunken discolored areas, plus 4% quality defects, four days after arrival, was held 

to show breach as to potatoes. Record contained expert testimony supporting conclusion, and it

was also noted that “during the four day period the outside temperatures ranged from 30 to 34 

degrees, no heat was applied to the potatoes, and the load was properly ventilated . . .” Baltes

Potato Co. v. I. Kallish & Sons, 18 Agric. Dec. 1301, 1304 (1959).

Potatoes shipped on a delivered basis from Maine (where they graded U.S. No. 1 on May 30,

31, and June 2) to Brooklyn, New York, were then shipped on June 5, from New York to

Puerto Rico where they were inspected on June 10th, and found to contain an average of 25%

fusarium tuber rot in advanced stages. It was stated that, “[i]n our view, this evidence of

condition in Puerto Rico some 5 to 8 days after the potatoes were delivered to the Bull Line [in 

Brooklyn], is unacceptable to establish grade requirements at the time the potatoes were

delivered to the pier in Brooklyn.” Aroostook Growers & Packers, Inc. v. Flores & Co., 18

Agric. Dec. 918, 920-21 (1959).

Where parties concluded a “no grade” contract for the sale of onions on a delivered basis, the

U.S. Grade Standards for onions were the standard for determining a breach as to condition (as

distinguished from quality). Sharyland L.P. v. Caribe Food Corp., 56 Agric. Dec. 1011, 1014-

15 (1997).

b. FREIGHT

“A delivered sale is the opposite of an f.o.b. sale; i.e., it is one in which the seller is responsible 

for paying the freight and the seller has the risk of loss in transit.” In re Ben Gatz Co., 38 Agric. 

Dec. 1038-39 (1979).

c. RESPONSIBILITY FOR TRUCKER’S FAILURE TO TENDER.

Trucker’s failure to effect delivery or “tender” is attributable to seller in a delivered sale. L.J.

Crawford v. Ralf & Cono Comunale Produce Corp., 51 Agric. Dec. 804, 810 (1992).

Truck driver, after being informed by receiver that he would not be unloaded until later that

day, took the product away and disposed of it without authorization. Found that there was no

acceptance or wrongful rejection. The carrier, acting as the shipper’s agent in a delivered sale,

failed to make an adequate tender of delivery and the subsequent wrongful conversion of the 

goods by the carrier falls on the shipper. San Joaquin Valley Vegetable Co. v. Kallish, 42

Agric. Dec. 645, 651 (1942).
81

d. TRANSIT CONDITIONS

In a delivered sale, the shipper is responsible for what occurs during transit. Pandol Bros.,Inc.

v. D’Acquisto, 43 Agric. Dec. 646, 648 (1984); Wallace Fruit & Vegetable Co. v. Mercurio, 18

Agric. Dec. 1327, 1330 (1959).

31. DIVERSION

Diversion en route is an act of acceptance. See 7 C.F.R. § 46.2(dd)(1). See also Magic Valley

Potato Shippers, Inc. v. C.B. Marchant & Co., 42 Agric. Dec. 1602, 1606-07 (1983);

Lindemann Farms, Inc. v. Food Fair Stores, 36 Agric. Dec. 92, 95 (1977).

32. DUMPING

Dumping requires a dump certificate or other appropriate evidence of the act. 7 C.F.R. §

46.23. La Mantia-Cullum-Collier & Co. v. Castille, 34 Agric. Dec. 769 (1975).

In Great Lakes Produce v. Johnnie’s Produce & Popcorn Supply Co., 31 Agric. Dec. 1300,

1303 (1972), although there was no adequate certificate to cover dumping of 800 out of 820

sacks of potatoes, a federal inspection showed 20 to 53%, average 33% damage, including 24% 

serious damage by hollow heart, and it was held that there was adequate proof that the potatoes

were not merchantable, and damages were awarded. See also Harmon v. Pac. Gamble

Robinson Co., 45 Agric. Dec. 2072, 2074-75 (1986); Salinas Lettuce Farmers Coop. v. Larry

Ober Co., 39 Agric. Dec. 65, 71 (1980).

In Jameson v. Valerio’s Produce Co., 46 Agric. Dec. 653, 656-56 (1987), it was stated that

there is a presumption against verbal waiver of the required evidence of dumping. The parties

had modified an f.o.b. contract following arrival of strawberries to call for protection against

loss with no need for the receiver to secure an inspection. The receiver dumped a large portion 

of the berries without securing evidence of dumping. It was held that the receiver’s evidence 

was sufficient to overcome the presumption as well as the seller’s sworn statement that he had 

not made such a waiver.

Where a buyer claimed damages from tomatoes having been dumped, statements from third

parties were held not sufficient in identifying the tomatoes being dumped, and the buyer was

held liable for the value of the tomatoes. Kaplan’s Fruit & Produce Co. v. Tooley & Sons, Inc.,

38 Agric. Dec. 97, 100 (1979).

Where buyer rejected produce due to its failure to meet requirement of contract that it conform 

with the government pesticide tolerances of buyer’s jurisdiction and undertook with seller’s 

knowledge to secure return of produce to seller’s jurisdiction where it could be legally resold 

and was informed by customs broker that return would likely not be possible, buyer’s

subsequent dumping of produce, under all circumstances of case, was found to fall within good 

faith requirement of § 2-603 of the U.C.C. Steve Dart, Inc. v. Mecca Farms, Inc., 49 Agric.

Dec. 638, 643-44 (1990).
82

A consignee in a consignment transaction has the duty to secure evidence of dumping for all

produce dumped in excess of 5%, and any dumped produce in excess of 5% must be brought

back into the accounting at the average price realized for the produce that was not dumped.

Alamo Produce v. Triton Imports, PACA R-96-056, slip op (1997).

In an open sale transaction, dumping of any portion of the produce must be substantiated by a

dump certificate or other appropriate evidence. In a consignment transaction, the Regulations

[Requirements] promulgated pursuant to the PACA require “proof as to the quantities of 

produce destroyed ordumped in excess of 5%.” Here, the PACA investigator mischaracterized 

the contract as one of consignment rather than sale and erroneously granted a 5% dump 

discount. Carmack v. Selvidge, 51 Agric. Dec. 892, 901-02 (1992).

Where federal inspection on arrival showed an average of 7% decay in load of 1,090 cartons of

cantaloupes, and buyer dumped 99 cartons (9%), we said that “we consider the dumpage on this

load to be reasonable.” M. Offutt Co. v. Caruso Produce, Inc., 49 Agric. Dec. 596, 606 (1990).

Where a joint venture partner accounted zero and negative returns for lots of cabbage, the

accountingmust also have included other adequate evidence to justify the zero and negative

returns. Inspections or other adequate evidence are required to demonstrate that produce is 

without commercial value, and that documentation must be given to the joint account partner. 

Because the expenses were not separately accounted for, presumption arose that zero and 

negative returns were a result of dumping. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric.

Dec. 942, 965 (2010).

33. ELECTION OF REMEDIES

See PRACTICE AND PROCEDURE – ELECTION OF REMEDIES – this index.

7 U.S.C. § 499e(b):

Such liability may be enforced either (1) by complaint to the Secretary as hereinafter provided, 

or (2) by suit in any court of competent jurisdiction; but this section shall not in any way

abridge or alter the remedies3 now existing at common law or by statute, and the provisions of 

this Act are in addition to such remedies.

THE LEADING CASES ARE:

Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric. Dec. 1955, 1957 (1983).

M.S. Thigpen Produce Co. v. Park River Growers, Inc., 48 Agric. Dec. 695, 697 (1989).

3 The term “remedies” refers to procedural rights, not to substantive rights. Rothenberg v. H. Rothstein & Sons, 183 F.2d 

524, 21 A.L.R.2d 832 (3rd Cir. 1950).
83

Kurt Van Engel Comm’n Co., v. Schultz Sav-O Stores, Inc., 48 Agric. Dec. 731-33 (1989).

34. ESTOPPEL

a. DUTY TO SPEAK

A party must have a duty to speak to be stopped from denying it had agreed to pay invoices for

which another party is obligated. See 28 Am. Jur. 2d 667-668. See also Floriza Sales Co.

v. Pamco Air Fresh, Inc., 47 Agric. Dec. 1328, 1339-40 (1988).

b. ESTOPPEL TO DENY AGENCY

Where Respondent remitted payment to a collection agent in settlement of its indebtedness to

Complainant, but Respondent failed to establish that the agent was bestowed by Complainant

with either actual or apparent authority to collect on Complainant’s behalf, held that

Respondent’s sole reliance on the representation of the agent that it was authorized to settle the 

indebtedness on Complainant’s behalf was neither reasonable nor legally sufficient to absolve it 

of liability to Complainant. New Generation Produce Corp. v. NY Supermarket, Inc., 68 Agric.

Dec. 561, 586 (2009).

Estoppel to deny agency arises when the principal gave the agent indicia of authority on which 

another party relied to its detriment. Bud Antle, Inc. v. Spruton, Inc., 47 Agric. Dec. 1619,

1622-23 (1988); Sunny Sally, Inc. v. Ray Burke Farmer, 23 Agric. Dec. 268 (1964) (not

established); Tri-State Sales Agency v. Palmetto Fruit & Produce Co., 14 Agric. Dec. 1140,

1143 (1955).

The necessary elements for the doctrine of estoppels to apply are: (1) the principal has given

indicia of authority to the agent or has knowingly permitted or caused another to appear to be

its agent; (2) there must be a representation of the agency by the principal; (3) there must be a

reliance upon such representation by a third party; and (4) such representation must have been

acted on in good faith to the injury of that third party. Floriza Sales Co. v. Pamco Air Fresh,

Inc., 47 Agric. Dec. 1328, 1339-40 (1988).

c. NECESSARY ELEMENTS

Where Complainant, who sold tomatoes on Respondent’s behalf while acting in the capacity of 

a grower’s agent, paid Respondent the net proceeds from its sales of the tomatoes but neglected 

to deduct the 8% commission that it was entitled to withhold as commission according to the 

contract, Respondent argued that Complainant should be estopped from recovering its 

commissions because it represented to Respondent that the settlement amounts already remitted

to Respondent were final, which representation Respondent reasonably relied upon and paid its 

growers accordingly, so Respondent would suffer a loss if it were ordered to pay the 

commissions owed to Complainant. Held that in order for Respondent to defend the claim on 

the basis of estoppel, Respondent must establish both that its reliance upon the information 

provided to it by Complainant was reasonable, and that it relied upon the error made by

Complainant to its detriment. The contract did not specify whether the commission would be 

deducted on the product liquidation or billed separately, so in the absence of any mention of the 
84

commission on the liquidation, Respondent should not have assumed that the commission had 

already been deducted. Moreover, Respondent failed to show that Complainant otherwise

represented that the settlement amounts paid to Respondent were final, i.e., net after

commission. Therefore, Respondent failed to establish that its reliance upon the information

provided to it by Complainant was reasonable. Respondent also failed to establish that it relied 

upon the error made by Complainant to its detriment because it failed to show that it attempted 

to contact its grower to recoup the overpayment that it made as a result of its presumption that

the funds received from Complainant were net after commission. Thus, Respondent failed to 

show that any losses incurred as a result of having to pay commission to Complainant were 

unavoidable. Because Respondent failed to establish the necessary elements of estoppel, 

Respondent was ordered to pay the commission owed to Complainant according to the terms of 

the contract. Eurofresh, Inc. v. Tricar Sales, Inc., 68 Agric. 1224, 1235 (2008.)

35. EVIDENCE

See BURDEN OF PROOF – this index.

a. ALTER EGO

A newly-formed corporation was found to have been the alter ego of an established corporation

because the established corporation: (1) accepted produce for both corporations, (2) provided 

warehouse space for both corporations, (3) comingled funds by delivering remittance checks 

from accounts it controlled, (4) shared an employee and owner, and (5) the employee in 

common to both corporations negotiated for both corporations. There was some evidence of 

separation, but the weight of the evidence showed that the two corporations were not acting as 

separate entities for the purposes of the joint venture. Because of these facts, the newly-formed 

corporation’s interests were dominated by the established corporation to the extent that the 

newly-formed corporation was the alter-ego of the established corporation. L & M Farms, Inc. 

v. Y2S Trading, Inc., 69 Agric. Dec. 942, 953-54 (2010).

Two corporations that were formed in different states, at different times, and the corporations

had different owners and officers, separate employees, and accounting departments, were not

alter-egos of one another. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 954

(2010).

b. ATTORNEYS

In regard to relevant evidence offered by the parties under the documentary procedure, it was

said that statements of fact sworn to by a party involved in relevant transactions could be

accorded less weight when the statements were a part of legal argument obviously constructed

by an attorney who was the first person to sign the statement. The situation was said to be

analogous testimony elicited in response to leading questions. Faris Farms v. Lassen Farms, 59

Agric. Dec. 471, 480 (2000).
85

c. BROKERS

In the absence of the required statement on the broker’s memorandum of sale as to who

engaged the broker, a broker is presumed to have been engaged by the buyer. This fact should 

be weighed carefully in regard to the credibility of a broker’s statements. In a case where the

broker was found to have been engaged by the respondent, the broker’s statements in 

respondent’s favor were nevertheless given credence. Charles Johnson Co. v. Hoversen, 57

Agric. Dec. 756, 759-60 (1998).

d. CLEAR AND CONVINCING

Complainant shipped 44 loads of citrus to 2 buyers. All negotiations were through a broker, 

who was found to have purchased only one of the loads for the broker’s own account.

Complainant alleged that the broker made an oral agreement to guarantee the payment of the 

buyers. However, where the broker’s memorandums of sale disclosed that the buyers were

being accommodation invoiced by the broker, and such memorandums did not say that there 

was a guarantee by the broker, it was stated that a guarantee would have to be proven by the

most forceful evidence. Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1790

(1994).

The use of f.o.b. acceptance final terms must be very clearly established due to the harshness of

the terms and the rarity of its use in the trade. Rose Valley Group, Inc. v. Misty Shores Trading,

Inc., 53 Agric. Dec. 870, 874 (1994).

Fact of use of term f.o.b.a.f., if disputed, must be very clearly established, due to “the harshness

of the conditions imposed . . . as well as . . . the rarity of its use in the trade. . .” Morgan Prod. 

Corp. v. United Prod Co., 25 Agric. Dec. 1484, 1488-89 (1966).

e. CREDIBILITY

Various factors may be considered when assessing the credibility of a party’s allegations. For

instance, in R.L. Burden Produce Serv. v. Taylor Produce, 50 Agric. Dec. 1009, 1013 (1991),

complainant alleged failure to pay for a series of four produce transactions. However, the

evidence showed that complainant, during the informal stages of the proceeding, admitted to

the Department that respondent had paid two of the items, but nevertheless included the two

items in its formal complaint. On this basis, we said that although we would not normally have 

been disposed to credit respondent’s assertion of payment due to the failure of respondent to 

correlate payments with transactions, we would give credit to respondent’s representation of

payment as to all four transactions due to complainant’s lapse of memory as to two of the items.

f. EQUITY

Equity is not automatically available whenever plaintiff perceives a subjective unfairness in the

legal outcome; equity grants relief when the law will not make plaintiff whole. Equity cannot

be supported without adequate evidence of loss. Pearl Ranch Produce LLC v. Desert Springs

Produce LLC, 67 Agric. Dec. 1465, 1475 (2008).
86

g. FAILURE TO OBJECT

Where Respondent failed to object to invoices sent by Complainant and received in the normal 

course of business, Respondent provided a credible explanation for its lack of objection and

provided evidence that the sale did not take place, the failure of Respondent to object to the 

invoices did not create a sale between Complainant and Respondent. Evans Sales, Inc. v. W.

Coast Distrib., Inc., 67 Agric. Dec. 1441, 1461 (2008).

When documents such as mailgrams and invoices which contain terms of sale are not objected

to in a timely manner, such documents are evidence of a contract containing the terms set forth 

therein. Pac. Fruit, Inc. v. Bonafede, 45 Agric. Dec. 371, 373 (1986); Pac. Valley Produce Co. 

v. Garin Co., 44 Agric. Dec. 414, 415 (1985); Casey Woodwyk, Inc. v. Albanese Farms, 31 

Agric. Dec. 311, 317 (1972); Frank’s Packing Co. v. Landow-Gordon Grape Co., 19 Agric. 

Dec. 859, 863 (1960).

The failure of a party to object to an invoice received in the normal course of business does not

create a sale which is otherwise non-existent. Floriza Sales Co. v. Pamco Air Fresh, Inc., 47 

Agric. Dec. 1328, 1340 (1988).

h. FOUNDATION

A verified signature on a questioned document is insufficient to show the authenticity of the

document if there is no showing as to the knowledge of the person who signed it. Great Am.

Farms, Inc. v. William P. Hearne Produce Co., 59 Agric. Dec. 466, 469 (2000).

i. HEARSAY

Hearsay is admissible in administrative proceedings if it is the kind of evidence upon which

responsible persons are accustomed to rely in serious affairs. Cop Cotton Mills, Inc. v.

Administrator, 312 U.S. 126, 154-155 (1941). Under this rule, uncorroborated hearsay evidence 

where it did not appear that direct evidence was not conveniently available with respect to the

facts alleged, was excluded. In re Becker, 16 Agric. Dec. 211, 214 (1957).

Moreau alleged that the sale to his agent Anderson was a sale by sample but was not present at

the sale and did not submit a statement from Anderson. Held inadmissible hearsay. Senter 

Bros., Inc. v. Moreau, 18 Agric. Dec. 145, 147 (1959).

“While hearsay evidence is not necessarily inadmissible in these proceedings, if such evidence 

is admitted it is subject to careful scrutiny to determine the weight to which it is entitled.” G & 

S Farms v. Mendelson-Zeller Co., 20 Agric. Dec. 272, 277 (1961).
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Account of sales received by complainant in regular course of business was properly admitted

in evidence even though it was hearsay. Mut. Vegetable Sales v. Joseph Notarianni & Co., 29

Agric. Dec. 1049, 1054 (1970).

j. INFERENCE DRAWN FROM FAILURE TO FOLLOW NORMAL PRACTICE

AND REQUIREMENTS

Where the shipper claimed a sale and the receiver claimed the produce was received on

consignment, the failure of the shipper to prepare an invoice showing a sale was found to be

contrary to normal practice to contravene the Regulations [Requirements], and to lend credence 

to the transaction having been one of consignment. Procacci Bros. Sales Corp. v. B.T. Produce 

Co., 60 Agric. Dec. 341, 344 (2001).

k. INSPECTION BY INSPECTOR CONVICTED OF RECEIVINGBRIBES

Four inspections were made of four lots of vine ripe tomatoes delivered to three of respondent’s 

customers. Although all of the vine ripe tomatoes were the same brand and size and were 

shipped from the same packing house, one of the inspections showed two to four times the 

decayed and soft tomatoes as the other three inspections. Such inspection was performed by an 

inspector who had pled guilty to taking bribes, and the firm at which the inspection was 

performed was one of the firms whose personnel had been implicated in bribery of federal 

inspectors. Under the circumstances, for the purpose of determining whether there was a breach 

and the amount of damages resulting therefrom, the tomatoes that were the subject of the 

aberrant inspection were considered to have decayed and soft tomatoes equal to the average of 

the other tomatoes. Oceanside Produce, Inc. v. JSG trading Corp., PACA R-00-031, slip op 

(June 19, 2000).

Under the original f.o.b. contract, the respondent who accepted the grapes had the burden of

proving a breach on the part of complainant. Although under the PACA federal inspections are 

prima facie evidence of the truth of the statements recorded therein, it was held that such prima 

facie evidence is rebuttable, and that the credibility of the inspections was rebutted by the guilty 

pleas of the inspectors coupled with the implication of the buyer in the bribery of inspectors. It 

was found that the federal inspections were unconvincing, and that the respondent failed to 

prove a breach of contract. The complainant was awarded the original contract price. Spencer

Fruit Co. v. L & M Companies, Inc., 60 Agric. Dec. 799, 805 (2001).

l. INSPECTION NECESSARY TO PROVE BREACH

In the absence of an inspection by a neutral party at destination, the buyer fails to prove a

breach. Tantum v. Weller, 41 Agric. Dec. 2456, 2457 (1982); O.D. Huff, Jr., Inc. v. Pagano &

Sons, Inc., 21 Agric. Dec. 385, 387 (1962).

For seller’s failure to prove that effective rejection was wrongful due to seller’s failure to

secure inspection following rejection. See Gilmeister Farms v. Schmieding Produce Co., 41

Agric. Dec. 2271, 2272 (1982).
88

Where a purchase and sale contract called for numerous bulk loads to contain a specific number 

of pumpkins and for payment to be made on the basis of a per pound price for the total weight 

of the loads but limited to the total poundage assuming a 15 pound per pumpkin average, the

delivery of loads containing pumpkins which averaged more than 15 pounds was not a breach 

of contract, and no notice of breach was required. The inventory count performed by the 

receiving retail stores was accepted as adequate evidence of the number of pumpkins delivered 

where such count was adequately documented, and no federal inspection was necessary to 

prove the count received. PSM Produce, Inc. v. Boyer Produce, Inc., 60 Agric. Dec. 809, 826 

(2001).

EXCEPTION: Chipping potatoes. See Nicolls v. Fairmount Foods Co., 38 Agric. Dec. 469, 

472-73 (1979); Fairbrother v. Gulf Farms, 28 Agric. Dec. 612, 615 (1969).

m. INVOICES NOT CONCLUSIVE EVIDENCE OFCONTRACT

Invoices, in and of themselves, are not conclusive evidence of existence of a contract or sale,

particularly where Respondent has provided evidence that no sale existed, and Complainant has

failed to rebut Respondent’s evidence. Evans Sales, Inc. v. W. Coast Distrib., Inc., 67 Agric.

Dec. 1441, 1461 (2008).

Invoices are not conclusive evidence of the existence of a sale. Cook Sales Co. v. Food City,

Inc., 42 Agric. Dec. 1627, 1629 (1983).

The failure of a party to object to an invoice received in the normal course of business does not

create a sale which is otherwise non-existent. Floriza Sales Co. v. Pamco Air Fresh, Inc., 47 

Agric. Dec. 1328, 1340 (1988).

n. INVOICES ARE EVIDENCE OF CONTRACT TERMS

A failure to promptly complain as to the terms set forth in an invoice is considered strong

evidence that such terms were correctly stated. Pemberton Produce, Inc. v. Tom Lange Co., 42

Agric. Dec. 1630, 1636 (1983); Casey Woodwyk, Inc. v. Albanese Farms, 31 Agric. Dec.

311, 317 (1972); George W. Haxton & Son v. Adler Egg Co., 19 Agric. Dec. 218, 224-25

(1960). (Such evidence is not conclusive and is merely one factor to be considered by the trier

of the facts.)

Where, as to accepted goods, seller promptly issued invoices and respondent did not deny

receiving same, and record disclosed no prompt objection thereto, buyer failed to meet its

burden of proof in regard to alleged different price agreement than reflected by invoices. Pac.

Fruit, Inc. v. Bonafede, 45 Agric. Dec. 371, 373 (1986).

Where buyer firm had changed hands and current ownership was unable to offer firsthand

testimony but called into question whether produce was purchased and received, the testimony 

of the seller’s manager that he had personal knowledge of the sales, talked to the buyer’s

purchasing agent many times following receipt of the produce by buyer, and mailed invoices to

the buyer, the inability of the buyer to show that a timely objection was made to the invoices 

was held to be sufficient proof that the produce was purchased, received and accepted. C.H.
89

Robinson Co. v. Tedesco’s Wholesale Grocers, Inc., 50 Agric. Dec. 935, 937 (1991).

When Complainant sent Respondent invoices for each transaction showing the sales prices for

the limes, and also sent Respondent weekly statements showing the sales prices for limes sold

that week, to which Respondent did not object, and Respondent’s former salesperson who was

principally responsible for handling the contract with Complainant offered testimony that did

not support Respondent, Complainant was found to have sustained its burden of proving that

the lime prices were to be based on what Complainant elected to charge plus a packing fee,

rather than Respondent’s claim that the lime prices were to be based on prices set forth in the

Market News Service Reports. Progreso Produce Ltd. 1 LP v. Fresh Group Ltd., 66 Agric.

Dec. 1492, 1507 (2007).

o. NEGATIVE INFERENCES – TEMPERATURE TAPE

Failure to submit a temperature tape when asked to do so raises the negative inference that the

tape would show abnormal transit. Sharyland, L.P. v. Miller, 57 Agric. Dec. 762, 767 (1998);

G.D.I.C., Inc. v. Misty Shores Trading, Inc., 51 Agric. Dec. 850, 863-64 (1992); Monc’s

Consol. Produce Inc. v. A.J. Produce Corp., 43 Agric. Dec. 563, 566 (1984).

While acknowledging that a negative inference may be taken when a receiver neglects to

retrieve a temperature recorder from the truck, held that such failure is nevertheless insufficient 

cause to conclude that the buyer failed to sustain its burden to prove normal transportation 

where there were no other factors present indicating that the transportation conditions were not

normal. Southern Specialties, Inc. v. Amerifresh, Inc., 66 Agric. Dec. 916, 921 (2007).

p. NEGATIVE INFERENCE RULE

Negative inferences may be taken when a party fails to provide obviously necessary documents

or testimony. In re: Mattes Livestock Co., 42 Agric. Dec. 81, 96 (1982); In re: Speight, 33

Agric. Dec. 280, 300-01 (1974); Sec. & Exch. Comm’n v. Scott, 565 F. Supp. 1513 (SD NY,

1983).

Buyer attempted to revoke acceptance of frozen potatoes after microbiological testing by

buyer’s lab. When seller requested retesting, buyer made two lots available for retesting and

withheld two other lots. A negative inference was drawn against buyer for the lots it withheld,

and its revocation of acceptance deemed unjustified. A negative inference was drawn against

seller on the two available lots when it failed to show results of retesting, and buyer’s

revocation of acceptance was deemed justified as to those two lots. Global Reliance, Inc. v.

Pinnacle Food Groups LLC, 73 Agric. Dec. 342, 358 (2014).

Where a grower’s agent claimed to have allowed adjustments to purchasers and had issued

invoices to the purchasers but did not submit in evidence copies of the invoices or other

documents on which the adjustments were noted, a negative inference was drawn as to the
90

existence of such documents and the alleged underlying adjustments. Burnac Produce, Inc. v.

Calavo Growers of Cal., 47 Agric. Dec. 1624, 1627 (1988). Citing In re: Speight, 33 Agric.

Dec. 280, 300-01 (1974); In re Mattes Livestock Co., 42 Agric. Dec. 81, 96 (1982); In re

DeJong, 36 Agric. Dec. 1181, 1213 (1977), affirmed, 618 F.2d 1239, certiorari denied, 499

U.S. 1061; Sec. & Exch. Comm’n v. Scott, 565 F. Supp. 1513 (SD, NY 1983), affirmed per

curiam, 734 F.2d 118 (2d cir. 1984); Chase Manhattan Bank, N.A. v. Frenville, 67 B.R. 858 (D,

NJ 1986).

q. POLYGRAPH TESTS – ADMISSIBILITY

In excluding a polygraph report from consideration in a reparation proceeding, we said:

We agree that the report should be excluded. In a leading federal case on the

admissibility of polygraph tests the United States Court of Appeals for the 8th Circuit 

summarized the status of such tests as evidence in the following manner:

In applying the scientific acceptability standard to polygraph tests, all 

United States Courts of Appeals addressing the issue have excluded the 

results of unstipulated polygraph tests. These courts reasoned that the 

polygraph does not command scientific acceptability and that it is not 

generally believed to be scientifically reliable in ascertaining truth and 

deception to justify its utilization inthe trial process. Consequently, they 

have held that the results of an unstipulated polygraph examination are 

either per se inadmissible or that the trial court did not abuse its discretion in

refusing admission of the test results . . . United States v. Alexander, 526

F.2d 161 (8th Cir. 1975).

The above quotation is from Martinous v. Keith Connell, Inc., 44 Agric. Dec. 1636, 1638-39

(1985).

r. PREPONDERANCE OF THE EVIDENCE

The party which has the burden of proof as to a fact must prove the fact by a preponderance of

the evidence. A.D. McGinnis Produce v. Pinder’s Produce Co., 28 Agric. Dec. 249, 251-52

(1969).

“. . . preponderance of the evidence, ... is not necessarily controlled by the number of

witnesses, but rather by their credibility.” One witness was believed over two witnesses

because of improbability of the two witness’s testimony. Am. Foods v. Corey Bros., 34 Agric.

Dec. 401, 405 (1975).

s. PROOF OF MAILING

Proof that item was placed in the mail results in presumption that the item was received.

Abatti Produce, Inc. v. H.R. Bushman & Son, 30 Agric. Dec. 558, 561-62 (1971).
91

Proof of proper mailing resulting in a presumption of its receipt can be established through

proof of ordinary business practice. George W. Haxton & Son v. Adler Egg Co., 19 Agric. Dec. 

218, 224 (1960); Meckel v. Cont’l Res. Co., 758 F.2d 811 (2d Cir., 1985); Wells Fargo Bus. v. 

Ben Kozloff, Inc., 695 F2d 940 (5th Cir., 1983), rehearing denied 699 F 2d 1163, cert. denied

104 S. Ct. 77.

Where there was no evidence tending to confirm that invoices were received and opposing

party positively swore that invoices were not received, strict proof of the mailing of the

invoices was required. Such evidence would consist of a declaration by the person responsible 

for the mailing that the invoices were, in fact, properly addressed and placed in the mail.

Pismo-Oceano Vegetable Exch. v. A & S Produce, Inc., 56 Agric. Dec. 966, 968-69 (1997).

Proof required is testimony or sworn statement by person who mailed items, that of his or her

personal knowledge, such items were properly addressed, and were placed in mail with proper

postage. Me. Potato Growers v. Orrell Produce Co., 14 Agric. Dec. 399, 403 (1955); Butler

v. S.D. Monash Produce Co., 11 Agric. Dec. 472, 476-77 (1952); Postel v. Phil Peck Co., 10

Agric. Dec. 82, 87 (1951); Goldsby-Evans Produce Co. v. Ernest E. Fadler Co., 9 Agric. Dec.

228, 235 (1950) (Testimony established that invoices were mailed, “and there is a presumption

that they were received.”)

t. REPORT OF INVESTIGATION

“The report contains both factual findings . . . and advisory opinions . . . and is included as

evidence in the proceeding to be considered by the Presiding Officer. The report itself is neither 

binding on the Presiding Officer nor determinative of the Presiding Officer’s final legal 

judgment. Each party is given the opportunity to rebut the investigator’s findings in the same 

manner as each is allowed to submit other evidence. When the record is presented to the 

Presiding Officer for preparation of a decision, the Presiding Officer examines all evidence: the 

Report of Investigation, the pleadings submitted by the parties, and any other evidence

contained in the record. The Presiding Officer considers each piece of evidence and renders a 

decision based on the totality of the evidence contained in the record . . .” Investigator’s 

mistaken characterization of a sale contract as consignment was found not to defeat the 

empirical findings of his audit. Carmack v. Selvidge, 51 Agric. Dec. 892, 902 (1992).

Unsworn evidence may be treated as evidentiary pursuant to 7 C.F.R. § 47.7 if contained within

the Department’s Report of Investigation. Tanita Farms, Inc. v. City Wide Distrib., Inc., 44

Agric. Dec. 1738-39 (1985) (Decision on Reconsideration).

u. SELF-EVIDENT AND CERTAIN

Parties concluded an f.o.b. contract that called for shipment of a load of cantaloupes to

Houston, Texas, as the contract destination, but trucker disclosed to seller prior to loading that

load was destined for Los Angeles. Seller then informed buyer through the broker that

diversion to any other destination than Houston would result in contract terms being changed
92

to “Acceptance Final, No Recourse.” Buyer agreed, but shipped the load to Los Angeles where

a federal inspection showed substantial condition defects. Buyer’s defense that the load was en 

route to Houston through Los Angeles was found to lack credibility. It was stated that the 

acceptance final terms of the contract abrogated the warranty of suitable shipping condition, but 

left the seller liable for any material breach of the contract. A material breach, as the term is 

used in the Regulations [Requirements], refers to all substantial breaches of contract other than 

a breach of the warranty of suitable shipping condition. The inspection in Los Angeles could

be used to show a breach of the warranty of merchantability, applicable at shipping point, but

would have to show condition defects so severe as to render it self-evident and certain that the 

commodity was non-conforming at shipping point. The certainty required was, however, stated 

to be reasonable certainty, not certainty that excludes all fanciful doubt. It was found that 

although the results of the inspection rendered it improbable that the cantaloupes were

conforming at shipping point, it was not reasonably certain that they were non-conforming.

Martori v. Hous. Fruitland, Inc., 55 Agric. Dec. 1331, 1339 (1996).

By analogy to the judicial exception to the requirement that transportation be normal in order

for the warranty of suitable shipping condition to apply, it was found that Canadian inspections 

could be used to attempt proof that the corn was not in suitable shipping condition. This proof 

would relate to the condition of the corn that would have been shown by a timely inspection 

following a timely arrival at the contract destination in Bainbridge, Georgia, and would have to 

demonstrate the breach of the warranty at that point with reasonable certainty. It was found

that, although the condition factors shown by the Canadian inspections were extensive, the 

standard of reasonable certainty had not been met. Alger Farms, Inc. v. Foster, 57 Agric. Dec. 

1655, 1668-69 (1998).

v. SELF-SERVING DOCUMENTS

A broker inspected the general run of lettuce on behalf of respondent buyer and following sale

and shipment, issued a confirmation that disclosed no grade for the lettuce. On arrival, a federal 

inspection disclosed that the lettuce failed to grade U.S. No. 1, and the buyer rejected. After

notice of rejection, the broker issued a second confirmation showing a sale of U.S. No. 1 

lettuce. It was held that the second confirmation was a self-serving document and should be

discounted. Navajo Mktg. Co. v. Kaiser, 19 Agric. Dec. 894, 898 (1960).

“As a general rule, anything in writing at time of transaction given more weight than

subsequent statements by interested parties.” Chalona Bros. v. Associated Fruit Distrib., Inc.,

10 Agric. Dec. 1430, 1432 (1951).

w. STATEMENTS BY PARTY WITHOUT PERSONALKNOWLEDGE

Pleadings or statements under the documentary procedure signed by an attorney lack

evidentiary value. Royal Valley Fruit Grower’s Ass’n v. Hamady Bros. Food Mkts., Inc., 37

Agric. Dec. 1925, 1927 (1978).

x. STATEMENTS BY PERSON NOT UNDER OATH

“. . . While Touchstone, in his letter of September 4, 1969, to the Department, has been very
93

explicit regarding the making of the alleged contract, the fact remains that this was a statement 

not made under oath, by a witness who was not subject to cross-examination. John Findley, on 

the other hand, in denying Touchstone’s statement, was under oath and was subject to crossexamination . . . Under these circumstances, we must give greater weight to the testimony of

John Findley than to that of Touchstone.” Southland Produce Co. v. Findley Bros., 29 Agric. 

Dec. 1284, 1287-88 (1970).

Statements submitted by complainant were from a person with personal knowledge of the facts, 

but were unverified, hence they could not be given equal weight as verified statements from 

respondent’s witness. Cambridge Farms, Inc. v. H.R. Bushman & Sons, 46 Agric. Dec. 1526,

1528 (1987).

An unsworn statement that is in evidence under the documentary procedure “. . . may be

considered by the trier of the facts. (Footnote omitted) The credence to be given to it is

dependent upon the plausibility of the statement in the light of the surrounding circumstances.”

Woods v. Conogra, Inc., 50 Agric. Dec. 1018, 1022-23 (1991).

“The allegations and testimony of respondent, under oath, to the effect that the $328.96

payment was made and accepted as full settlement are entitled to greater weight than the

unsworn statement . . . contained in the report of investigation, that the amount was in part

payment.” Anonymous, 8 Agric. Dec. 598, 601 (1949).

“. . . the statements of J. V. Cedergreen (in letters in the Report of Investigation) are not under

oath and, therefore, they cannot be given as much weight as the statements of Bredenkamp

which are in affidavit form.” Empire Foods, Inc. v. Fir Grove Farm, 16 Agric. Dec. 202, 206

(1957).

y. TAPED PHONE CONVERSATIONS – ADMISSIBILITY

Federal statute making it illegal to intercept phone calls, and making intercepted messages

inadmissible in evidence, has an exception for conversations taped by a party to the

conversation. It was not proven that the law of Florida made such recordings illegal, or that, if

it did, it was applicable to the facts of the case, or should take precedence over federal law as to 

admissibility. Big Apple Pineapple Corp. v. Fashion Fruit Co., 58 Agric. Dec. 1106, 1108-09

(1999).

z. TESTIMONIAL EVIDENCE AS TO CONDITION DISCOUNTED

“We have often discounted testimonial evidence concerning the condition of perishable

commodities, and stated the necessity of obtaining a neutral inspection showing the exact 

extent of damage.” Chiquita Brands, Inc. v. Joseph Williams, Jr. Co., 45 Agric. Dec. 374, 376

(1986).
94

aa. UNCONTROVERTED STATEMENTS

A sworn statement which has not been controverted must be taken as true in the absence of

other persuasive evidence. Sun World Int’l v. Bruno Dispoto Co., 42 Agric. Dec. 1675, 1678

(1983); see also Apple Jack Orchards v. M. Offutt Brokerage Co., 41 Agric. Dec. 2265, 2267

(1982).

bb. UNVERIFIED PLEADINGS

Unverified pleadings cannot be given evidentiary value. C.H. Robinson Co. v. ARC Fresh Food

System, Inc., 50 Agric. Dec. 950, 952 (1991); see also Prillwitz v. Sheehan Produce, 19

Agric. Dec. 1213, 1215 (1960).

cc. WEIGHT GIVEN TO DOCUMENTS CONTEMPORARY WITH TRANSACTION

Documents issued at or near the time of the contract or transaction may be very material. In

Anonymous, 8 Agric. Dec. 841, 845 (1949), we stated:

We believe the telegrams to be very material. The telegrams were written

shortly after the transactions and so represent [complainant’s] understanding of

the terms when fresh in mind. This was, of course, before the controversy herein

arose and before there would be any reason for fabrication.

36. EXPRESS WARRANTY

See U.C.C. § 2-313.

Parties entered into installment contract calling for the future delivery of potatoes which seller

expressly warranted to chip on arrival without specifying any color criteria or other perimeters

of quality. It was stated that while under such terms, the receiver has the sole right to decide

whether potatoes would chip, receiver could not arbitrarily apply its standards so as to accept

and reject potatoes of same characteristics. Markel v. E. K. Bare & Sons, 49 Agric. Dec. 631,

635 (1990).

Complainant created an express warranty that product would continue in useable condition by

promising to place date codes on product and by the placing of such codes on the product.

Silver Star Processors, Inc. v. Costa Fruit & Produce Co., 53 Agric. Dec. 897, 906-08 (1994).

An express warranty may be any promise or guarantee by a seller which entices a buyer or

consignee to accept goods. Complainant made an express warranty by promising that the

cantaloupes would be “not green.” Stamoules, Inc. v. Sid Goodman & Co., 45 Agric. Dec.

2069-71 (1986).

Where complainant tendered six pallets of grapes to respondent’s agent for examination and

stated that they were from the same lot of grapes that was subsequently shipped to respondent,

the sale was by sample and amounted to an express warranty that the whole lot of grapes would

conform to the sample. The condition or other characteristics disclosed by a sample are subject 
95

to subsequent proof in the normal manner. Delano Farms Co. v. Suma Fruit Int’l, 57 Agric.

Dec. 749, 754 (1998).

Note that potatoes may be viewed as guaranteed to chip by reason of an implied warranty of

fitness for a particular purpose. See U.C.C. § 2-315.

37. FEES AND EXPENSES

Where there is no oral hearing, the contract for the exchange of the produce may nevertheless

provide for the payment of attorney fees. Where complainant placed words in its memorandum

of sale requiring payment of attorney fees in connection with collection costs, it was held that 

the words used did not contemplate the payment of attorney fees in connection with the 

litigation of a good faith dispute. Lionheart Group, Inc. v. Sy Katz Produce, Inc., 59 Agric.

Dec. 449, 460 (2000).

Fees and expenses in hearing cases will be awarded to the extent they are reasonable. Mountain 

Tomatoes, Inc. v. E. Patapanian & Son, Inc., 48 Agric. Dec. 707 (1989); Pinto Bros. v. F. J. 

Bolestrieri Co., 38 Agric. Dec. 269 (1979); Nathan’s Famous, Inc. v. Merberg, 36 Agric. Dec. 

243, 251-52 (1977).

Only expenses incurred in connection with the oral hearing will be awarded. Mountain 

Tomatoes, Inc. v. E. Patapanian & Son, Inc., 48 Agric. Dec. 707, 714-16 (1989).

a. ALLOCATION WHERE TWO OR MORE HEARINGS HELD AT SAMETIME

Coachella-Imperial Distrib. v. Franklin Produce Co., 37 Agric. Dec. 1257, 1263 (1978);

Coachella-Imperial Distrib. v. G. Mercurio Fruit & Prod. Co., 37 Agric. Dec. 1264, 1271

(1978); Coachella-Imperial Distrib. v. United Fruit & Produce Co., 37 Agric. Dec. 1081, 

1086-87 (1987).

b. AMOUNT

$100.00 per hour not excessive for competent counsel in the New York area. Deardorf-Jackson

Co. v. N.Y. Fruit Auction Corp., 37 Agric. Dec. 1577, 1582 (1978).

$125.00 per hour reasonable in view of complexities of proceeding. (1975 hearing in New York

City) Nathan’s Famous, Inc. v. Merberg, 36 Agric. Dec. 243, 247-50 (1977).

Issues were said not to warrant claim of $2,240.00 (32 hours at $70.00 per hour). Reduced to

$700.00. Patterson Produce Co. v. John Love Produce Co., 39 Agric. Dec. 1006, 1009 (1980).
96

Amount requested found excessive “considering the length and complexity of this proceeding.” 

Legal fees reduced and lesser amount awarded. Zoller Distrib. v. Tom Lange Co., 36 Agric. 

Dec. 428, 436-37 (1977).

Where complainant claimed 64 hours for time spent at hearing and hearing lasted only nine

hours, only nine hours were awarded. Complainant claimed 161 hours for preparation; 80 hours 

were allowed as reasonable. Potato Sales, Inc. v. Perfection Produce, 38 Agric. Dec. 273, 280-

81 (1979).

Requested $120.00 per hour was thought not unreasonable in view of the complexities of the

case and the length of the hearing; however, amount awarded was reduced to $100.00 per hour. 

Such amount was found to be more reasonable in view of the amount of reparation awarded.

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 747, 748-49 (1980).

Complainant’s counsel awarded $200.00 per hour. E. Produce, Inc. v. Seven Seas Trading Co.,

59 Agric. Dec. 853, 864-65 (2000).

c. ATTORNEY FEES UNDER SECTION 6e

Where a Chilean complainant, who had posted the double bond required by section 6(e) of the 

PACA, requested a voluntary dismissal of its complaint due to the refusal of two of its key

witnesses to come from Chile to attend the hearing in the United States, a dismissal without

prejudice was ordered, and respondent was, therefore, not the prevailing party under the feeshifting provision of Section 6(e). Zeus Service S.A. v. L.A. Wroten Co., 60 Agric. Dec. 806,

861-62 (2001); (Note: this case was appealed by Wroten to the Middle Dist. of Fla., Tampa

Div., on June 6, 2002; [Case No. 8:02-CV-1007-T-27 TBM]. By order dated February 11,

2003, the Department’s decision was affirmed.)

d. CONNECTION WITH ORAL HEARING

Fees and expenses will only be awarded to the extent that they are incurred in connection with

an oral hearing. That an oral hearing might have been “contemplated” from the time of

commencement of a reparation case does not necessarily make all work performed on that

reparation case, from its early informal stages to the oral hearing, work that is “in connection”

with the oral hearing. The prevailing party must clearly identify any fees and expenses incurred

in connection with an oral hearing. Grasso Foods, Inc. v. Americe, Inc., 69 Agric. Dec. 1547,

1566-67 (2010).

Costs associated with depositions which are admitted in evidence at the hearing are allowable.

Potato Sales, Inc. v. Perfection Produce, 38 Agric. Dec. 273, 281 (1979).

“[E]xpenses which would have been incurred in connection with the case if that case had been

heard by documentary procedure may not be awarded under Section 7(a).” Mountain Tomatoes, 

Inc. v. E. Patapanian & Son, Inc., 48 Agric. Dec. 707, 714-16 (1989); Nathan’s Famous, Inc. v.

Merberg, 36 Agric. Dec. 243, 251-52 (1977).
97

Post-trial brief denied as not being in connection with oral hearing. (Fees and expenses

provision has been interpreted from the beginning to exclude any fees or expenses which would 

have been incurred in any event under the documentary procedure. Legislative history is said to

support this view.) Pinto Bros., Inc. v. Frank J. Balestrieri Co., 38 Agric. Dec. 269, 272-73

(1979); Nathan’s Famous v. N. Merberg & Son, 36 Agric. Dec. 243, 251-52 (1977); Mahns v.

A.M. Fruit Purveyors, 34 Agric. Dec. 1950, 1953 (1975).

Respondent claimed 9.6 hours for “Misc. services related to case.” Held: No way to determine

whether related to oral hearing and therefore denied. Pinto Bros., Inc. v. Frank J. Balestrieri

Co., 38 Agric. Dec. 269, 272 (1979).

Amount claimed for preparation of counterclaim and associated research disallowed as not

incurred in connection with oral hearing. Cal-Swiss Foods v. San Antonio Spice Co., 37 Agric.

Dec. 1475, 1481 (1978).

Claim for fees incurred in connection with the preparation of answer, response to cross-claim,

preparation of brief, and proposed findings of fact disallowed. E. Produce, Inc. v. Seven Seas

Trading Co., 59 Agric. Dec. 853, 865 (2000).

e. NON-PREVAILING PARTY BANKRUPT

Respondent, as the prevailing party, is entitled to reasonable fees and expenses pursuant to 7

U.S.C. § 499g(a), however, the award of fees and expenses is stayed pursuant to the automatic

stay provision of the Bankruptcy Code because Complainant filed a Chapter 11 bankruptcy

petition before the issuance of a Decision and Order. Paganini Foods LLC v. Westlake

Distributors, Inc., 69 Agric. Dec. 868, 905 (2010).

f. NOT AWARDED AGAINST GROWER

Where complainant is a grower and not licensed or subject to license under PACA, a prevailing

respondent may not recover fees and expenses. Blasé v. Keegan, 36 Agric. Dec.709, 714

(1977).

g. PREVAILING PARTY

Attorney’s fees and expenses were not awarded because there was no prevailing party. Each of 

the four parties to this litigation failed in aspects of their allegations. With the exception of one

party, all of the other parties were required to pay damages. The single party that did not have 

to pay damages, however, made arguments contrary to the statements of its witnesses at the 

hearing, and charged excessive amounts to the joint venture that was the subject of the 

litigation. It did not substantially prevail on the arguments it made in its complaint or on the

arguments that it made in its post-hearing briefs. L & M Farms, Inc. v. Y2S Trading, Inc., 69

Agric. Dec. 942, 974 (2010).

It was formerly stated that the prevailing party is the party in whose favor a judgment is entered 

even if the party does not recover its entire claim. Offutt v. Berry, 37 Agric. Dec. 1218, 1225 

(1978); Mountain Tomatoes, Inc. v. E. Patapanian & Son, Inc., 48 Agric. Dec. 707, 715-16 
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(1989). However, these two cases were overruled as to the point stated by Newbern Groves, 

Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1854 (1994), see below. See also M. Offutt Co. 

v. Caruso Produce, Inc., 49 Agric. Dec. 596, 607 (1990), where respondent successfully 

defended against $75,342.81 of complainant’s $79,521.73 claim, and respondent was found to 

be the prevailing party, although there was a positive award in complainant’s favor.

Although Complainant was awarded only a small percentage of the damages claimed,

Complainant prevailed on the issues upon which most time was spent at the oral hearing and

was found to be the prevailing party in whose favor fees and expenses were awarded. Mayoli,

Inc. v. Weis-Buy Services, Inc., 65 Agric. Dec. 648, 668 (2006).

In Anthony Vineyards, Inc. v. Sun World Int’l, Inc., 62 Agric. Dec. 342, 357 (2003), respondent 

prevailed on two of the three issues presented at the hearing and limited complainant’s recovery

to 32% of the amount actually litigated at the hearing. Respondent was determined to be the 

prevailing party and was awarded attorney’s fees and expenses, reduced by 32%.

In Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1854 (1994), petition for

reconsideration denied (54 Agric. Dec. 1444 (1995)). Although complainant recovered

approximately one-fourth of the amounts claimed, it was found not to be the prevailing party in 

regard to any of the respondents. Case contains extensive discussion of point. There is further

important discussion in the Order on Reconsideration.

In James Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 1477, 1484 (1979),

complainant claimed reparation in the amount of $50,673.70, but was awarded $19,247.70.

Complainant was held to be the prevailing party without discussion.

In Mic Bruce, Inc. v. Chiquita Brands, Inc., 45 Agric. Dec. 1215, 1244 (1986), complainant

claimed $57,411.25 from respondent and was awarded $10,652.53. Complainant was found to

be the prevailing party without discussion.

In Valenzuela Produce v. Teddy Bertuca Co., 45 Agric. Dec. 1333, 1341 (1986), complainant

sought reparation in the amount of $26,178.19, and respondent counterclaimed for $6,321.39.

Complainant was awarded $5,735.36, and the counterclaim was dismissed. Complainant was

found to be the prevailing party.

In V.V. Vogel & Sons Farms v. Cont’l Farms, 44 Agric. Dec. 886, 896 (1985), complainant

sought reparation in the amount of $14,255.00, and respondent counterclaimed for $26,000.00

and requested an oral hearing. Complainant was awarded $7,704.00, and the counterclaim was

dismissed. Complainant was found to be the prevailing party.

In M & C P Farms v. Lloyd Myers Co., 45 Agric. Dec. 2099, 2105 (1986), complainant sought

reparation in the amount of $69,180.25, and respondent counterclaimed for $5,000.00 in

connection with the same transactions. Complainant was awarded $52,386.96, and the

counterclaim was dismissed. Complainant was held to be the prevailing party.

Where a respondent has tendered a lesser amount than claimed by complainant, and is found to 

only be liable for such lesser amount, respondent is the prevailing party. Dixon Tom-A-Toe
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Produce v. Kaleck, 37 Agric. Dec. 1794, 1798 (1979); George Arakelian Farms, Inc. v. Haral

Fruits & Produce, 37 Agric. Dec. 655, 658 (1979).

In case with two respondents, complainant prevailed as to one respondent, and other respondent 

prevailed as to complainant. Fees and expenses awarded accordingly. Dimare Bros., Inc. v.

Wholesale Produce Supply, Inc., 39 Agric. Dec. 257, 260 (1980).

In a case that arose under the double bond provision of section 6(e) of the PACA, a Chilean

complainant, who had posted the double bond required by section 6(e), requested a voluntary

dismissal of its complaint due to the refusal of two of its key witnesses to come from Chile to

attend the hearing in the United States. A dismissal without prejudice was ordered, and

respondent was, therefore, not the prevailing party under the fee-shifting provision of section

6(e). Discussion of the disposition of voluntary dismissals under the Federal Rules of Civil

Procedure in relation to fee shifting provisions of federal statutes and application by analogy to

reparation cases. Zeus Service S.A. v. L.A. Wroten Co., 60 Agric. Dec. 806, 861-62 (2001).

h. PROCEDURAL REQUIREMENTS MUST BE FOLLOWED

Where a prevailing party failed to include in its claim an explanation of how each item of fees

and expenses was computed, and claim was not accompanied by the required supporting

affidavit, the full amount requested was not allowed. However, since the record showed that

transportation cost and subsistence in specific amounts were incurred, these amounts were

awarded. Attorney fees were disallowed. Coachella-Imperial Distrib. v. E. Armata, Inc., 32

Agric. Dec. 909, 915-16 (1973). To same effect is Wileman Bros. & Elliott, Inc. v. E. Armata

Auction Sales Corp., 32 Agric. Dec. 927, 933 (1973).

Although complainant was found to be the prevailing party, no fees and expenses could be

awarded because complainant’s claim was filed late, was not itemized, contained no

explanation of separate items and was not accompanied by the required affidavit. L.E. Jensen &

Sons, Inc. v. Huston Produce, Inc., 51 Agric. Dec. 814, 837-39 (1992).

i. SECRETARY TO DETERMINE WHAT IS REASONABLE

In hearing cases, it is the province of the Secretary to determine what are reasonable fees and

expenses. Mountain Tomatoes, Inc. v. E. Patapanian & Son, Inc., 48 Agric. Dec. 707, 715

(1989). In the Mountain Tomatoes case, it was held that the failure of the parties to enter into

serious settlement negotiations after being urged by the presiding officer to do so could be

taken into consideration in determining the reasonableness of fees and expenses. Extensive

discussion and item-by-item review of claimed fees and expenses. See Hensley v. Eckerhart,

461 U.S. 424 (1983).

j. SET-OFF AGAINST REPARATION DUE OTHER PARTY

Where complainant was found to be due only $4,178.92 on a claim of $79,521.73, respondent

was held to be the prevailing party and entitled to fees and expenses in the amount of

$13,368.27. However, complainant was in bankruptcy and Secretary was stayed from issuing 

an award in respondent’s favor for its fees and expenses. It was held that “[s]ince fees and
100

expenses are, under the Act awardable as additional reparation, not to a party’s attorney, but to 

the party, we will set off the $13,368.27 against the $4,178.92” which would have otherwise 

been awarded to complainant. No award was made to either party. M. Offutt Co. v. Caruso 

Produce, Inc., 49 Agric. Dec. 596, 607 (1990). See also Weller v. George, 41 Agric. Dec. 294, 

296-97 (1982), where complainant admitted liability for the counterclaim, and the amount of 

the counterclaim was offset against the amount awarded to complainant in the original claim.

k. SPECIFIC ITEMS

Fees and expenses of an attorney who appeared voluntarily as a personal attorney of certain of

Respondent’s witnesses, and who served no real purpose at hearing other than to protect the

personal interests of his clients, were not reasonable, and therefore disallowed. Evans Sales,

Inc. v. W. Coast Distrib., Inc., 67 Agric. Dec. 1441, 1464 (2008).

As Complainant failed to establish that two attorneys were necessary to be present and

represent it at the hearing, Complainant was only awarded the fees and expenses attributed to 

its lead attorney. Progreso Produce Ltd. 1 LP v. Fresh Group Ltd., 66 Agric. Dec. 1492, 1518

(2007).

Where Respondent’s attorney made a claim for fees and expenses relating to time spent

preparing a post-trial brief, fees for time spent in preparation of the brief were disallowed as

they were not in connection with the oral hearing, and would have been incurred had the case

been decided by documentary procedure. Evans Sales, Inc. v. W. Coast Distrib., Inc., 67 Agric.

Dec. 1441, 1463 (2008).

Complainant’s claim for fees and expenses related to post-hearing expenses, including the

preparation of its brief, were determined not to be in connection with the oral hearing and were 

denied. Progreso Produce Ltd. 1 LP v. Fresh Group Ltd., 66 Agric. Dec. 1492, 1518 (2007).

In Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1768-69 (1994),

employment of salaried in-house counsel did not preclude an award of attorney fees to such

counsel at market rates.

Fees and expenses of Respondent’s non-attorney representative who appeared as a voluntary

witness at hearing were reasonable and allowed. Evans Sales, Inc. v. W. Coast Distrib., Inc., 67

Agric. Dec. 1441, 1464 (2008).

Fee awarded to non-attorney representative. O.P. Murphy Produce Co. v. Genbroker Corp., 37

Agric. Dec. 1780, 1785 (1978).

Rules of Practice [Administrative Procedures] do not provide for award of fees and expenses for

pro se representation. Crow v. Mr. Spud, Inc., 38 Agric. Dec. 705, 715 (1979).

Attorney fees for time spent in travel disallowed. Golden Harvest Farms, Inc. v. Stanley

Produce Co., 38 Agric. Dec. 727, 730 (1979); E. Produce, Inc. v. Seven Seas Trading Co., 59

Agric. Dec. 853, 865 (2000).
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Where Respondent’s attorney made a claim for fees and expenses relating to travel to the

hearing in California from New Jersey, the state where the attorney’s office is located, and 

back, fees for time spent on travel were disallowed. Evans Sales, Inc. v. W. Coast Distrib., Inc.,

67 Agric. Dec. 1441, 1463 (2008).

Telephone calls which were not detailed as to necessity and as to who called whom – denied.

Byrd Foods v. A.E. Albert & Sons, 38 Agric. Dec. 995, 998 (1979).

Depositions – travel expenses in connection with deposition taken by written questions denied.

Also denied attorney fees in connection with deposition by written questions of complainant

and stenographic expenses denied as excessive. Byrd Foods v. A.E. Albert & Sons, 38 Agric.

Dec. 995, 998 (1979).

Where Respondent’s attorney made a claim for fees and expenses relating to travel within the

state of California during the hearing for the purpose of interviewing witnesses scheduled to

testify at hearing the following day, fees for time spent on travel were disallowed. Evans Sales,

Inc. v. W. Coast Distrib., Inc., 67 Agric. Dec. 1441, 1463 (2008).

Eight complainants out of total often were represented by one attorney, and claims for total 

time spent at hearing were submitted for each of the eight complainants. Held fee must be split 

between the eight complainants, but attorney was allowed total time at hearing, not 8/10’s as 

urged by respondent, since it was necessary that attorney be at a hearing for full-time. Ashley v. 

Cyr Bros. Meat Packing Co., 36 Agric. Dec. 401, 420-21 (1977).

Subsistence only allowed when attendance required at a point so far removed from place of

residence of party as to prohibit return thereto day-to-day. Tenneco W., Inc. v. Gilbert Distrib.

Co., 38 Agric. Dec. 488, 493-94 (1979). Applied to attorneys. Patterson Produce Co. v. John 

Love Produce Co., 39 Agric. Dec. 1006, 1009 (1980).

Claim based on appearance of principal at depositions of witnesses disallowed. Patterson

Produce Co. v. John Love Produce Co., 39 Agric. Dec. 1006, 1010 (1980).

Claims for witnesses who were subpoenaed for appearance at the hearing but not called,

disallowed. Since complainant had taken their deposition, it should have known that these

witnesses would not be called. Patterson Produce Co. v. John Love Produce Co., 39 Agric. 

Dec. 1006, 1010 (1980).

Fees for voluntary non-subpoenaed witness allowed. Analogy with federal court does not hold

because of our statutory provision. Watson Distrib. v. Fruit Unlimited, Inc., 42 Agric. Dec.

1613, 1618 (1983).

Expenses incurred in airline travel and for hotel, which were not documented, were allowed

since other party did not object to these expenses. E. Produce, Inc. v. Seven Seas Trading Co.,

59 Agric. Dec. 853, 865 (2000).

l. TIMELY FILING NECESSARY

Where the claim of the prevailing party is not timely filed, it cannot be allowed. Brown & Hill 
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Tomato Shippers, Inc. v. Superior Shippers Assoc., Inc., 32 Agric. Dec. 503, 506-07 (1973).

38. F.O.B.

U.C.C. terminology is “shipment contract.” See U.C.C. § 2-319, Comment 4.

The Regulations [Requirements] (7 C.F.R. § 46.43(i)), in relevant part, define f.o.b. as meaning 

“that the produce quoted or sold is to be placed free on board the boat, car, or other agency of 

the through land transportation at shipping point, in suitable shipping condition . . ., and that the

buyer assumes all risk of damage and delay in transit not caused by the seller irrespective of

how the shipment is billed.” Oshita Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric. Dec.

968, 973-74 (1991).

The buyer has the risk of loss in transit in an f.o.b. sale. In re Ben Gatz Co., 38 Agric. Dec.

1038-39 (1979).

“Where a tender or delivery of goods so fails to conform to the contract as to give a right of

rejection the risk of their loss remains on the seller until cure or acceptance.” U.C.C. § 2-

510(1).

In an f.o.b. “no grade” contract, it is the shipper’s obligation to load subject produce at shipping 

point which conforms to the contract, and which is in suitable shipping condition. Main St. 

Produce, Inc. v. W. Veg. Produce, Inc. and Main St. Produce, Inc. v. Florance Distributing Co., 

74 Agric. Dec. 193, 220 (2015).

In an f.o.b. contract, where the parties agree upon a destination, it is the seller’s obligation to

ship produce that arrives at the destination in suitable shipping condition. La Valenciana

Avocados Corp. v. Tomato Specialties, LLC, 74 Agric. Dec. 503, 509 (2015).

a. ACCEPTANCE TERMS

See 7 C.F.R. § 46.43(1).

Where goods on track at Nogales, Sonora, Mexico, were sold “f.o.b. Nogales, Arizona,” basis

“Nogales Government Inspection and Acceptance,” and shipped by seller to buyer in North

Carolina where they were federally inspected and subsequently rejected by buyer, the rejection 

was wrongful. It was held that the terms fell under “f.o.b. acceptance” in the Regulations 

[Requirements], and that under such terms, “[t]he buyer must accept the produce in order to 

obtain any relief for breach of contract by the seller. L. Gillarde v. Joseph Martinelli & Co. (1st 

Cir. 1948) 168 F.[2d] 276, [amended] 169 F.2d 60 cert. den. 33[5] U.S. 885. Having rejected 

the shipment, respondent is liable to complainant for the loss sustained on resale of tomatoes 

and is barred from claiming a breach of warranty, including the warranty of suitable shipping

condition, on the part of complainant.” Alpha Produce Co. v. Kelly & Weatherington, Inc., 18 

Agric. Dec. 1488, 1493 (1959).

b. ACCEPTANCE FINAL TERMS
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See 7 C.F.R. § 46.43(m).

Juice grapes were sold “f.o.b. acceptance final” on October 13th and warranted to have been

shipped on that day from California and to be U.S. No. 1 on that day. Seller further undertook 

in the contract to divert railcar from Kansas City on the B & O Railroad, but delayed two days

in issuing the diversion order and diverted via the Pennsylvania Railroad causing two-day delay 

in arrival at destination where grapes were accepted by buyer, who then sought reparation for

breach of contract. It was held that inspection on October 11th at shipping point showing U.S. 

No. 1 was best evidence of condition at time of shipment on the 13th; that warranty of suitable 

shipping condition was not available under f.o.b. acceptance final terms, but that seller 

materially breached the contract by issuing untimely and improper diversion orders to the 

railroad. Buyer was entitled to the difference between the market value of goods meeting 

contract requirements on the date when such goods should have been delivered at contract 

destination and the value of such goods at that place on the date they were actually delivered.

L. Gillarde Sons Co. v. I. Meltzer & Sons, Inc., 23 Agric. Dec. 481, 486 (1964).

Fact of use of term, if disputed, must be very clearly established, due to “the harshness of the

conditions imposed . . . as well as . . . the rarity of its use in the trade ...... ” Morgan Products

Corp. v. United Prod Co., 25 Agric. Dec. 1484, 1488-89 (1966).

Where contract terms were f.o.b. acceptance final, the supply of vine ripe tomatoes when the

contract specified gas green tomatoes was a material breach. DeSomma v. All World Farms,

Inc., 61 Agric. Dec. 821, 833 (2002).

Where seller stated it wanted no complaints with respect to the lettuce and that condition was

conveyed to respondent who, nevertheless, took the goods, shipment was found to be f.o.b.

acceptance final. Buyer could not, therefore, complain about condition or quality defects at

destination. Colendich Farms, Inc. v. Finest Fruits, Inc., 46 Agric. Dec. 986, 988-89 (1987).

Where lettuce, upon arrival, showed 6% quality defects, 4% tipburn, 8% discoloration of head

leaves and 8% decay, respondent had no recourse since use of f.o.b.a.f. terms voids the

warranty of suitable shipping condition. Brady v. Ben B. Schwartz & Sons, 36 Agric. Dec. 437,

440 (1977).

c. CONVERSION

In an f.o.b. sale, loss of goods through conversion by trucker falls upon buyer. Salinas Mktg.

Coop. v. Loving’s Produce, 22 Agric. Dec. 1155, 1158 (1963).

However, “[w]here a tender or delivery of goods so fails to conform to the contract as to give a

right of rejection the risk of their loss remains on the seller until cure or acceptance.” U.C.C.

§ 2-510(1).

Also, under U.C.C. § 2-722, the seller, if it had an insurable interest, would have a right of

action against a third party who so dealt with the goods as to cause injury to a party to the

contract. This section should probably be interpreted so as to allow an action by the seller

against innocent, or non-innocent, purchasers for value from a trucker who converts goods even 
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though the buyer in an f.o.b. sale would have the primary cause of action. The last part of 

paragraph (a) speaks of a cause of action consequent upon conversion, and there is no reason in 

such a case to limit the cause of action to a third party who first caused the injury. In such a 

case, subsequent good-faith purchasers for value from the party who converted the goods also 

cause a continuing injury to the seller and are third parties in relation to the seller. An f.o.b.

seller would have an insurable interest (since there is always the possibility in an f.o.b. sale that

the goods might be rejected on arrival).

Where the owner/shipper of a load of perishables sold the load f.o.b. to customers in

Connecticut, and the trucking company converted the load and secured the services of a

licensed firm, acting as a broker or dealer to dispose of the load, such firm was liable to the

owner for the value of the perishables, though such firm acted in good faith without knowledge 

of the lack of title in the trucking company, and the goods had already been disposed of and the 

trucking company paid therefore, when the licensed firm discovered the owner’s interest in the 

goods. “No right, title or interest may be acquired as the result of an unauthorized or wrongful 

sale, gift, exchange, pledge, mortgage, or other transfer of property by a bailee in possession, 

though to an innocent purchaser. The bailor is not divested of his title by such an unauthorized 

act and may recover the property or its value from the vendee or transferee in an appropriate 

action.” The Secretary was found to have jurisdiction to award reparation as to a transaction 

involving stolen goods. It was also stated that even if the licensed firm that received the goods 

from the trucker was acting as a commission merchant, “the general and almost universally 

recognized rule at common law is that a factor or commission merchant who receives property 

from his principal, sells it under the latter’s instructions, and pays him the proceeds of the sale, 

is guilty of a conversion if his principal had no title thereto or right to sell the property, and that 

the factor is liable to the true owner for the value of the property even though he acted in good 

faith and in ignorance of his principal’s want of title.” Section 2-722 of the U.C.C. was not 

mentioned in the decision, but since the complainant seller, in view of the f.o.b. sale, would not 

have had title, such section is the only possible basis for complainant to have had standing. 

Scott & Allen v. C.H. Robinson Co., 53 Agric. Dec. 1901, 1904 (1994). See also Smith Potato, 

Inc. v. Wood Bros. Produce, 45 Agric. Dec. 2091, 2094-95 (1986); George Teifer, Inc. v.

LaMantia Bros. Arrigo Co., 39 Agric. Dec. 1498, 1501-02 (1980).

Where, under an f.o.b. acceptance final sale, respondent was deemed to have accepted a

shipment at shipping point and upon arrival of the shipment at the place of business of

respondent’s customer on December 30th, such customer refused to unload until an inspection

could be obtained after the New Year’s holiday, and complainant then ordered the truck to

another place of business and unloaded it without respondent’s consent, it was held that

complainant had converted the produce. Complainant, after the holidays, resold a part of the

load and requested and secured respondent’s help in placing the remainder of the produce with 

another firm. The resultant net proceeds were substantially less than the original sale price, and 

it was held that respondent, having accepted the produce, was liable to complainant for the 

original contract price, that complainant was liable to respondent for the value of the produce at 

time of conversion and that such value was the original contract price, and that respondent only

owed complainant the net proceeds of the resale of the portion of the load that respondent 

handled at complainant’s request. It was stated that:

“Conversion” is exercise of dominion over personal property to exclusion or in
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defiance of [the owner’s] rights and it may be committed by acquiring possession

of goods with an intent to assert right over them which is, in fact, adverse to that

of the owner. (Citing case)

It was further said that:

A converter need intend nothing evil; so long as he intends to deal with the

property in a way which is in fact inconsistent with the [owner’s] right, he is a

converter. (Citing case)

Turbana Corp. v. Tom Lange Co., 49 Agric. Dec. 1221, 1225-26 (1990).

Where a close review of the evidence revealed that the shipper recovered ownership of the load

from its customer but subsequently relinquished beneficial ownership to the carrier, held that 

the carrier had not converted the load and the customer could not be held liable to the shipper 

for the salvage value, having paid the proceeds to the carrier. Christian Salvesen Packing & 

Mktg. Co. v. Waldo H. Lailer & Co., 49 Agric. Dec. 645, 650 (1990).

d. FREIGHT

“In an f.o.b. transaction, the buyer is responsible for paying freight . . .” In re Ben Gatz Co., 38 

Agric. Dec. 1038-40 (1979).

“In an f.o.b. sale, since the buyer is responsible for paying the freight, if the seller initially finds

a trucker, pays the freight and invoices the buyer for the freight, the seller is, as a matter of law, 

the agent of the buyer, and the law of agency is applicable. Under the law of agency, such a 

seller is in a fiduciary capacity and cannot make a secret profit on the freight. The seller can, of

course, charge the buyer whatever fee or service charge is agreed upon to compensate him for 

procuring the truck and paying the freight, but this must be disclosed to the buyer. In the 

absence of an agreement and disclosure, the buyer has a right to assume that the amount of 

freight shown on the invoice is the amount of freight paid by the seller on the buyer’s behalf.”

In re Ben Gatz Co., 38 Agric. Dec. 1038-40 (1979).

e. RISK OF DELAY DUE TO FAILURE TO MEET IMPORT REQUIREMENTS

Where a buyer has specified the method of transportation and the carrier to a foreign country,

the buyer is in a better position to know the importation requirements of that country.

Accordingly, in an f.o.b. contract, the buyer was responsible for delays caused by failure to

affix labels required by that country when the contract terms did not require the seller to affix

those labels. The warranty of suitable shipping condition warrants that the produce was in a

condition when loaded such that under normal shipping conditions, it would arrive at contract

destination without abnormal deterioration. What is abnormal deterioration, which would

constitute a breach of the warranty, “will be determined by PACA standards and regulations,”

and not the laws and regulations of the foreign country which is the ultimate destination. Good 

v. Europacific Fruit Exp., Inc., 66 Agric. Dec. 891, 910 (2007).

f. TERMS ASSUMED
106

“. . . the existence of f.o.b. terms are [sic] assumed when the contract is silent as to terms of

delivery, . . .” Hunts Point Tomato Co. v. S & K Farms, Inc., 42 Agric. Dec. 1224-25 (1983).

See U.C.C. § 2-503, Comment 5, and Ocean Breeze Exp., Inc. v. Rialto Distrib., Inc., 60 Agric.

Dec. 840, 899 (2001). See also White & Summers, Handbook of the Law under the U.C.C., § 5-

2, p. 143 (1972).

39. FOREIGN COMMERCE

Although the literal words of the PACA would apply to a foreign resident buying or selling in

the United States, the Secretary has never considered such a foreign resident under the

Secretary’s jurisdiction if no agent or representative (other than a broker) is in the country.

Solicitor’s Opinion 254; Jan. 31, 1945.

40. FREIGHT

Official notice taken of the fact that freight rates charged in the produce industry are commonly 

flat rates which are applicable whether or not a full load is shipped. S. Fla. Growers Ass’n, Inc.

v. Country Fresh Growers & Distrib., Inc., 52 Agric. Dec. 684, 700-01 (1993).

See sub-topic FREIGHT under DAMAGES, DELIVERED SALE, and F.O.B. See major

topic TRANSPORTATION.

41. GOOD DELIVERY

Defined – 7 C.F.R. § 46.43(j). The term “good delivery” is used in the Requirements only in 

reference to iceberg lettuce which is the only commodity for which there are official good 

delivery standards. However, the term is commonly used to refer to the definition of suitable

shipping condition in reference to any perishable commodity. Reference to the good delivery 

standards for lettuce in the Requirements will show the general methodology for application of

the concept to all perishables.

Remember, there are specific published good delivery standards for lettuce – 7 C.F.R. § 46.44.

These do not apply to leaf lettuce. Billingsley Farms, Inc. v. E.L. Kempf & Son, 37 Agric.

Dec. 721, 726 (1978).

See SUITABLE SHIPPING CONDITION – this index.

For Latent Defects see MERCHANTABILITY – WARRANTY OF, subheading –

WARRANTY’S APPLICABILITY TO LATENT DEFECTS – this index.

a. AVERAGING LOTS TO DETERMINE

When one lot from a single load (sold under one contract) did not make good delivery and the

other lot did, the two lots were averaged, and it was determined that the load as a whole did not 

make good delivery. Idaho Fruit Sales, Inc. v. Milwaukee Produce Distrib. Co., 37 Agric. Dec.

737, 742 (1978).

In Sin-Son Produce Co. v. Tom Lange Co., 44 Agric. Dec. 409, 411 (1985), we found that a
107

truckload containing three sizes of tomatoes shipped under one contract was a “commercial

unit,” and the whole load was deemed accepted when the tomatoes were unloaded “because a

receiver cannot accept a part of a truckload of perishable agricultural commodities while

rejecting the rest.” We found that the inspection results as to each size should be averaged

together to arrive at a damage percentage for the whole load in order to determine whether the

load as a whole made good delivery. See also Jen Sales, Inc. v. S. Friedman & Sons, Inc., 53

Agric. Dec. 810, 815 (1994).

HOWEVER:

After analysis of the definition of “commercial unit” in the Regulations [Requirements], and of 

prior cases holding that lots of similar produce on a load should be averaged to determine if the 

load as a whole made good delivery, it was held that there is no reasonable basis for continuing 

to require that a breach pertain to a load as a whole. It was stated “[t]here is nothing to prohibit 

rejection of a shipment when the breach exists only as to a portion of the load, and there is no 

prohibition of finding a breach and damages as to only a portion of a load when the whole load 

is accepted.” The portions of a load which will be considered as subject to a finding of a breach 

of contract were stated to be those which are distinguished in federal inspections. It was also 

stated “[t]his should not be viewed as having any effect upon the line of cases dealing with 

those situations where only a portion of a homogenous load is inspected and found to be in 

poor condition.” Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 985 at n. 31 

(1997).

b. GRADE STANDARDS AS REFERENCE POINT FORDETERMINING

See SUITABLE SHIPPING CONDITION – RELATIONSHIP TO GRADE

STANDARDS – this index.

Grade standards were used as a reference point for determining good delivery for cucumbers

sold without any specification as to grade. “Where U.S. grade tolerances of 1% or less (for

decay) are allowed for a commodity we have held that, depending on the applicable

circumstances, such commodity can make good delivery with double or sometimes more than

double the 1% decay allowed under the U.S. Grade Standards.” Pope Packing & Sales, Inc.

v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101 (1979). Exception: See Borton

& Sons, Inc. v. Firman Pinkerton Co., 51 Agric. Dec. 905, 911 (1992).

“When the tolerances provided by a U.S. grade standard for a commodity are higher (than 1%) 

. . . the amount of defects in excess of the published tolerances which would be found to

comport with good delivery would not be proportionally as great.” Denice & Felice Packing

Co. v. Super Food Services, Inc., 38 Agric. Dec. 744, 747 (1979). (Approximately half again as

much as the published tolerances is usually allowed for coast-to-coast shipments.)

c. COMMODITIES

Apples:

Discussion of the presence and extent of water core damage. Apple Jack Orchards v. M. Offutt
108

Brokerage Co., 41 Agric. Dec. 2265-2266 (1982).

Where 20% injury at destination on Extra Fancy apples held to represent a breach of the f.o.b.

contract even though the shipping point inspection showed no damage. Yakima Fruit & Cold

Storage Co. v. Int’l A.G., Inc., 42 Agric. Dec. 275 (1983).

Asparagus:

Inspection showing 13% serious damage held to reveal a breach of the f.o.b. contract. Oshita

Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric. Dec. 968, 974 (1991).

Beans, Snap:

Where inspection made three days after shipment revealed 12% watery soft rot, held that beans

failed good delivery. Cayuga Producers Coop., Inc. v. Krotzki Farm Produce, 8 Agric. Dec.

287, 290-91 (1949).

Broccoli:

Where destination inspection revealed 4% decay after ten-day transit period, held that railcar

load of broccoli made good arrival. Martori v. Olympic Wholesale Produce & Foods, Inc., 53

Agric. Dec. 887, 891 (1994); H.H. Mulhardt Packing Co. v. First Nat’l Stores, Inc., 34 Agric.

Dec. 1133, 1135 (1975).

Cabbage:

Where destination inspection made on carload of cabbage revealed 12% damage by yellowing

and 1% damage by discolored areas, held that cabbage made good arrival. Cal-Zona, Inc. v.

Charles P. Sweeney Co., 22 Agric. Dec. 579, 583-84 (1963).

Cantaloupes:

Inspection made 48 hours after arrival and showing 10% decay too remote in time to reflect the 

condition of the cantaloupes on arrival. G & S Produce Co. v. Watton Distrib., Inc., 35 Agric.

Dec. 1653, 1657-58 (1976).

Federal appeal inspection made seven days after shipment and showing 2% soft and 5% decay

(ranging from 0 to 33%) held to support claim that product failed good arrival. G & S Produce

Co. v. Schnuck Distrib. Co., 34 Agric. Dec. 1604, 1608 (1975).

Inspection made on railcar load of cantaloupes sold “f.o.b. rolling car” six days after date of

sale, and showing 1% fresh cracks, 2% damage by bruising and 5% decay, found to have met

good arrival requirements. G & S Produce Co. v. L.R. Morris Produce Exch., 31 Agric. Dec.

1167, 1170 (1972).

Inspection made on railcar load ten days after shipment and showing 4% damage by bruising,

1% damage by fresh cracks, 1% damage by large sunken areas and 4% decay. Load was found
109

to have made good arrival. Woods Co. v. Robert T. Cochran & Co., 22 Agric. Dec. 1295, 1298

(1963).

Inspection at destination after 11 days in transit showed an average of 10% decay. Held that

evidence fails to establish that the cantaloupes were not in suitable shipping condition.

Anonymous, 9 Agric. Dec. 244, 249 (1950).

Cherries:

Shipment of Bing cherries showing 2% decay at destination held not abnormally deteriorated.

Staples & Son Fruit Co. v. Auster Co., 37 Agric. Dec. 475, 481 (1978).

Cucumbers:

Cucumbers containing 2% decay were found to meet the warranty of suitable shipping

condition. Pope Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric.

Dec. 101, 104-05 (1979).

Where cucumbers sold f.o.b. arrived with 4% decay, the product was found not to meet suitable 

shipping warranty. HM Distrib. v. Van Buren Cnty. Fruit Exch. of Fla., Inc., 44 Agric. Dec. 

528, 531 (1985).

Grapes:

Shipment of grapes showing 3% wet and sticky and 4% decay found to fail good delivery.

Tamouzian Bros. v. Prevor-Mayrsohn Int’l, 34 Agric. Dec. 892, 895-96 (1975).

Where recording thermometer reflected that proper temperatures were maintained on board

truck and there was no transit delay, grapes which had average 8% serious damage and 6%

decay were not in suitable shipping condition. Granada Mktg., Inc. v. Nat’l Fresh Fruit &

Vegetable Co., 45 Agric. Dec. 1610, 1616 (1986).

Lettuce:

Good delivery standards specified in the Regulations [Requirements] apply only to iceberg

lettuce and do notapply to leaf lettuce. Billingsley Farms, Inc. v. E.L. Kempf & Son, 37 Agric. 

Dec. 721, 726 (1978).

Where the contract specifically excluded bruising and/or discoloration following bruising, an

inspection showing 33% discoloration following bruising and no other defects conforms with

the f.o.b. terms. Garin Co. v. Nash-Decamp Co., 44 Agric. Dec. 1283, 1286 (1985).

Melons – Honeydew:

Where 9% serious damage to honeydew melons is considered excessive given normal transit

conditions. Half Moon Fruit & Produce Co. v. Dan Garcia Brokerage, Inc., 42 Agric. Dec.

2048, 2051 (1983).
110

Onions:

Onions containing 8% total defects, including 1% decay found to have made good arrival.

Sunfresh, Inc. v. Brown, 49 Agric. Dec. 626, 630 (1990).

Held that for northern onions, an allowance of 8% total defects including up to 4% decay was

appropriate for an f.o.b. shipment from Washington to East coast receivers. Flanagan & Jones,

Inc. v. World Wide Consultants, Inc., 53 Agric. Dec. 828, 852 (1994).

Where 3% decay at destination was found to show that the onions made good arrival. Am.

Potato Co. v. D.L. Piazza Co., 17 Agric. Dec. 187, 190 (1958).

Oranges:

Where two truckloads of oranges, each of which traveled two days to destination, were found to

contain 14% and 12% damage by skin breakdown respectively, shipper was found to have

breached the warranty of suitable shipping condition. Marion Cnty. Citrus Co. v. Egan, Fickett

& Co., 23 Agric. Dec. 1289, 1293 (1964).

Inspection made at destination after three days of transit showed 11% total defects, including 

3% decay. Found that oranges made good arrival. Lake Fruit Co. v. Jackson, 18 Agric. Dec.

140, 143 (1959).

Pears:

Where the shipment was handled under normal transportation service and conditions, and the

federal inspection showed 3% decay and 4% overripe, this condition approximately one day

after arrival at destination is not adequate proof that the shipment was in unsuitable shipping

condition at the time of sale. Auster Co. v. Wesco Foods Co., 11 Agric. Dec. 70, 75 (1952).

Peppers:

Where respondent failed to prove U.S. No. 1 contract terms, an inspection showing 7% damage

by bruising and 3% decay did not establish a breach of contract on an f.o.b. contract. Denice & 

Felice Packing Co. v. Super Food Services, Inc., 38 Agric. Dec. 744, 746-47 (1979).

Prunes (Plums):

Prunes containing 3% decay at destination found to make good arrival. Anonymous, 8 Agric.

Dec. 593, 598 (1949).

Potatoes:

Potatoes found to contain 3% slimy rot four to seven days after shipment did not represent a

breach of suitable shipping condition. Vecchio v. Battleground Farms, 16 Agric. Dec. 1135,

1138-39 (1957); Contra-Michael-Swanson & Brady Produce Co. v. Schwendiman, 8 Agric.
111

Dec. 1300 (1949).

Assuming normal transportation, potatoes could have 2% decay on arrival at destination and

still be deemed to have made good delivery. M.J. Duer & Co. v. J.F. Sanson & Sons Co., 49

Agric. Dec. 620, 624-25 (1990); Harvest Fresh Produce, Inc. v. Clark-Ehre Produce Co., 39

Agric. Dec. 703, 709-110 (1980).

Where contract called for “good skin” and the inspection showed “mostly slightly skinned,

some moderately skinned,” rejection by the buyer was justified. Bushman’s, Inc. v. Sol Salins,

Inc., 39 Agric. Dec. 1568, 1571-72 (1980).

Since mahogany rot primarily results from extended storage at cold temperatures and the

potatoes were only two days in transit, the receiver met its burden of proving that the shipper

breached the contract. Katz Co. v. Kunkel Co., 45 Agric. Dec. 760-68 (1986).

Potatoes found to contain 2% and 4% decay respectively made good arrival. Mendelson-Zeller

Co. v. Murlas Bros. Co., 23 Agric. Dec. 224, 230 (1964).

Where contract for chipping potatoes agreed that the buyer’s duty to accept was expressly

conditioned on its satisfaction that the potatoes were of good chipping quality, the buyer cannot 

use arbitrary or unreasonable standards in determining whether the potatoes met contract terms

since this would be unconscionable and against public policy. W.T. Holland & Son. v. C.K. 

Sensenig Potatoes, 52 Agric. Dec. 1705, 1709 (1993).

Strawberries:

The maximum allowance for f.o.b. no grade strawberries to make good delivery after five days 

in transit is 15% total damage, 8% serious damage and 3% decay. Main St. Produce, Inc. v. W. 

Veg. Produce, Inc. and Main St. Produce, Inc. v. Florance Distributing Co., 74 Agric. Dec. 

193, 212 (2015).

Inspection showed 15% total defects, including 4% serious damage, including 1% decay.

Decision found the berries to have made good arrival after four days in transit. Norden Fruit 

Co. v. E D P, Inc., 50 Agric. Dec. 1865, 1870-71 (1991).

In a shipment of strawberries from California to Pennsylvania, an average of 3% gray mold rot 

and 2% missing capstems not abnormal. Watsonville Berry Coop. v. Jos. Notarianni & Co., 37 

Agric. Dec. 443, 446 (1978).

Strawberries showing 3 to 20%, average 9% damage, including 3% serious damage by large, 

flattened areas and 3 to 9%, average 3% gray mold rot, found not abnormally deteriorated in an

f.o.b. sale. Dave Walsh Co. v. Golub Corp., 37 Agric. Dec. 824, 827 (1978).

Establishes 15% total damage, 8% serious damage and 3% decay as the maximum allowance

on f.o.b. sales of strawberries. Supreme Berries, Inc. v. McEntire, 49 Agric. Dec. 1210, 1216

(1990).
112

Inspection revealing 3% bruised and leaking, 5% soft and 3% decay shows berries made good

arrival. Empire Distrib. Co. v. Wholesale Produce Supply, 32 Agric. Dec. 1301, 1305 (1973).

Tangerines:

Decay in tangerines ranging from 2 to 6%, averaging 4%, is not sufficient deterioration to

indicate a lack of suitable shipping condition in an f.o.b. shipping point transaction in view of

the fact that a tolerance of 3% decay is allowed by the U.S. Standards for tangerines in

delivered sales. Nor is 2 to 10%, averaging 6% soft and puffy fruit sufficient damage to warrant 

the conclusion that the tangerines were abnormally soft and puffy. Haines City Growers Ass’n 

v. Robinson & Gentile, 10 Agric. Dec. 968, 972 (1951).

Tomatoes:

85% U.S. No. 1 tomatoes have been held to make good delivery if they have no more than 25% 

condition defects at destination. Produce Exch., Inc. v. Tom Lange Co., 42 Agric. Dec. 1588,

1592 (1983); Stockton Tomato Co. v. Albee Tomato Co., 28 Agric. Dec. 1051, 1054 (1969).

In shipment of tomatoes which failed to meet color requirements upon arrival, seller was held

liable for buyer’s expenses incurred to repack and ripen the tomatoes. Botts Produce Co., Inc.

v. Flamingo Distrib. Co., Agric. Dec. 724 (1934).

Inspection made three days after arrival showing 3% decay, 3% bruising and 30% damage by

mottling held to establish breach by seller of the warranty of suitable shipping condition, as

mottling becomes more evident as the fruit turns red. Strano Farms v. Sanzone-Palmisano Co.,

50 Agric. Dec. 938, 940 (1991).

In shipment of tomatoes which failed to meet color requirements upon arrival, seller was held

liable for buyer’s expenses incurred to repack and ripen the tomatoes. B & L Produce, Inc. v.

Procacci Bros. Sales Corp., 37 Agric. Dec. 1243, 1246 (1978).

Tomatoes shipped under normal conditions arrived showing 7% decay and 6% damage by

sunken discolored areas does not represent a breach of contract. Lookout Mountain Tomato &

Banana Co. v. Consumer Produce Co. of Pittsburgh, 50 Agric. Dec. 960, 964-68 (1991).

Tomatoes sold as “Pinks” are off-color where inspection shows 10% green or breakers and

70% light red to red. Horwath & Co. v. Mim’s Produce, Inc., 47 Agric. Dec. 332, 334 (1988).

An inspection made five days after arrival showing 70% green and breakers and 25% turning

and pink was sufficient to show that complainant failed to deliver pink tomatoes, which the

contract called for. B & L Produce of Ariz. v. Mim’s Produce, Inc., 37 Agric. Dec. 201, 205

(1978).

Inspection showing 6% decay insufficient to show breach of suitable shipping condition

warranty, but inspection on another load showing 10% decay held to show breach. Nat’l

Growers, Inc. v. Pelican Tomato Co., 24 Agric. Dec. 405, 410 (1965).
113

Watermelons:

Ruled that an inspection obtained one day after arrival showing 4% decay was a breach of the

warranty of suitable shipping condition. Digioia v. Dino Produce, Inc., 37 Agric. Dec. 839, 843

(1978).

Two piggyback containers of watermelons arrived at destination showing 6% and 5% decay

respectively. Held that good arrival was not made, breaching the suitable shipping condition

warranty. B.G. Anderson Co. v. Zeidenstein Bros., 29 Agric. Dec. 1443, 1446-47 (1970).

42. GUARANTEE OF PAYMENT BY A THIRD PARTY

If a third party guarantees payment, it may be held liable in the event of non-payment by the

principal. Top Pac Growers & Shippers, Inc. v. Dock Case Brokerage Co., 42 Agric. Dec.

1251, 1254 (1983); Wolverine Fruit Co. v. Boehmer, 27 Agric. Dec. 1153, 1158 (1968);

MacClaren v. M-T Fruit & Produce, Inc., 22 Agric. Dec. 1048, 1053 (1963); Hollandale Mktg.

Ass’n v. Lally, 18 Agric. Dec. 730, 735 (1959).

All defenses available to buyer are available to buyer’s guarantor. William Rosenstein & Sons

Co. v. Greene, 29 Agric. Dec. 627, 632 (1970).

43. IMPLIED WARRANTY

See MERCHANTABILITY – WARRANTY OF – this index.

a. MERCHANTABILITY – EXCLUSION OF

Exclusionary language must mention merchantability. See L.E. Jensen & Sons, Inc. v. Huston

Produce, Inc., 51 Agric. Dec. 814, 829 (1992).

Where tomatoes were purchased by Respondent from Complainant pursuant to the December

4, 2002 Suspension Agreement on Fresh Tomatoes Imported from Mexico, Respondent’s claim 

that the tomatoes were not merchantable due primarily to the quality defects disclosed by a 

USDA inspection cannot be considered because the Suspension Agreement permits

adjustments to the sales price for the condition defects listed in the Agreement and for no other 

defects. The language used in the Suspension Agreement is sufficiently explicit to bring the 

exclusion of warranties to the buyer’s attention and make plain that there are no implied

warranties. Omega Produce Co. v. Boston Tomato & Packing LLC, 64 Agric. Dec. 1156, 1164

(2005).

b. FITNESS FOR PARTICULAR PURPOSE – EXCLUSION OF

Parties have the right to contract for waiver of the suitable shipping condition warranty as it

applies to specific defects. See Garin Co. v. Nash-Decamp Co., 44 Agric. Dec. 1283, 1286

(1985). However, the waiving of specific defects does not encompass the warranty of

merchantability. In order to have an effective waiver of the implied warranty of

merchantability, the requirements of § 2-316 of the Uniform Commercial Code must be met.
114

The implied warranty of merchantability will apply unless the parties expressly exclude or

modify the warranty by the use of conspicuous language which mentions the word

“merchantability.” River Valley Mktg. Inc. v. Tom Lange Co., 53 Agric. Dec. 918, 921 (1994). 

However, see Martori Bros. Distribs. v. Hous. Fruitland, Inc., 55 Agric. Dec. 1331, 1337-38 

(1996) for a description of the conditions under which the warranty of merchantability would 

apply to condition defects found at destination.

Subsection 2 of U.C.C. § 2-316 requires a conspicuous writing for the exclusion of any implied

warranty of fitness created under U.C.C. § 2-315. However, where oral evidence shows that a

buyer never relied upon seller to furnish goods fit for a particular purpose an issue of fact may

be raised as to whether a warranty of fitness for a particular purpose was ever created. See 

Davis v. Goldman-Hayden Co., 50 Agric. Dec. 1014, 1017 (1991).

44. INSPECTIONS

a. APPEAL INSPECTIONS

Relationship of appeal inspections to original inspections. See Vukasovich v. Fieldman Bros.

Produce Co., 37 Agric. Dec. 436, 441 (1978); Cargill Produce v. Sobiech Irrigation Equip., 33

Agric. Dec. 1141, 1149 (1974).

Where a shipping point inspection and a destination restricted inspection were reversed by an

appeal inspection two days after arrival, the questions raised as to the identity of the product

covered by the inspections were deemed insubstantial, and the determination made by the

appeal inspector that the product was the same as previously inspected was accorded weight in

arriving at a conclusion. Fed’n Produce Sales v. A. Sam & Sons Produce Co., 51 Agric.

Dec. 1460, 1466 (1992).

Notice of inspection provided to the shipper on the date of inspection, but after more than half

of the shipment was resold, was considered untimely, as the shipper was deprived of the 

opportunity for an appeal inspection. Quail Valley Mktg., Inc. v. Cottle, 60 Agric. Dec. 318, 

337 (2000).

Where a shipment of 630 cartons of lettuce were shipped, and 620 cartons were inspected

indicating that the product met the Good Delivery Standard for iceberg lettuce, the receiver

called for and obtained an appeal inspection two hours later, covering only 420 cartons of the

shipment. The appeal inspection, although it did not nullify the first inspection, was considered 

to represent the best evidence of the condition of the lettuce. In determining whether the appeal 

inspection revealed a breach of the Good Delivery Standard, the missing 210 cartons were 

considered to have contained no defects. Nunes Co. v. W. Coast Distrib., Inc., 64 Agric. Dec. 

1166, 1175 (2005).

Where the seller made a timely request for an appeal inspection, but the buyer denied the

product was available and the buyer subsequently issued account of sales or other evidence

which established that the product was, in fact, available for the requested appeal inspection,

the original inspection shall be disallowed. New Era Produce LLC v. Circus Fruits Wholesale
115

Corp., 72 Agric. Dec. 878, 892 (2013).

d. BY INSPECTOR CONVICTED OF RECEIVING BRIBES

Four inspections were made of four lots of vine ripe tomatoes delivered to three of respondent’s 

customers. Although all of the vine ripe tomatoes were the same brand and size and were 

shipped from the same packing house, one of the inspections showed two to four times the 

decayed and soft tomatoes as the other three inspections. Such inspection was performed by an 

inspector who had pled guilty to taking bribes, and the firm at which the inspection was

performed was one of the firms whose personnel had been implicated in bribery of federal 

inspectors. Under the circumstances, for the purpose of determining whether there was a breach 

and the amount of damages resulting therefrom, the tomatoes that were the subject of the 

aberrant inspection were considered to have decayed and soft tomatoes equal to the average of 

the other tomatoes. Oceanside Produce, Inc. v. JSG Trading Corp., PACA R-00-031, slip op 

(June 19, 2000).

Where grapes were consigned to a firm whose employee subsequently pled guilty to paying

bribes to federal inspectors to alter inspections, and where an inspector who pleaded guilty to

receiving bribes to alter inspections issued an inspection certificate covering 500 cartons of

grapes from the 1,280 carton consignment showing the 500 cartons were ready to be dumped, it

was held that since the consignee could only profit from the resale and not the dumping of the

grapes, the inspection certificate was presumed to be valid. Procacci Bros. Sales Corp. v.

B.T. Produce Co., 60 Agric. Dec. 341, 346 (2001).

Where two inspections of shipments of cantaloupes on the Hunts Point market were performed 

by inspectors who pleaded guilty to accepting bribes for the falsification of inspection 

certificates, but there was no evidence that the firms which received the produce on the Hunt’s 

Point market were involved in the paying of bribes, it was held that complainant had not 

submitted sufficient evidence to raise credible doubts as to the integrity of the federal

inspections, and the complaint was dismissed. Spencer Fruit Co. v. Nw. Choice, Inc., 60 Agric.

Dec. 346-47 (2001).

Where an inspection of a shipment of tomatoes on the Hunts Point market was performed by an

inspector who pleaded guilty to accepting bribes for the falsification of inspection certificates, 

and an employee of the purchasing firm was indicted for bribery of federal inspectors but

acquitted, it was held that complainant had failed to prove by a preponderance of the evidence 

that the employee participated in the bribery, and it was presumed, in the absence of the motive 

of a bribe, that the inspector would have inspected the tomatoes in the normal fashion. Pac.

Tomato Growers v. Am. Banana Co., 60 Agric. Dec. 352, 372 (2001).

e. BY NON-EXPERT DISCOUNTED

“We have often discounted testimonial evidence concerning the condition of perishable

commodities and stated the necessity of obtaining a neutral inspection showing the exact extent 

of damage.” Mut. Vegetable Sales v. Select Distrib., Inc., 38 Agric. Dec. 1359, 1362 (1979);

see also Tyre Farm, Inc. v. Dandrea Produce, Inc., 45 Agric. Dec. 796, 799 (1986); G. J. 

Albert, Inc. v. Salvo, 36 Agric. Dec. 240, 242 (1977); Salt Lake Produce Co. v. Butte Produce
116

Co., 32 Agric. Dec. 1732 (1973); B.G. Anderson Co. v. Mountain Produce Co., 29 Agric. Dec. 

513, 517 (1970).

See Jordan v. Tom Lange Co., 50 Agric. Dec. 1027, 1031-32 (1991), where testimony of

disinterested witnesses was disallowed because it had not been shown that federal or

commercial inspection or inspection by state or local health official could not be obtained, and

additionally, because produce was viewed by disinterested witnesses two weeks after arrival.

Testimony of buyer/consignee’s trucker and reports from buyer/consignee’s customers do not

prove condition defects; they are parties to the transactions, so their reports are not impartial.

Rogers Bros. Farms, Inc. v. Skyline Potato Co., 69 Agric. Dec. 1599, 1613-14 (2010).

f. BY NON-EXPERT ALLOWED

Where a purchase and sale contract called for numerous bulk loads to contain a specific number 

of pumpkins, the inventory count performed by the receiving retail stores was accepted as 

adequate evidence of the number of pumpkins delivered where such count was adequately

documented, and no federal inspection was necessary to prove the count received. PSM

Produce, Inc. v. Boyer Produce, Inc., 60 Agric. Dec. 809, 826 (2001).

g. COST OF

The cost of inspections is allowed as consequential damages. Strano Farms v. SanzonePalmisano Co., 50 Agric. Dec. 938, 941 (1991).

h. DESTINATION INSPECTION

Destination inspection takes precedence over shipping point inspection as to condition (but not

as to grade). Homestead Tomato Packing Co. v. Tray-Wrap, Inc., 46 Agric. Dec. 643, 646

(1987); Harvest Fresh Produce, Inc. v. Clark-Ehre Produce Co., 39 Agric. Dec. 703, 707

(1980).

i. FOLLOWING UNLOADING - LOSS OF IDENTITY

Where fungible goods are unloaded prior to inspection there may be insufficient proof that the

goods inspected are the same as those shipped. See Better Taters v. Haddad & Sons Brokerage, 

34 Agric. Dec. 1943, 1945-46 (1975) (potatoes); Victor Produce & Kraut Co. v. S&K Farms, 

Inc., 34 Agric. Dec. 1587, 1592 (1975) (cabbage); Me. Packers, Inc. v. Monticello Potato 

Shippers, Inc., 34 Agric. Dec. 1394, 1397 (1975) (potatoes - although inspection identified 

unloaded potatoes as having come from truck in which potatoes sold were shipped, quality 

factors differed so substantially from factors noted by inspection at shipping point that it was

held that buyer failed to prove that potatoes were the same as those shipped); Fruitcrest Corp.

v. Westco Products, 18 Agric. Dec. 386, 388-91 (1959) (frozen cherries); Anonymous, 8 Agric.

Dec. 418, 422 (1949) (bananas).

j. INADEQUATE SAMPLING
117

Arrival inspection by Mexican government used inadequate sampling and therefore could not 

be used to show a breach of the suitable shipping condition warranty. Borton & Sons, Inc. v.

Firman Pinkerton Co., 51 Agric. Dec. 905, 910 (1992).

k. OF ONLY A PORTION OF THE LOAD

When determining whether there is a breach, homogeneous lots or loads must be considered as 

a whole. The inspection of only a portion of a homogeneous lot should not be taken to reflect 

the condition of the entire lot. (We are not here speaking of a “restricted inspection;” i.e., an 

inspection of what the inspector considers to be a representative portion of a larger load, but of

an inspection of only a portion of a lot or load because the remainder of the lot or load is not 

present.) However, such an inspection may show sufficient condition problems to indicate a 

breach as to the entire lot. The uninspected part of the load should be assumed to have no

condition defects and be averaged with the portion that does contain such defects. Assume the 

result to apply to the entire lot, and rule accordingly. Sample computation: 300 inspected, out 

of a load containing an original 450, have 11% decay. 300 x .11 = 33; 33 ÷ 450 = .07, or 7% for

the load as a whole.

See M.J. Duer & Co. v. J.F. Sanson & Sons Co., 49 Agric. Dec. 620, 624-25 (1990), where

defects disclosed by inspection of only one-half of load were averaged with remaining half with

assumption being made that remaining half had no defects, and load as a whole was found to 

have made good delivery.

See also W. Vegetable Exch. v. Moyers & Sons Wholesale Produce, 50 Agric. Dec. 1001, 1004

(1991); Kaplan’s Fruit & Produce Co. v. Houlehan, Inc., 44 Agric. Dec. 370, 372 (1985); Mut.

Vegetable Sales v. Select Distrib., Inc., 38 Agric. Dec. 1359, 1363 (1979); Saikhon v. RussellWard Co., 34 Agric. Dec 1940, 1942-43 (1975).

The principle also applies where only a small portion of a lot was absent at time of inspection.

See Lookout Mountain Tomato & Banana Co. v. Case Produce, Inc., 51 Agric. Dec. 1471,

1478 (1992).

Note: this is not the same as a restricted inspection. See subheading “RESTRICTED

INSPECTIONS” – this topic.

l. OF SEVERAL LOADS LUMPED TOGETHER

A foreign survey that lumped together apples from three sea-land containers was utilized to

determine whether apples arrived with abnormal deterioration even though this method of

survey made it impossible to associate the apples surveyed with the transit conditions

applicable to each container. This was permitted because the temperature history for the three

containers was sufficiently similar and sufficiently within normal parameters, that transit

conditions could safely be said not to void the suitable shipping condition warranty as to any of

the containers. Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 981 (1997).

m. PERCENTAGE OF DEFECTS – FAILURE TO SPECIFY
118

A timely Swedish survey which noted and described poor condition of commodity without

giving percentage of defects and then estimated the remaining commercial value of the load,

was found to be inadequate as a record of the condition of the goods on arrival in Sweden and

could not be used in assessing damages. See Ont. Int’l, Inc. v. Nunes Co., 52 Agric. Dec.

1661, 1672-73 (1993).

In Associated Citrus Packers, Inc. v. Socodis Bocchi Trading, Inc., 53 Agric. Dec. 1889, 1900

(1994), a foreign survey which reported the percentage of cartons discarded during repacking

and which gave an estimate of damage expressed in a monetary amount was held to be not

adequate to show a breach of contract or damages. We quoted Ontario Int’l, Inc., as follows:

In order for such an estimate to be of any use in this proceeding, we would have

to be assured that the inspector possessed the commercial experience and

expertise necessary to arrive at such a judgment. It is obvious that an estimate of

commercial value moves us a step beyond the scientific sampling of produce, and

the careful tabulating of percentage of damage, into the realm of the vagaries of

the market place. Different markets vary greatly as to the degree to which

damaged produce will be accepted by consumers, and as to the discount which

will be necessary to move goods which are defective. Moreover, much will

depend upon the relative amount of undamaged goods of the same type which

will be concurrently available when the defective goods are marketed. This will,

of course, vary greatly from day to day on the same market.

However, in Viva Tiger, Inc. v. Cornucopia Trading Co., 53 Agric. Dec. 817, 825-26 (1994), a

foreign survey which did not specify percentage of defects nevertheless showed a breach

because the surveyor used the term “most” in the description of the damaged cartons, and such 

term had to be taken as meaning more than 50% of the cartons. It was stated that while “many” 

and “large” cannot be equated to the meaning accorded such terms in the “General Market 

Inspection Instructions” given to federal inspectors, the term “‘[m]ost’ is a term whose 

universal import signifies a majority and places the extent of damage at above 50% of the 

cartons sampled.”

n. PRIMA FACIE EVIDENCE

Federal inspections of produce are prima facie evidence of the accuracy of the information set

forth in the inspection report. See 7 U.S.C. § 499n(a). See also Fruit Distrib. Corp. v. Gary D.

Harney Co., 44 Agric. Dec. 1331, 1333 (1985).

Although under the PACA federal inspections are prima facie evidence of the truth of the

statements recorded therein, it was held that such prima facie evidence is rebuttable, and that 

the credibility of the inspections was rebutted by the guilty pleas of the inspectors to bribery

coupled with the implication of the buyer in the bribery of inspectors. It was found that the

federal inspections were unconvincing under the circumstances of the case; and it was also

found that testimony from the buyer’s employees was an insufficient basis on which to

conclude that the seller breached the contract of sale. The seller was awarded the original

contract price. Dimare Homestead, Inc. v. Koam Produce, Inc., 59 Agric. Dec. 866, 877 (2000).
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o. PRIVATE INSPECTIONS

Where a carload of grapes sold f.o.b. and shipped from California to Buffalo, New York, was

subjected to a restricted (upper two layers of load) federal inspection at destination which

found, “. . . less than 1⁄2 of 1 percent to 3 percent, in some none, in few as high as 15 percent

decay, Grey Mold Rot. Decay averages approximately 2 percent,” the buyer rejected, and the

car was moved to Philadelphia by the seller. Two unrestricted private inspections (one by the

Binney Inspection Service, and the other by the Railroad Perishable Inspection Service) done at 

Philadelphia two days after the federal inspection in Buffalo found “less than 1 percent decay.”

The buyer/respondent’s rejection was found to be wrongful on the basis of the private 

inspections. We said, “It appears that respondent, perhaps in good faith, placed too much 

reliance upon a restricted inspection, and that the entire carload was not as bad as was indicated 

by that inspection.” Cal. Fruit Exch. v. Rothenberg, 7 Agric. Dec. 986, 989-90 (1948).

Greater weight is given to the findings of federal inspections at shipping point than to private

inspections at destination, BUT only as to grade (as opposed to condition) defects. Chi.

Oxford Co. v. Tuchten-Altman Co., 41 Agric. Dec. 110, 120 (1982); see also Commonwealth v.

Idaho, 32 Agric. Dec. 1734, 1738 (1973).

In Dew-Gro, Inc. v. First Nat’l Supermarkets, Inc., 42 Agric. Dec. 2020, 2024 (1983), a private 

inspection done at destination on the same day as a federal inspection was found to elucidate 

the federal inspection. We stated, “It is obvious from the very carefully done R.P.I.A.

inspection that the celery was loaded with approximately 3 feet of lengthwise void which 

resulted in the shifting of the load during transit. Such shifting was undoubtedly the cause of 

the crushed and broken celery scored as a condition defect in the Federal inspection made 

January 26. Accordingly, we find that complainant did breach the contract of sale by improper

loading of the celery.” Similarly, where a private inspection made at time of arrival was given 

credence since it was not contested, and a federal inspection made four days later was 

confirmatory in that it showed further deterioration of the same defects noted on the private 

inspection. Harden Farms of Cal. v. Michael J. Navilio, Inc., 37 Agric. Dec. 1694, 1697

(1978).

o. RESTRICTED INSPECTIONS

“While a restricted inspection is certainly not as desirable as an inspection of an entire lot, a

restricted inspection is not the same as an inspection of only part of a load (as where, for

instance, a portion of the load may have been selectively removed and sold prior to inspection),

and is presumed to be representative of the load as a whole unless there is some reason to think

otherwise.” Pandol Bros., Inc. v. Prevor Mktg. Int’l, Inc., 49 Agric. Dec. 1193, 1197 (1990).

Followed in Fresh W. Mktg., Inc. v. McDonnell & Blankfard, Inc., 53 Agric. Dec. 1869, 1876 

(1994).

Where a first, unrestricted inspection showed onions with 16% condition defects and where the 

second, restricted inspection showed the onions as grading U.S. #1, it was concluded that the 

first inspection had evidentiary weight. Griffin & Brand Sales Agency, Inc. v. Bialis Produce

Co., 41 Agric. Dec. 1627, 1629 (1982).
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See also Cal. Fruit Exch. v. Rothenberg, 7 Agric. Dec. 986, 989-90 (1948), where a restricted

inspection was found not representative. The case is briefed under PRIVATE INSPECTIONS

– this topic.

p. SHIPPING POINT – WEIGHT

Greater weight is given to the findings of federal inspections at shipping point than to private

inspections at destination, BUT only as to grade (as opposed to condition) defects. Chi.

Oxford Co. v. Tuchten-Altman Co., 41 Agric. Dec. 110, 120 (1982); see also Commonwealth v.

Idaho, 32 Agric. Dec. 1734, 1738 (1973).

q. TIMELINESS

In cases where the condition on arrival is so poor that we can be reasonably certain that the

suitable shipping warranty would have been breached even under different conditions (in this

case, storage temperatures and time of inspection are the relevant conditions), we can allow

more time between arrival and inspection and still rely upon the inspection. Main St. Produce, 

Inc. v. W. Veg. Produce, Inc. and Main St. Produce, Inc. v. Florance Distributing Co., 74 

Agric. Dec. 193, 214-15 (2015).

An inspection performed 7 days after arrival at a destination agreed upon by the parties is too

remote in time to be considered as evidence in assessing the condition of the produce and

whether it was in suitable shipping condition at time of shipment or arrival. La Valenciana

Avocados Corp. v. Tomato Specialties, LLC, 74 Agric. Dec. 503, 512 (2015).

Although the inspection performed on the onions five days after arrival was not performed in a

timely manner, noted the onions remained on the conveyance under constant refrigeration at the

transit temperature specified by Complainant from the time of arrival to the time of inspection 

and concluded on this basis that the extreme amount of decay disclosed by the untimely 

inspection was sufficient to establish with reasonable certainty that a more timely inspection 

would have also disclosed abnormal deterioration in the onions. Four Rivers Packing Co. v. 

Sam Wang Produce, Inc., 76 Agric. Dec. A (U.S.D.A. 2009).

Inspections a few days (two is usually okay, three is stretching it, and we almost never use an

inspection made more than three days old) after arrival may show the condition of the goods on 

the day of arrival. Bruce Newlon Co. v. Richardson Produce Co., 34 Agric. Dec. 897, 900

(1975); D.L. Piazza Co. v. Stacy Distrib. Co., 18 Agric. Dec. 307, 310 (1959). An exception to 

this rule was made in Midwest Mktg. Co., v. Ralph & Cono Communale Produce Co., 46 Agric. 

Dec. 179, 180 (1987), where inspections made on two truckloads of watermelons four days 

after arrival showing 31% and 23% decay, respectively, were held to show a breach of contract

by the supplier.

As to foreign shipments, some extra time may be allowed, but the point at which condition is

being assessed is still time of arrival. Whether extra time is appropriate depends on the degree

of decay, the amount of time lapse, the relative caducity of the produce and the conditions

under which it was maintained after arrival. See Trans W. Fruit Co. v. Ameri-Cal Produce, Inc.,

42 Agric. Dec. 1955, 2008 (1983).
121

Inspections are too late when they are too remote in time from time of arrival to reflect

condition on delivery. Villalobos v. Am. Banana Co., 56 Agric Dec. 1969, 1980 (1997) (five

days after arrival of tomatoes in a delivered sale); Borton & Sons, Inc. v. Firman Pinkerton Co., 

51 Agric. Dec. 905, 910 (1992) (four days after arrival of pears); Dodds v. Produce Products, 

Inc., 48 Agric. Dec. 682, 684 (1989) (eight days after arrival of potatoes, citing case where 

seven days held too long); U.S.A. Fruit, Inc. v. Roxy Produce Wholesalers, Inc., 48 Agric. Dec. 

705-06 (1989) (four days after arrival of plums); Dave Westendorf Produce Sales, Inc. v. John 

Livacich Produce, Inc., 46 Agric. Dec. 536, 538-39 (1987) (four days after arrival of tomatoes); 

Bruce Newlon Co. v. Richardson Produce Co., 34 Agric. Dec. 897, 900 (1975) (six days after 

arrival of potatoes); D.L. Piazza Co. v. Stacy Distrib. Co., 18 Agric. Dec. 307, 310 (1959) (four 

days after arrival of carrots); Vaughn-Griffin Packing Co. v. Thomas Aeozzo & Son, 17 Agric.

Dec. 1035, 1037-38 (1958) (five to six days after arrival of oranges); Likins v. Walter Holm &

Co., 10 Agric. Dec. 593, 597 (1951) (extensive defects in tomatoes five days after arrival).

An inspection on 270 out of a total of 324 lugs of tomatoes showing 7% soft and 32% decay,

made five days after arrival, was too remote to show the condition of the tomatoes on arrival,

especially since the receiver failed to show the conditions under which the tomatoes were

stored. B & L Produce of Ariz. v. Mim’s Produce, Inc., 37 Agric. Dec. 201, 205 (1978).

Where a first inspection did not cover a substantial portion of the load and showed 12% decay, 

a second inspection, made five days later and showing only 9% decay was considered

representative in showing that the load made contract terms on arrival. Santa Clara Produce,

Inc. v. Roth Produce Co., 36 Agric. Dec. 1395, 1398 (1977).

Where two inspections are made within 24 hours of one another, the more comprehensive

inspection is a more reliable indication of the condition of the load as a whole. Garin Co. v.

Nicholas J. Zerillo, Inc., 35 Agric. Dec. 1259, 1262-63 (1976).

Where a restricted and an unrestricted inspection were taken on the load, the unrestricted

inspection taken one day after the first, restricted inspection was accorded more weight even

though it covered only 600 out of 750 cartons, because the pattern of damage was much the

same on both inspections. Senini Ariz., Inc. v. Fisher Foods, Inc., 39 Agric. Dec. 275, 277-78

(1980).

Respondent’s federal inspection on pears secured over two weeks after arrival, intended to

prove a breach of contract based on latent defects was not timely, and respondent was ordered 

to pay the full purchase price. Welch Fruit Sales, Inc. v. Jos. Notarianni & Co., 38 Agric.

Dec. 589, 591-92 (1979).

Where tomatoes arrived late Friday and were inspected Monday morning, showing 18% soft

and watery and 8% decay, held that the inspection supported receiver’s claim of a breach of

contract. Veg-A-Mix v. George DePaoli Distrib. Co., 42 Agric. Dec. 1619, 1621 (1983).
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Where, as to frozen strawberries, notice of breach was given one month after arrival, and

inspection was made almost two months after arrival, it was found that “complainant inspected 

the berries within a reasonable time after arrival, and informed respondent of the claimed defect

within a reasonable time after its discovery.” Kan. City Steak Co. v. Otto W.Cuyler, Inc., 10

Agric. Dec. 394, 399 (1951); petition for reconsideration and rehearing dismissed, 11 Agric.

Dec. 383 (1952).

However, as to frozen peaches, over two months was held to be too long. Cortley Frosted

Foods, Inc. v. Ecco Pack Co., 11 Agric. Dec. 76, 94 (1952).

As to foreign shipments, compare Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric.

Dec. 1955, 2008 (1983), where, as to shipments of containers of citrus, approximately 5% as to 

decay was the amount allowed for good delivery, and containers were not surveyed until five 

days after arrival. The buyer was found not to have met its burden of proving abnormal

deterioration as to containers showing 7.55% to 8.58% decay due to the length of time between 

arrival and inspection, but was found to have met such burden as to containers showing 12.42 

to 16.26% decay even though the length of time between arrival and survey was the same. This 

applies a standard closely analogous to the exception to the requirement of normal 

transportation where condition on arrival is so bad in a load transported under abnormal 

conditions that we can be sure that the warranty would have been breached even if

transportation had been normal. See also SEL Int’l Corp. v. Brown, 52 Agric. Dec. 740, 749

(1993). See SUITABLE SHIPPING CONDITION – EXCEPTION TO THE RULE – this

index.

Where foreign inspection was conducted seven days after receipt by the customer and eleven

days after arrival in Santos, Brazil, buyer was found to have failed to prove condition of grapes 

on arrival. The buyer showed by a preponderance of the evidence that this was the normal time 

for securing inspections in Brazil, but failed to show that the seller knew at time of entering the 

contract that a Brazilian survey would take such an extraordinary length of time to secure. El 

Rancho Farms v. Im Ex Trading Co., 58 Agric. Dec. 638, 645 (1999).

45. INTEREST

Section 5(a) of the PACA requires that we award to the person or persons injured by a violation

of section 2 of the PACA “the full amount of damages sustained in consequence of such

violations.” Such damages include interest. L & N R.R. Co. v. Sloss Sheffield Co., 269 U.S. 217 

(1925); L & N R.R. Co. v. Ohio Valley Tie Co., 242 U.S. 288 (1916). Since the Secretary is 

charged with the duty of awarding damages, he also has the duty, where appropriate, to award 

interest at a reasonable rate as a part of each reparation award. See Scherer v. Manhattan Pickle

Co., 29 Agric. Dec. 335, 338 (1970); Crokett v. Producers Mktg.Ass’n, 22 Agric. Dec. 66-67 

(1963).

Complainant requested prejudgment interest on the unpaid produce shipment listed in the

Complaint at the rate of 24% per annum (2% per month) based on a statement appearing on its

invoice providing for the payment of such interest. Applying U.C.C. § 2-207 to the 

circumstances of this case, held that in the absence of evidence that Respondent seasonably 

objected to the interest provision stated on Complainant’s invoice, the interest provision was 
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incorporated into the parties’ contract. Held further that by failing to file an answer to the

Complaint, Respondent waived its opportunity to argue that the 24% per annum interest rate set 

by the statement on Complainant’s invoice is not within the range of normal practice in the 

produce trade. Absent evidence indicating otherwise, the 24% interest rate set by

Complainant’s invoice is presumably a bargained term of the contract which this forum will 

enforce. Four Rivers Packing Co. v. Veracity Produce LLC, 74 Agric. Dec. A (U.S.D.A. 2015).

Complainant requested pre-judgment interest on the unpaid produce shipments listed in the

Complaint at the rate of 21% per annum (1.75% per month). Complainant’s claim was based on 

its invoices issued to Respondent, which expressly state: “A FINANCE CHARGE of 1 3/4% 

PER MONTH 21% PER ANNUM will be charged on all past due accounts.” There was

nothing in the record to indicate that Respondent objected to the interest provision stated on 

Complainant’s invoices. In the absence of a timely objection by Respondent, the interest

provision stated on Complainant’s invoices was incorporated into the sales contracts. See

Johnston v. AG Grower Sales LLC, 69 Agric. Dec. 1569, 1583-86 (2010). Accordingly, prejudgment interest was awarded to Complainant at the rate of 21% per annum (1.75% per

month). Coliman Pac. Corp. v. Sun Produce Specialties LLC, 73 Agric. Dec. 639, 646-47

(2014).

Complainant sought interest in a specified amount on the past due debt at the rate stated on its

invoices. Because Complainant sought a specified amount of prejudgment interest in its

complaint, the award of prejudgment interest was limited to the dollar amount sought in the

complaint. M & M Packaging, Inc. v. Casa De Campo, Inc., 70 Agric. Dec. xx, xxxi (USDA

2011), published in 72 Agric. Dec. xx, xxxi (USDA 2013).

Where Respondent filed a Counterclaim, it was awarded the full amount of its Counterclaim

less damages, which amount was offset against the amount awarded to Complainant. A 

Decision and Order was issued in favor of Complainant ordering Respondent to pay the offset 

amount plus prejudgment interest on that amount. Classic Fruit Co. v. Ayco Farms, Inc., 72 

Agric. Dec. 867, 876-77 (2013).

Respondent filed a Petition for Reconsideration seeking payment of prejudgment interest on the 

amount found due Respondent from Complainant under the Counterclaim. After

reconsideration, an Order on Reconsideration was issued awarding prejudgment interest to

Respondent. In order to be equitable in the distribution of the prejudgment interest, the

prejudgment interest was applied to the amount due each party prior to the application of an

offset. Classic Fruit Co. v. Ayco Farms, Inc., 72 Agric. Dec. 899, 903-4 (2013).

Complainant sought interest in a specified amount on the past due debt at the rate stated on its

invoices. Because Complainant sought a specified amount of prejudgment interest in its

complaint, the award of prejudgment interest was limited to the dollar amount sought in the

complaint. M & M Packaging, Inc. v. Casa De Campo, Inc., 70 Agric. Dec. xx, xxxi (USDA

2011), published in 72 Agric. Dec. xx, xxxi (USDA 2013).
124

Where an agreement is reached to change the original contract price for goods purchased, the

payment due date for the purpose of calculating interest is the original payment due date

specified in the contract, not the modification date, unless otherwise agreed between the parties. 

New Mundo Exp. Fruits, Inc. v. San Diego Point Produce, Inc., 67 Agric. Dec. 888, 895

(2008).

If parties’ contract for the payment of interest at a rate which is different than that normally

awarded in reparation proceedings, this forum will award the percent of interest for which the

parties contracted. Seaquist v. Gro-Pro, Inc., 43 Agric. Dec. 161, 164 (1984); Swanee Bee

Acres, Inc. v. Gro-Pro, Inc., 42 Agric. Dec. 637, 640-41 (1983); Grange v. Mark Bernstein Co.,

29 Agric. Dec. 978-79 (1970); Scherer v. Manhattan Pickle Co., 29 Agric. Dec. 335, 338

(1970).

Where a party has tendered payment in the exact amount which we later find to have been due

and such payment was rejected, no award of interest on the amount tendered will be made.

Turbana Corp. v. Tom Lange Co., 49 Agric. Dec. 1221, 1227 (1990); Salinas Mktg. v. Leonard 

O’Day Co., 16 Agric. Dec. 719, 725 (1957). Since a PACA claimant is entitled to full payment 

under the civil law and under the Act, this rule does not apply to payment tenders of less than

the amount due even if the amount tendered was very close to what was due.

Where respondent had tendered a greater amount than was eventually awarded, and

complainant had returned the unrestricted check to respondent, complainant would not be

awarded interest on its claim. Strano Farms v. Shapiro & Cohen, Inc., 49 Agric. Dec. 1227-28

(1990).

Where respondent, at the time of the filing of its answer, paid complainant $19,617.25 of the

original $25,601.50 purchase price of produce, complainant’s claim for interest on the

$19,617.25 covering the period between the original date on which it was due and the date on

which it was paid, was granted. It was stated that the award of such interest is similar to the

award of interest in connection with undisputed amount orders and is in accord with precedent

which views the authority to award interest as incident to the statutory duty to award the injured 

party “the full amount of damages sustained in consequence of such violations.” Peak

Vegetable Sales v. Nw. Choice, Inc., 58 Agric. Dec. 646, 657 (1999).

When contracts between the parties included an interest term that requires Respondent to pay 

interest of a specified amount on any past due balance, such interest accrues from the due date 

of the invoice. If Respondent pays an undisputed amount, interest accrues from the due date of 

the invoice until such payment is made. We find that this award of interestwill provide an 

additional incentive for licensees to avoid slow payment, and it will not remove the motive to 

admit and pay any amount known by the Respondent to be due, because by so paying a

Respondent will avoid interest for the balance of the period before the final order is issued.

Packman1, Inc. v. Ayco Farms, Inc., 78 Agric Dec. 435 (2019).

When parties contract for the payment of interest at a rate which is different than that
125

normally awarded in reparation proceedings, the percent of interest for which the parties

contracted will be awarded. Where invoices provided to Respondent, and undisputed by

Respondent, stated that the terms of payment were net 30 days, and further stated that any

balances unpaid after 30 days were subject to a 1.5% (18% per annum) finance charge or

interest on the invoice amount, interest of 18% on those invoices was awarded. Grasso Foods,

Inc. v. Americe, Inc., 69 Agric. Dec. 1547, 1567-68 (2010).

Complainant alleges that it is entitled to recover interest on its invoices which expressly state

that “Past Due Accounts will be assessed a late payment service charge at the rate of 11⁄2% per

month or 18% per annum from the date of invoice.” Respondent, rather than objecting to the

“FOB Prompt” payment and service charge terms in Complainant’s invoices, simply chose to

ignore them. Comment 6 to section 2-207 of the Uniform Commercial Code makes it clear that 

a merchant’s decision to ignore additional terms in confirming forms constitutes acceptance of 

those terms. Johnston v. Ag Grower Sales LLC, 69 Agric. Dec. 1569, 1586 (2010).

46. INTERSTATE COMMERCE

Shipments are considered to have occurred in “interstate commerce” if: (i) the produce

regularly moves in interstate commerce; and (ii) the shipper or receiver of the shipments was

also routinely engaged in interstate commerce. It is not necessary to demonstrate that each

shipment was actually intended to move out of the state in which it was grown. In re: Produce

Place, 53 Agric. Dec. 1715 (1994), aff’d, Produce Place v. USDA, 91 F.3d 173 (D.C. Cir.

1996); see, also Almquist v. Mountain High Potatoes & Onion, Inc. 65 Agric. Dec. 1418 

(2006). A-W Produce Co. v. Berry, 68 Agric. Dec. 1291, 1295-96 (2009).

A transaction is in interstate commerce for the purpose of a reparation case if the shipment

involves a type of produce commonly shipped in interstate commerce, and the produce is

shipped for resale by or to a dealer that does a substantial portion of its business in interstate

commerce. Magallon v. Pac. Sun Distrib., Inc., 69 Agric. Dec. 848, 856 (2010).

a. BURDEN OF PROOF

In a case where the complainant was the assignee of the claims of multiple firms, and

complainant alleged that the firms received the produce from out of state, the respondent, in its 

answer, stated that it neither admitted nor denied the allegation. The allegation in the complaint 

was hearsay and also was not in evidence because the case was an oral hearing case. At the 

hearing, representatives of several of the firms testified, but failed to mention where the

produce came from. It was held that, “. . . the jurisdiction of the Secretary under the act

depends upon proof that the transactions were in interstate or foreign commerce, and such proof

is lacking...” The complaint was dismissed. S. Water Mkt. Credit Ass’n Inc. v. Treasure Island

Foods, Inc., 28 Agric. Dec. 1186, 1189 (1969), pet. recon. dismissed, 28 Agric. Dec. 1553-55

(1969).

In Aday v. Springer, 25 Agric. Dec. 272, 274 (1966), complainant, under oath, asserted that the

produce was shipped in contemplation of interstate commerce and respondent, under oath,

asserted that there was no such contemplation. Because of small inconsistencies in other

testimony by respondent, it was stated that “. . . we believe the complainant’s testimony, and
126

find that this transaction was made in contemplation of shipment in interstate commerce.”

Where tomatoes were sold for processing within the state where grown, and complainant

offered testimony which was unrebutted that the processed tomatoes were sold in interstate

commerce, the Secretary had jurisdiction over the transactions. Faris Farms v. Lassen Farms,

59 Agric. Dec. 471, 478 (2000).

b. CONTEMPLATION OF

Proof necessary to show:

A railcar load of potatoes was sold by complainant, located in Fort Fairfield, Maine, and

shipped from the same location to respondent, which was located in Presque Isle, Maine. The

terms of sale were f.o.b. inspection and acceptance arrival Presque Isle, Maine. Three days after

shipment, respondent diverted the shipment to a customer out of state. It was stated that,“[w]e 

conclude from the contract as a whole that complainant expected respondent to divert the 

shipment in interstate commerce to a destination unknown or uncertain at the time of the

making of the contract. The actual destination turned out to be Camden, New Jersey, which we 

consider to have been within the contemplation of the parties.” L.E. Rand Co. v. Shur-Gain,

Inc., 24 Agric. Dec. 499, 500-01 (1965).

Where a load of cucumbers was sold by a Florida complainant to a Florida respondent, and

shipped to a customer of respondent in Florida with the contemplation that the cucumbers

would be distributed to firms outside the state, and over two-thirds of the cucumbers were

shown to have in fact been shipped out of the state of Florida, but less than one-third were

shipped to other Florida firms, it was found that the load was sold in contemplation of interstate

commerce, and that the Secretary had jurisdiction. Lionheart Group, Inc. v. Sy Katz Produce, 

Inc., 59 Agric. Dec. 449, 455 (2000).

c. CURRENT OF COMMERCE

A load of chipping potatoes was purchased from a Pennsylvania complainant by respondent

who was located in Pennsylvania. A substantial portion of respondent’s chips were distributed 

by Valley Distributing Company, also located in Pennsylvania, but situated near the borders of

three states. The Judicial Officer found that,

[o]n the basis of evidence of record showing that Valley Distributing Company

shipped respondent’s potato chips into the state of Ohio and the evasive

statements by respondent’s president upon being questioned about where the

products of respondent were sold, including his admission that it is possible

respondent’s potato chips are shipped into other states, we conclude that this was

a transaction contemplating shipment in interstate commerce, and that the

Secretary has jurisdiction in the matter.

Troyer v. Blue Star Potato, 27 Agric. Dec. 301, 304 (1968).

Where potatoes were shipped intrastate to a processing plant located near the Canadian border,
127

that fact alone was insufficient to show that the resulting processed potatoes were then exported 

to Canada or that it was contemplated by the parties that they would be so exported, it was 

concluded that the transactions were not in interstate or foreign commerce within the meaning 

of the Act, and the complaint was dismissed. Troyer v. Blue Star Potato is explained and 

distinguished. DeBacker Potato Farms, Inc. v. Pellerito Foods, Inc., 57 Agric. Dec. 770, 772-

73 (1998).

Where tomatoes were sold for processing within the state where grown, and complainant

offered testimony which was unrebutted that the processed tomatoes were sold in interstate

commerce, the Secretary had jurisdiction over the transactions. Faris Farms v. Lassen Farms,

59 Agric. Dec. 471, 478 (2000).

Where Big “O” Foods, a Minnesota firm, sold and shipped ten loads of potatoes to Roland,

another Minnesota firm, and the potatoes were subsequently sold at retail within the state of

Minnesota, it was found that the Secretary had jurisdiction over the transactions because five of 

the loads were purchased by Big “O” Foods in North Dakota, and a substantial portion of the 

potatoes in the remaining five loads were purchased in North Dakota, and mixed with the

remaining potatoes in the remaining five loads which were grown in Minnesota. We stated, “It 

seems clear to us that complainant’s normal business practice involved the bringing of potatoes 

into Minnesota from North Dakota and the subsequent shipping of such potatoes at least to 

other points in Minnesota. This involves a ‘current of commerce’ of which the Minnesota

potatoes became a part.” Big “O” Foods, Inc. v. Roland Mktg., Inc., 44 Agric. Dec. 928, 933

(1985).

d. MOVEMENT

Goods shipped from a state through another state to a receiver in the state from which they

were shipped are shipped in interstate commerce. Clearview Farms v. Noha, 21 Agric. Dec.

806, 808 (1962).

It was formerly held that a contract for the sale of produce made by a party located, at the time 

of contracting, in New York, to a party located in Michigan, was not in interstate commerce 

because there was no proof that the commodity moved, or was contemplated to move, 

interstate. Wright Supply Corp. v. Carpenter Mktg., 38 Agric. Dec. 1641-42 (1979). See also 

Wide World of Foods v. Trinity Valley Foods Co., 34 Agric. Dec. 423, 426-27 (1975), where 

the seller was located in Texas, the broker in California, and the buyer in New York, but the 

goods were transferred from the seller’s ownership to the buyer’s ownership by a transfer in 

storage in Oregon and never moved outside of that state. We said,

[c]omplainant failed to offer any evidence that the terms of sale . . . involved any

contemplation of movement of the peas in interstate commerce or any evidence that 

the peas were ever actually moved in interstate commerce. The fact that the buyer, 

Imperial Frozen Foods, is a New York company and the peas are in Oregon is of no

significance without a showing of interstate commerce.

Iwata v. W. Fruit Growers, Inc., 90 F.2d 575 (1937).
128

However, in Tulelake Potato Distrib., Inc. v. Giustino, 52 Agric. Dec. 752, 760 (1993), we

stated:

In the present case, there is no evidence that the commodity involved ever crossed a 

state line. Nonetheless, we must conclude that the [sic] this transaction was in

commerce. The parties involved were in different states, the buyer was in

Washington state and the seller and receiver were in California. When the parties to

a transaction are in different states, the purchase or sale transaction is in interstate

commerce even if there is no evidence that the commodity physically crossed a

state line. In this case, therefore, the fact that the parties to the transaction were in

separate states supplies the necessary interstate commerce for a finding of

jurisdiction.

See, however, Cont’l Growers v. Fisher Procurement, Inc., 55 Agric. Dec. 1382, 1385-86

(1996), at “MOVEMENT IN BOND,” supra.

The following is excerpted from an April 29, 1987, memo from Kenneth H. Vail, Assistant

General Counsel, Packers and Stockyards Division, to Jack D. Flanagan, Chief, PACA

Division:

The leading case regarding the jurisdiction of a federal agency over activities

involving movement among the islands of Hawaii is Island & Airlines, Inc. v.

Civil Aeronautics Bd., 352 F.2d 735 (9th Cir. 1965). In that case, the C.A.B.

sought to enjoin Island Airlines, Inc. from conducting inter-island flights on the

ground that it had not obtained certification from the C.A.B. Island Airlines, Inc.

argued that its activities all occurred within the territory of the State of Hawaii.

The district court ruled in favor of the C.A.B., holding that the boundaries of

Hawaii were the islands plus a three mile belt around each. Civil Aeronautics

Board v. Island Airlines, Inc., 235 F. Supp. 990 (D. Hawaii 1964). The Court of

Appeals affirmed, stating that where Congress had failed to delineate boundaries

with certainty, the court must define such limits. The court then extensively

examined the legislative history of the Hawaiian Statehood Act (48 U.S.C. prec.

Subsection 491), and concluded that Congress had not intended that the territorial

waters of the individual islands be extended beyond the traditional three mile

limit, Island & Airlines, Inc. v. Civil Aeronautics Bd., supra at 740. The court also 

relied on United Airlines, Inc. v. Public Utilities Comm’n of Cal.,109 F. Supp.13

(N.D. Cal 1952) rev. on other grounds 346 U.S. 402 (1953), which held that the 

C.A.B. has jurisdiction over airline flights from the California mainland to Santa 

Catalina Island, a part of California 30 miles from the mainland, because such 

flights were in air space over the high seas, and not within the State of California, 

after they passed three miles from the mainland until reaching three miles from

the coast of Santa Catalina. Island & Airlines, Inc. v. Civil Aeronautics Bd., supra

at 744.

The principle that the area beyond three miles from the coastline of the United States

constitutes international waters has been affirmed on many occasions. U.S. v. Wright-Barker, 

784 F.2d 161, 166 (3rd Cir. 1986); U.S. v. Romero- Galue, 757 F.2d 1147, 1149 (11th Cir. 
129

1985); U.S. v. Warren, 578 F.2d 1058,1064-65 n.4 (5th Cir. 1978), cert. denied 446 U.S. 956 

(1980).

Where both parties are located within a state, but shipment is outside the state, there is

interstate commerce. J & J Produce Co. v. Weis-Buy Serv., Inc., 58 Agric. Dec. 1095, 1098

(1999).

Where sale and delivery of perishables took place entirely within the District of Columbia and

there was no record of where the produce originated, the transaction was found to be within

interstate commerce because there was testimony that no fruits and vegetables are grown within 

the District, and because the term interstate or foreign commerce is defined in the PACA to 

include commerce “within the District of Columbia.” Sol Salins, Inc. v. FJL, Inc., 51 Agric.

Dec. 888, 891 (1992).

e. MOVEMENT IN BOND

Where commodities, which were the subject of a contract between parties in the same or

separate states of the United States, never entered the commerce of the United States because

the commodities moved through the United States from one foreign country to another foreign

country, in bond, it was held that there was no interstate or foreign commerce within the

meaning of the PACA. See Cont’l Growers v. Fisher Procurement, Inc., 55 Agric. Dec. 1382,

1385-86 (1996), which includes extensive discussion of the question of the necessity for

interstate or foreign movement of the commodity. Tulelake Potato Distrib., Inc. v. Giustino, 52 

Agric. Dec. 752, 760 (1993), was distinguished on the basis that the commodity which moved

entirely intrastate was nevertheless found to have been a part of the current of interstate 

commerce usual in such commodity. We stated:

There is no question that under the current concept of the constitutional meaning

of interstate commerce Congress would have power to regulate the parties’

contracting, whether viewed as between the two parties in California, or as

between complainant in California and respondent Albert in Arizona. The

question is whether Congress has sought to reach the contracting undertaken by

these parties, divorced as it was from any movement, or contemplated movement,

in interstate or foreign commerce, of a perishable agricultural commodity. We

think that in view of the evident close tie that exists in the Act between the

concept of commerce, and the movement, or contemplated movement, of

commodities in, or to, or from one of the several states, the answer must be in the

negative. The situation is legally no different from the hypothetical sale by a firm

in California to a buyer in New York, of perishables, which remain at all times in

a warehouse in Germany, or which transfer, due to the sale, from a warehouse in

Germany to one in France. In this hypothetical there is an interstate sale and a

foreign sale, but there is no interstate or foreign commerce as defined by the Act,

because there is no movement, or contemplated movement, of a perishable

commodity, into, or out of, one of the United States, and there is no current of

commerce in such commodity into, or out of, one of the United States. We

conclude that we lack jurisdiction over the subject matter of the complaint.
130

(Footnote omitted.)

See JURISDICTION – TRANSACTION NECESSARY – this index.

47. JOINT ACCOUNT TRANSACTIONS

Partners in a joint account relationship owe each other the utmost good faith in their dealings

with one another. If the joint venture sustains damages because a joint venture partner breaches 

his duties, the breaching partner must bear the loss, although in matters of judgment the joint

venture partner will not be liable for a loss caused by honest mistake or error of judgment not

amounting to wantonness or fraud. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec.

942, 960-61 (2010).

The ordinary rule of a joint venture is that each party bears their individual expenses. The basic

principle is that general overhead expenses are excluded from the gross profit of the joint 

venture where the overhead represents an attempt to charge compensation for services in

providing capital and in providing the organization to handle the transaction. Joint account

partners may agree to share expenses differently, however, joint venturers do not ordinarily

agree to share the expenses of turning on the lights, making telephone calls, buying uniforms,

or paying the salaries of office staff. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec.

942, 966 (2010).

A joint account transaction is in the nature of a partnership to which the rules of partnership

ordinarily apply. Fla. Lime & Avocado Growers, Inc. v. Kegar-Caribe of Fla., Inc., 20 Agric.

Dec. 795, 798 (1961); Bertolla & Sons v. Hyman Distrib. Co., 13 Agric. Dec. 961, 967-69

(1954); L. Gillard Co. v. Ball, 4 Agric. Dec. 588, 591 (1945).

“. . . We have held that a joint account agreement is in the nature of a partnership in which the

parties intend to share profits and losses equally. Since this is true each of the parties is entitled 

to full disclosure from the other of all material facts concerning the subject of their agreement. 

A partner in a joint account arrangement owes the utmost good faith to his co-partner and we 

have held it is the duty of a partner to his co-partner to transact the joint-account business with 

reasonable care, skill diligence, and economy; and if the co-partnership sustains injury by 

reason of his failure to do so, he must bear the losses, though in matters of judgment he will not 

be liable for a loss caused by honest mistake or error of judgment not amounting to wantonness 

or fraud.” D.L. Piazza Co. v. Harshfield Bros., 13 Agric. Dec. 521, 524 (1954) (citations 

omitted).

“If one joint account partner can prove that the other partner had knowledge of the abnormal

condition of a commodity at the time of contracting and that such knowledge was not

communicated to the first partner, the innocent partner cannot be held liable for joint losses

incurred solely because of the condition of the commodity.” Senini Ariz., Inc. v. Gentile Bros.,

Inc., 37 Agric. Dec. 1759, 1762 (1978).

Where lettuce was shipped f.o.b. in a joint account transaction, the warranty of suitable

shipping condition was held to apply. Green Valley Produce Coop. v. Mut. Produce, Inc., 43

Agric. Dec. 659, 662 (1984).
131

In Kunkel Co. v. Salisch Produce Co., 32 Agric. Dec. 1585, 1588 (1973), we quoted an early

decision, L. Gillard Co. v. Ball, 4 Agric. Dec. 588, 591 (1945), as follows:

In the joint venture, complainant has as much to gain or lose as did respondent. It

is reasonable to assume, then, that complainant did not jeopardize its own

interests . . . We fail to see wherein complainant could be said to have been

negligent . . . a joint adventurer “contracts for good faith and integrity, but not that

he will commit no errors; for negligence, fraud and dishonesty he is liable, but not

for non-negligent mistakes.

A joint account transaction contemplates, unless otherwise stated, that profits and losses will be 

shared equally. Patterson Produce Co. v. John Love Produce Co., 39 Agric. Dec. 1006, 1009 

(1980); Wilco Produce v. McDonnell & Blankfard, 27 Agric. Dec. 305, 308 (1968). See

example of how shared loss is computed in Davis v. Lebo, 18 Agric. Dec. 1499, 1502-03

(1959).

A joint venture is a form of partnership to which apply the rules of partnership, wherein each of 

the joint venturers has the power to bind the others and to subject them to liability to third

persons in matters which are within the scope of the joint venture. Willingham v. Patterson

Produce Co., 39 Agric. Dec. 766, 770-71 (1980); C.H. Robinson Co. v. Sierra Packing Co., 24

Agric. Dec. 712, 714 (1965).

Sales charges and commissions are not normally contemplated as a part of the expenses of a

joint account agreement. Wilco Produce v. McDonnell & Blankfard, 27 Agric. Dec. 305, 308

(1968) and Nat’l Produce Distrib., Inc. v. Lewis D. Goldstein Fruit & Produce Corp., 13 Agric.

Dec. 69-75 (1954).

Freight, hauling, terminal charges, reconditioning (where evidence supports necessity), and

inspection charges have been allowed as expenses, prior to the splitting of the net proceeds.

Nat’l Produce Distribs., Inc. v. Lewis D. Goldstein Fruit & Produce Corp., 13 Agric. Dec. 69-

75 (1954).

A joint account transaction can involve produce as to which no joint cost is stated. The receiver 

resells and deducts expenses from the gross proceeds and instead of charging a commission as 

an expense, splits the net proceeds with the shipper. Nat’l Produce Distribs., Inc. v. Lewis D. 

Goldstein Fruit & Produce Corp., 13 Agric. Dec. 69 (1954). Most joint account transactions 

involve produce which has a joint cost (the shipper has purchased the produce at such cost, and

such cost is used as a base for computation of shared profit or loss). Frequently the contract 

calls for a particular grade and may include f.o.b. terms. The receiver resells, deducting 

expenses of the resale such as freight, and splits the profit above the sale price, or the loss 

below the sale price, with the shipper. In this situation, damages from any breach of the 

contract may be factored in. See Frank Kenworthy Co. v. Belson Bros., 14 Agric. Dec. 502, 509 

(1955).
132

The amount represented as joint cost must be the true joint cost. See Sam Egalnick Co. v. Ben

Cole Produce Co., 9 Agric. Dec. 1037, 1043-44 (1950), where the shipper was found to have

violated the Act by reason of receipt of a secret rebate from the grower.

a. ADEQUACY OF ACCOUNTING

An accounting from a joint venture partner showed the date of shipment, the lot number, the

name of the purchaser, the amount of cabbage sold, the initial invoice price, the amount 

actually received, the bill of lading number, the trucking company who delivered the cabbage, 

and notes on the problems with each load was held to be an adequate accounting even though it

lacked an itemized explanation of the shipping charges, the commissions taken, or costs

incurred, and it referred to the date of shipment without regard to the date of sale. L & M

Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 963 (2010).

b. DAMAGES

Damages in the amount of the reasonable value of the produce are awarded when a party fails 

to account for produce. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. Dec. 942, 973

(2010).

c. DUMPING

Where a joint venture partner accounted zero and negative returns for lots of cabbage, the

accounting must also have included other adequate evidence to justify the zero and negative

returns. Inspections or other adequate evidence are required to demonstrate that produce is 

without commercial value, and that documentation must be given to the joint account partner. 

Because the expenses were not separately accounted for, presumption arose that zero and 

negative returns were a result of dumping. L & M Farms, Inc. v. Y2S Trading, Inc., 69 Agric. 

Dec. 942, 965 (2010).

48. JURISDICTION

“The jurisdiction conferred by the Perishable Agricultural Commodities Act, 1930, supra,

applies to transactions in interstate commerce and is not dependent upon the amount in

controversy or diversity of citizenship.” Simon Siegal Co. v. Heaton, 5 Agric. Dec. 915, 918

(1946), citing Krueger v. Acme Fruit Co., 75 F.2d 67 (5th Cir. 1935).

Jurisdictional issues are raised by the Secretary sua sponte. DeBacker Potato Farms, Inc. v.

Pellerito Foods, Inc., 57 Agric. Dec. 770, 772 (1998); Provincial Fruit Co. v. Brewster Heights

Packing, Inc., 39 Agric. Dec. 1514-15 (1980).

“There are four basic jurisdictional requirements under the Act; they are: (1) the transaction

must involve “perishable agricultural commodities” (7 U.S.C. § 499a(4)); (2) the transaction

must involve “interstate or foreign commerce” (7 U.S.C. § 499a(8)); (3) the person

complaining must petition the Secretary within nine months after the cause of action accrues (7

U.S.C. § 499f(a)); and (4) the respondent must be a licensee under the PACA or operating
133

subject to the licensing requirements of the Act (7 U.S.C. § 499d(a)).” Jebavy-Sorenson

Orchard Co. v. Lynn Foods Corp., 32 Agric. Dec. 529, 531 (1973).

a. COMPULSORY COUNTERCLAIM

See ELECTION OF REMEDIES – this index.

A party may bring an action in this forum and still file a compulsory counterclaim on the same

subject matter in a court of competent jurisdiction without losing its cause of action in this

forum. Kurt Van Engel Comm’n Co. v. Schultz Sav-O Stores, Inc., 48 Agric. Dec. 731, 733

(1989); Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric. Dec. 1955, 1957 (1983).

Extensive discussion: A state court judgment based on the compulsory counterclaim is res

judicata in this forum and may form the basis for an award of reparation. M.S. Thigpen

Produce Co. v. Park River Growers, Inc., 48 Agric. Dec. 695, 697 (1989).

b. CONSENT INJUNCTION – FAILURE TO NOTIFY

A Consent Injunction issued by a federal district court in a trust proceeding brought pursuant to

section 5(c) of the PACA (7 U.S.C. 499e(c)) is given effect in reparation proceedings with

proper notice to the Secretary. Where proper notice is given, reparation actions before the

Secretary may be stayed. Where parties fail to provide the Secretary with proper notice of a

Consent Injunction before the Secretary’s reparation order becomes final, the Secretary lacks

jurisdiction to consider a petition to reopen or request to vacate the order. Banacol Mktg. Corp.

v. Jard Mktg. Corp., 69 Agric. Dec. 828, 831 (2010).

c. CONTEMPLATION OF INTERSTATE COMMERCE

Where a load of cucumbers was sold by a Florida complainant to a Florida respondent, and

shipped to a customer of respondent in Florida with the contemplation that the cucumbers

would be distributed to firms outside the state, and over two-thirds of the cucumbers were

shown to have in fact been shipped out of the state of Florida, but less than one-third were

shipped to other Florida firms, it was found that the load was sold in contemplation of interstate

commerce, and that the Secretary had jurisdiction. Lionheart Group, Inc. v. Sy Katz Produce,

Inc., 59 Agric. Dec. 449, 455 (2000).

d. COUNTERCLAIMS

Counterclaims are permitted under PACA Rules of Practice [Administrative Procedures], 

whether or not arising from the transaction complained of, and even though they arise from

extrinsic matters. Schumman Co. v. Yeckes-Eichenbaum, Inc. of N.Y., 7 Agric. Dec. 1216, 1220-

22 (1948).

Counterclaims involving the same transaction may be filed more than nine months after the

transaction occurred. Calagno Farms v. Spring Kist Sales, 22 Agric. Dec. 406, 410 (1963); C.F.

Smith, Inc. v. Bushala, 21 Agric. Dec. 1365, 1370 (1962); Chapin Bros., Inc. v. Michael
134

Bros., 15 Agric. Dec. 616, 619 (1956); Vener Co. v. McCaffrey Bros. Co., 15 Agric. Dec. 405,

410 (1956).

Counterclaims arising out of different transactions than those covered by a timely complaint

must be filed within nine months after the cause of action as to such counterclaims accrued.

F&J Produce Sales v. Hdrlicka Dairy Cattle Inc., 45 Agric. Dec. 1342, 1344-45 (1986);

Sanders & Drake v Gardner Bros., 31 Agric. Dec. 128, 131-32 (1972); Calcagno Farms v.

Spring Kist Sales, 22 Agric. Dec. 406, 410 (1963).

A counterclaim involving different transactions from those in complaint filed by a foreign

complainant and filed within nine months after the filing of the complaint, but not within nine

months of accrual of cause of action, was untimely. Bar-Well Foods Ltd. v. Valley Packing

Serv. Int’l, 39 Agric. Dec. 1200, 1204 (1980).

e. COVERED COMMODITIES

The PACA defines “perishable agricultural commodity” as fresh fruits and fresh vegetables of

every kind and character, and the Regulations [Requirements] state that “fresh fruits and fresh 

vegetables” include all produce in fresh form generally considered as perishable fruits and

vegetables. The popular conception of what is a fresh fruit and vegetable has always been the 

standard by which determinations have been made as to what commodities are covered by the

PACA, and not the botanical definition. Chestnuts are considered nuts, and are not covered by 

the PACA. Regal Mktg., Inc. v. All Am. Farms, Inc., 58 Agric. Dec. 1133, 1134-36 (1999). See 

also J. Stein & Son v. Magnelli’s Fruit & Produce, 14 Agric. Dec. 782, 784-85 (1955); Phila.

Produce Credit & Collection Bureau v. Frushon, 8 Agric. Dec. 1055, 1057 (1949).

Peanuts, pecans, and coconuts were excluded early from the category “perishable agricultural

commodity.” Mason v. D.O. Lucas & Son, 18 Agric. Dec. 835, 837 (1959); Kelso v. Creech, 16

Agric. Dec. 773, 774 (1957); Arnold Fruit Co. v. Holly Bros., 10 Agric. Dec. 885, 887 (1951).

Respondent questioned the Secretary’s jurisdiction over hydrated dates and requested a hearing. 

Dates are berries that are the fruit of date palm trees. Hydration is used to soften the texture of 

some date cultivars and is part of the curing and ripening process. The PACA defines 

“perishable agricultural commodity” as fresh fruits and fresh vegetables of every kind and 

character. The Regulations [Requirements] (Other than Rules of Practice [Administrative 

Procedures]) (7 C.F.R. § 46.1 et seq.) provide that fresh fruits and fresh vegetables include all 

produce in fresh form generally considered as perishable fruits and vegetables, that have not 

been manufactured into a food product of a different kind or character. (7 C.F.R. § 46.2(u)). 

The Regulations [Requirements] further state that the effects of curing and ripening operations

are not actions that change the character of a perishable agricultural commodity. Id. Dates, 

whether or not requiring hydration, are therefore perishable fruit subject to the PACA. Since 

the Secretary has jurisdiction over this proceeding and Respondent admits liability in the full 

amount of the claim (after deducting payment), there is no need for an oral hearing. 

Respondent’s request for an oral hearing is therefore denied. Datepac LLC v. Trans Mid East 

Shipping & Trading Agency, Inc., 72 Agric. Dec. A, E (U.S.D.A. 2013).
135

See § 46.2(u) of the Requirements (7 C.F.R. § 46.2(u)).

See also paragraph entitled “LOSS OF CHARACTER AS PRODUCE” – this topic.

f. CROSS-CLAIMS

The Secretary does not have jurisdiction to hear a cross-claim by one respondent against

another respondent where such claim was not filed within nine months after the cause of action 

relative to such cross-claim accrued, even though the cross-claim arises out of the same cause 

of action as a timely complaint filed in the same proceeding. Larry Merrill Produce Co. v. L&P 

Vegetable Corp., Inc., 51 Agric. Dec. 802-03 (1992).

A cross-claim arising out of the same nucleus of fact as that involved in the complaint, filed by 

one respondent against another respondent, was found to be outside the Secretary’s jurisdiction 

because filed more than nine months after the causes of action relative to such claims accrued. 

Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1768-69 (1994).

However, in U.S. for the Use of Bros. Builders Supply Co. v. Old World Artisans, Inc.; Ticor

Constr. Co. & Cent. Nat’l Ins. Co. of Omaha, 702 F.Supp. 1561 (N.D. GA 1988); it was stated

that,

[i]n determining whether a cross-claim may relate back to the date of the original

complaint, the federal courts distinguish between those wherein the defendant

seeks to reduce the amount a plaintiff can recover, such as by recoupment,

contribution, or indemnity, and those wherein the defendant is seeking affirmative

relief . . . The cross-claim, to the extent that it seeks indemnity or contribution for

sums it may owe to Builders Supply, relates back to the date of the filing of the

original complaint and is therefore timely filed under the Miller Act. That part of

the cross-claim that seeks payment for other labor, materials or damages,

independent of the material for which Builders Supply seeks payment, is an

independent cause of action. That part of the cross- claim does not relate back to

the date of original complaint, and because it was not filed within the one-year

period of the Act, it is barred.

See PRACTICE AND PROCEDURE – CROSS-CLAIMS FILED AGAINST CORESPONDENTS – this index.

g. DEALERS – RETAIL EXEMPTION

The PACA (7 U.S.C. § 499a(6)(B)) provides that “no person buying any such commodity

solely for sale at retail shall be considered as a ‘dealer’ until the invoice cost of his purchases of 

perishable agricultural commodities in any calendar year are in excess of $230,000.” See

Gregory v. Lane, 17 Agric. Dec. 60, 62-63 (1958); Michael-Swanson-Brady of Moorhead, Inc.

v. Backer’s Potato Chip Co., 17 Agric. Dec. 651, 655-56 (1958), where, after finding that
136

the potatoes involved had been sold at wholesale, the opinion was offered that section 1(6)(B)of 

the Act “appears to contemplate a resale of the original product as purchased, rather than the

resale of the end product after being purchased.”

h. DEFINITION OF DEALER AND TRANSACTION

Complainant, a farmer with acreage in Michigan, contracted with respondent, a canner of

vegetables in Michigan, to produce green beans on 37 acres of land. The contract provided that 

title to the seed and the beans produced from the seed, would at all times remain in respondent. 

Respondent harvested the beans as required by the contract and then rejected them at the 

cannery due to the alleged presence of worms, but did not notify complainant of the rejection 

until after the beans were dumped. Complainant alleged that the rejection was improper, and 

sought to recover the value set by the contract for the beans. It was held that the transfer of the 

beans from complainant to respondent under the contract could fit within the meaning of the 

term “transaction” used in Section 2 of the PACA, that respondent was a dealer under Section 

1(b)(6) of the PACA because it purchased beans on the open market from time to time, and 

because the canner exception of Section 1(b)(6)(C) was inapplicable due to respondent having 

elected to secure a license under the PACA. However, respondent did not fall within the 

definition of dealer in Section 1 vis-à-vis complainant, nor did respondent participate in a 

transaction covered by Section 2(4) because no sale of the beans took place between

complainant and respondent. Areklet v. Stokely USA, Inc., 55 Agric. Dec.1387, 1390-91 (1996).

i. FOREIGN COMMERCE

Although the literal words of the PACA would apply to a foreign resident buying or selling in

the United States, the Secretary has never considered such a foreign resident under the

Secretary’s jurisdiction if no agent or representative (other than a broker) is in the country.

Solicitor’s Opinion 254; Jan. 31, 1945.

j. HANDLING FEE

The failure to pay both the filing fee and the handling fee was noted as a problem in connection

with the attempted filing of a counterclaim over which it was held the Department lacked 

jurisdiction. However, the decision could as readily rest on the failure to file a timely claim as 

upon the failure to file the statutory fees. C.H. Robinson Co. v. Kay Gee Produce Co., 60 Agric. 

Dec. 314, 316 (2001).

k. INFORMAL COMPLAINT – WITHDRAWAL OF

Cause of action accrued March 24, 1966. Informal complaint was filed May 19, 1966, and

respondent was notified of such. Complainant then withdrew informal complaint, and was

informed by the Department on October 17, 1966, that the Department’s file on the matter was

being closed. We said:
137

It is true that the informal complaint of May 19, 1966, was withdrawn. It also

appears that the formal complaint was not filed until April 3, 1967. If these were

all the facts, we would not have jurisdiction in this matter. However, the records

of the Department, of which we take official notice, show that under date of

November 17, 1966, complainant wrote to the Department requesting permission

to reopen the proceeding. This letter, which was received by the Department on

November 21, 1966, had the effect of reinstating the earlier informal complaint.

It constituted, in fact, a new informal complaint. Since it was filed within the

statutory nine-month period, the Secretary has jurisdiction in this proceeding.

Colace Bros. v. Thomas J. Holt Co., 27 Agric. Dec. 932, 935 (1968).

On reconsideration, it was held that although the letter of November 17, 1966, was not a part of

the record, the Secretary’s jurisdiction did not depend upon the record, but upon the fact of a

timely filing. 27 Agric. Dec. 1301 (1968).

l. INTERSTATE COMMERCE

Physical movement of a commodity across a state border is not a prerequisite to jurisdiction

under the PACA. A-W Produce Co. v. Berry, 68 Agric. Dec. 1291, 1295-96 (2009).

Jurisdiction cannot be found purely on basis of admission in answer where evidence indicated

lack of interstate movement. E.S. Harper Co. v. Osborne, 8 Agric. Dec. 1027, 1031 (1949).

Respondent, a PACA licensee located in the state of California, purchased California grown

broccoli crowns from Complainant, a PACA licensee also located in the state of California. In

defense of its alleged failure to pay Complainant the unpaid balance of the agreed purchase

price for the broccoli crowns, Respondent asserted that neither the commodity in question, nor

any of the products purchased by Respondent, are ever shipped out of state, so the Secretary

lacks jurisdiction over this transaction. It was found that since the shipment in question

involves a type of produce commonly shipped in interstate commerce and was shipped by a

produce dealer that does a substantial portion of its business in interstate commerce, the subject 

shipment is considered to be in interstate commerce under the PACA. Based on this analysis, 

the Department could properly exercise jurisdiction over this dispute. Produce Supply, Inc. v.

Guy E. Maggio, Inc., 69 Agric. Dec. 791, 795 (2008).

Where there is no indication that the commodities involved in the Complaint ever physically

crossed state lines, the transaction is nevertheless considered as entering the current of

interstate commerce where the commodities commonly move in interstate commerce and

where the parties reasonably could be expected to regularly engage in interstate purchases and 

sales of produce based on the nature of their businesses. San Joaquin Tomato Growers, Inc. v.

Abdallah, 67 Agric. Dec. 645, 651 (2008).

Where potatoes were shipped intrastate to a processing plant located near the Canadian border, 

that fact alone was insufficient to show that the resulting processed potatoes were then exported

to Canada or that it was contemplated by the parties that they would be so exported. It was 

concluded that the transactions were not in interstate or foreign commerce within the meaning
138

of the PACA, and the complaint was dismissed. DeBacker Potato Farms, Inc. v. Pellerito

Foods, Inc., 57 Agric. Dec. 770, 772-73 (1998).

The sale of Florida-grown tomatoes by a Florida grower/shipper to a “pinhooker” who intended

to sell the tomatoes to local buyers for use at farmers’ markets and roadside stands is not in 

interstate commerce because the tomatoes in question are not eligible for shipment outside the 

state of Florida due to Marketing Order requirements and because the parties never intended or 

contemplated that these tomatoes would travel in interstate commerce. As a result, these 

tomatoes cannot be considered a commodity that commonly moves in interstate commerce. As 

there was no actual or contemplated movement in interstate commerce for the shipments in 

question, the Secretary is without jurisdiction to consider the dispute. DiMare Homestead, Inc. 

v. Yzaguirre Farms LLC, 70 Agric. Dec. W, CC (USDA 2011), published in 72 Agric. Dec. W, 

CC (USDA 2013).

See INTERSTATE COMMERCE – this index.

m. LOSS OF CHARACTER AS PRODUCE

Water or steam blanching does not affect the character, but partial cooking of produce in oil

prior to freezing changes its character and excludes such produce from our jurisdiction. Dicta in

Bar-Well Foods Ltd. v. Valley Packing Serv. Int’l, 39 Agric. Dec. 1200, 1206 (1980).

The addition of chemicals for the purpose of inhibiting the growth of microorganisms in chilled 

orange sections packed in juice fell within the category of “curing,” and thus was not an

operation which changed the product into a food of a different kind or character within the

meaning of the applicable section of the Regulations [Requirements]. Silver Star Processors, 

Inc. v. Costa Fruit & Produce Co., 53 Agric. Dec. 897, 905-06 (1994).

See Section 46.2(u) of the Requirements (7 C.F.R. § 46.2(u)).

n. LOSS OF 30 DAYS AFTER THE ISSUANCE OF ANORDER

Absent intervening action which would stay an order, the Secretary loses jurisdiction over the

subject matter 30 days after the issuance of a final order. Morgan of Wash., Inc. v. Bramson, 48 

Agric. Dec. 1121 (1989); Southland Produce Co. v. Caamano Bros. Wholesale, 39 Agric. Dec.

789, 797 (1980); Yamada v. Natural Disaster Claims Comm’n, 513 P.2d 1001 (1973).

The leading authority is Lasky v. Comm’n of Internal Revenue, 235 F.2d 97 (9th Cir. 1956),

aff’d, per curiam without opinion, 352 U.S. 1027 (1957) (Douglas, J., dissenting). In Lasky, the 

United States Court of Appeals had jurisdiction by statute to review Tax Court action if the 

petition for review was filed within three months after the decision of the Tax Court was

rendered. The Tax Court entered its decision on April 8, 1954. No petition was filed. “Some

four months after the decision, on August 23, 1954, the petitioners moved the Tax court to

vacate the decision of April 8, 1954, on the ground of excusable neglect, a power formerly in

the federal court’s equity jurisdiction (citing cases), and now contained in Rule 60(b), F.R.C.P.,

28 U.S.C., which by Rule 1 is confined to the United States District Courts and not applicable

to executive agencies.” (Lasky, at p. 98). The Court of Appeals stated:
139

Though not a court at all but merely an administrative agency [the Tax Court]

assumed the power of a district court and in December, 1954, it granted

petitioners’ motion to vacate its decision of April 8, 1954, and for the taking of

additional evidence. After additional evidence was taken, the Tax Court rendered

a second decision reaching the same result as in the first. The petition for review

of the second decision was filed well within three months of the date it was

entered.

. . .

We hold that the Tax court was without jurisdiction to set aside its first decision

and that this court has no jurisdiction to consider a petition for review of its

second decision. The petition for review is ordered dismissed.

Lasky, at p. 98, 100. See also Harbold v. Commissioner of Internal Revenue, 51 F.3d 618 (6th

Cir. 1995), and Kelley v. Commissioner of Internal Revenue, 45 F.3d 348 (9th Cir. 1995) where 

the Court of Appeals said: “. . . the Tax Court is a court of strictly limited jurisdiction and 

cannot assert equitable powers in any way that could be construed as extending its

jurisdiction.”

o. NECESSITY THAT PRODUCE BE INVOLVED

For a party to be liable, it must have a contractual relationship involving the purchase and sale

of produce and that transportation, or the sale of bags, separate from the sale of produce is not

such a relationship. E.J. Harrison & Son v. A.E. Albert & Sons, 24 Agric. Dec. 884, 885

(1965); Reid & Joyce Packing Co. v. Touchstone, 15 Agric. Dec. 884, 887 (1956); Anonymous,

4 Agric. Dec. 332-33 (1945).

Complainant’s claim for bags, wire ties, and the cost of grading equipment used in connection

with potatoes sold to respondent was allowed. Such items were “incidental and necessary to the 

merchandising of perishable agricultural commodities” and therefore they “come within the 

scope of the act.” Kowinsky v. Gardner Bros., 23 Agric. Dec. 717, 720 (1964). See also Otoy v. 

Red Head Tomato Packing Co., 14 Agric. Dec. 331, 333 (1955); Piper v. Main Estates, 12 

Agric. Dec. 1369 (1953).

In Eady v. Eady & Assoc., 37 Agric. Dec. 1589, 1592 (1978), complainant contracted to furnish

farm equipment to respondent (for use in cultivation of produce crops) in exchange for

respondent’s promise to give complainant 10% of the net proceeds from the sale of the crop.

The farm equipment was not a perishable commodity and (as between complainant and

respondent) there was no exchange of a perishable commodity. We held that we had

jurisdiction. Issue discussed at length.

Where A was alleged to have provided B with consulting services as to how to grow Oriental

vegetables in exchange for a portion of the commission B was to be paid by the grower of the
140

vegetables, and the vegetables were grown, sold, and shipped, it was held that the jurisdictional

requirement of transactions involving perishable agricultural commodities was met so as to give 

Secretary jurisdiction over a reparation complaint by A against B for the commissions. E.

Produce, Inc. v. Seven Seas Trading Co., 59 Agric. Dec. 853, 861 (2000).

See “TRANSACTION NECESSARY” – this topic.

p. NINE-MONTH STATUTE OF LIMITATIONS

See CAUSE OF ACTION – this index.

See STATUE OF LIMITATIONS – this index.

The statute is jurisdictional in nature. “...the time allowed for filing of claims is a limitation

upon jurisdiction and, therefore, being of more consequence than a statute of limitations, cannot 

be altered by the parties.” – citing Louisville Cement Co. v. I.C.C., 246 U.S. 638 (1918).

Cadenasso v. Cal-Mex. Distrib. Co., 2 Agric. Dec. 751, 754 (1943).

In Louisville Cement Co. v. Interstate Commerce Comm’n, Justice Clark, writing for a

unanimous court, stated:

We agree with this conclusion of the Commission, that the two-year provision of

the act is not a mere statute of limitation, but is jurisdictional, - is a limit set to the

power of the Commission, as distinguished from a rule of law for the guidance of

it in reaching its conclusions.

The statute in question read, “All complaints for the recovering of damages shall be filed with

the Commission within two years from the time the cause of action accrues, and not after.”

Good explanatory language in H & M Banana Co. v. Rakovich Farm Produce, 18 Agric. Dec.

504, 507 (1959). See also B & K Produce Co. v. Shipper’s Serv. Co., 33 Agric. Dec. 701, 706

(1974).

“Contrary to complainant’s assertion that a cause of action does not accrue until the facts are

known to a complainant, it is well settled that a cause of action accrues at the time that an event 

occurs and not at the time when a party discovers the facts or learns of his rights thereunder.” 

(Citing cases) Calavo Growers of Cal. v. Int’l Food Mktg., Inc., 40 Agric. Dec. 972, 974 

(1981).

A complaint, either informal or formal, must be filed within nine months of when the cause of

action arose. 7 U.S.C. 499 f (a)(1). Sanders & Drake v. Gardner Bros., 31 Agric. Dec. 128,

131-32 (1972); Freshpict Foods, Inc. v. Consumers Produce, 29 Agric. Dec. 163, 164 (1970);

Immokalee Vegetable Growers Coop. Ass’n v. Sidney Rosenthal Produce, Inc., 29 Agric. Dec.

483, 486 (1970); Pelletier Fruit Co. v. Koutroulares, 9 Agric. Dec. 1232, 1237 (1960).

See CAUSE OF ACTION – this index.
141

Filing of informal complaint tolls statute. Syracuse & Jenkins Produce Co. v. Anthony

Gagliano & Co., 44 Agric. Dec. 1034, 1036 (1985); E. Potato Dealers of Me., Inc. v.

Commodity Mktg. Co., 36 Agric. Dec. 2017, 2021 (1977). See 10 N. Harl, Agricultural Law,

§ 72.10[2][c] at n. 41 (1983).

Where a complainant files an informal complaint and subsequently informs the Department that 

it wishes to close the file or dismiss the complaint, the file will be closed, and the Department 

will so notify the complainant. Once the complaint is dismissed, the statute of limitations is no 

longer tolled, and the time to file a complaint will expire in nine months after the accrual of the 

cause of action. Bemel, Inc. v. U.S. Produce Brokers, Inc., 53 Agric. Dec. 1859, 1860 (1994).

Cause of action did not accrue until the time the accounting was rendered by the grower’s 

agent. Wuszke v. Fruit Pak, Inc., 42 Agric. Dec. 1207, 1211 (1983).

q. NON-PRODUCE COUNTERCLAIMS

For this forum to have jurisdiction over a counterclaim or set-off, the claim must involve a

produce transaction. Respondent’s off-set was based on the contention that complainant,

without authorization, used respondent’s bulk loader and damaged it. The Secretary had no

jurisdiction over this claim. Quincy Produce Co. v. Stewart Produce Co., 20 Agric. Dec. 681-

82 (1961).

r. OFFSETS

An offset as to transactions extraneous to the complaint must be pleaded within nine months of 

when it occurred for there to be jurisdiction. Produce Distrib., Inc. v. Michael Bros., 45 Agric.

Dec. 814, 816-17 (1986); Sanders & Drake v. Gardner Bros., 31 Agric. Dec. 128, 131-32

(1972).

s. OVER IMPLIED DUTY ARISING OUT OF UNDERTAKING

Complainant seller renounced ownership of produce in favor of trucking company, and

trucking company subsequently refused to convey produce to out of state commission merchant 

as directed by seller and instead conveyed load to a local commission merchant. In action

against local commission merchant by seller to recover proceeds of salvage sale it was held that 

the Secretary had jurisdiction to adjudicate issue of whether seller had beneficial ownership, 

and it was found that seller did not have such ownership. Citing section 2(4) of the PACA 

making it illegal “. . . to fail, without reasonable cause, to perform any specification or duty, 

express or implied, arising out of any undertaking in connection with any such transaction . . .,”

we stated:

If, as alleged by complainant, the beneficial ownership of the produce belonged to

complainant, and respondent, a licensee under the Act acting in the capacity of a

commission merchant, was put on notice of that beneficial ownership, then
142

respondent had at least an implied duty arising out of an undertaking in regard to

a transaction involving perishables to pay the proceeds of the load to its beneficial

owner.

Christian Salvesen Packing & Mktg. Co. v. Waldo H. Lailer & Co., 49 Agric. Dec. 645, 649

(1990).

t. PROMISES TO PAY OR NOTES

If a produce creditor accepts a note in lieu of timely payment, it is assumed that it was accepted 

merely as evidence of the indebtedness unless it is made clear by the parties that it is accepted 

in satisfaction of the indebtedness. If it is not accepted in satisfaction of the indebtedness and 

the debtor defaults on the note, the creditor may elect to sue on the note or on the original debt. 

If the creditor chooses to sue on the original debt in a reparation proceeding, the complaint 

must be filed within nine months of the date of the accrual of the PACA cause of action and, in 

addition, the creditor must surrender the original note to the Department, or satisfactorily 

account for its failure to do so. This protects the debtor from having the note negotiated for 

value to a bona fide purchaser by a creditor who also chooses to sue on the debt. It follows that 

in order for a PACA action to be filed following the taking of a note, the default must take 

place within such time as to allow filing of the complaint within nine months after the PACA 

cause of action accrued. If the note is taken after the filing of the jurisdictional complaint, such 

complaint should be returned to the complainant since it would have no PACA cause of action 

while the note is still executory. During the period when a note is executor, a creditor is not 

entitled to file a formal or informal complaint with the Department. See Fed. Fruit & Produce

Co. v. Sandy’s Produce, 24 Agric. Dec. 1121, 1123-24 (1965) and Cadenasso v. Cali-Mex.

Distrib. Co., 2 Agric. Dec. 751, 754 (1943). To the extent that Or. Onions, Inc. v. Paiute

Frozen Foods Corp., 48 Agric. Dec.1122 (1989) appears contradictory, it should not be

followed.

The foregoing was followed in Turbana Fruit Co. v. Larry Merrill Produce Co., 50 Agric. Dec.

1872, 1874 (1991).

Reparation proceedings exist to resolve disputes between members of the produce industry

involving perishable agricultural commodities. Where it is clear that the parties intended that

their payment agreement would replace the original debt, thereby settling the matter in dispute

in the reparation complaint, the complaint must be dismissed. Sandhu Bros. Growers v. R & L 

Sunset Produce Corp., 77 Agric. Dec. 296 (2018).

u. RESPONDENT NOT SUBJECT TO LICENSE

This forum lacks jurisdiction over a respondent who is neither licensed nor subject to license.

Jebavy-Sorenson Orchard Co. v. Lynn Foods Corp., 32 Agric. Dec. 529, 531 (1973);

Fairbrother v. Gulf Farms, 28 Agric. Dec. 612, 616-17 (1969). Similarly, this forum lacks

jurisdiction to issue a positive award against a complainant, the subject of a counterclaim, who

is not licensed or subject to license under the PACA. The amount found due may, however, be

set off against any positive award to the complainant arising from the original claim. Crawford

v. Ralf & Cono Comunale Produce Corp., 51 Agric. Dec. 804, 810 (1992).
143

v. RESPONDENT UNLICENSED BUT OPERATING SUBJECT TO LICENSE

Where it was established from evidence regarding the transactions that are the subject of the

reparation complaint, along with evidence regarding transactions that are not the subject of the 

complaint, that Respondent was operating subject to license during the time period of the

transactions contained in the complaint, Respondent held liable for the reasonable value of

tomatoes received and sold on behalf of Complainant. Sol Fresh Produce, Inc. v. LA Repack,

Inc., 65 Agric. Dec. 688, 692-93 (2006).

w. TRANSACTION NECESSARY

The word “transaction” in Sec. 2(4) of the PACA refers to a commodity that is “bought or sold, 

or contracted to be bought, sold, or consigned . . . or the purchase or sale” thereof “is negotiated 

by a broker.” A contract for $0.05 per lug fee for storing, gassing, and for freight as to ten

carloads of grapes was not a transaction subject to the PACA. Anonymous, 4 Agric. Dec. 934, 

936-37 (1945). See also Alkop Farms, Inc. v. Frupac Int’l Corp., 50 Agric. Dec. 1901, 1920-21

(1991); E.J. Harrison & Son v. A.E. Albert & Sons, 24 Agric. Dec. 884-885 (1965); Reid &

Joyce Packing Co. v. Touchstone, 15 Agric. Dec. 884, 887 (1956).

“Although the word ‘transaction’ is not defined in the Act or the Regulations [Requirements], it 

has been consistently construed to mean any of the types of contracts or understandings which 

are mentioned in the definitions in the Act for commission merchants, dealers, and brokers, that 

is, consignments, purchases and sales, and negotiating of sales and purchases on behalf of a 

seller or purchaser.” Reid & Joyce Packing Co. v. Touchstone, 15 Agric. Dec. 884, 887 (1956).

A joint venture might be viewed as involving no “transaction” as between the joint venturers

but where the joint venture is for the purpose of engaging in a perishable transaction, we have

jurisdiction to adjudicate issues between the joint venturers. Thus, where complainant entered

into a joint venture farming agreement with respondent which agreed to raise and market

various perishable commodities with complainant furnishing the equipment necessary to the

cultivation of the crops and receiving under the agreement 10% of net proceeds, it was held that 

“complainant does not merely seek recovery of a rental fee for farm equipment. This case 

rather partakes of the nature of a joint venture which was directly concerned with participation

in the proceeds from the sale of perishable agricultural commodities.” Eady v. Eady & Assoc.,

37 Agric. Dec. 1589, 1591-93 (1978).

In R.B. Todd Prod. Co. v. Frostreat Frozen Foods, 22 Agric. Dec. 917, 920-21 (1963), there

was an agreement between the parties that complainant would harvest and transport beans at a

certain price per ton. Since there was no consignment, purchase or sale of beans, the complaint 

was dismissed for lack of jurisdiction. The contract was purely for harvesting and

transportation.
144

Contracts for the rendering of a service such as harvesting are covered transactions if they

involve the sale of a perishable commodity. Faris Farms v. Lassen Farms, 59 Agric. Dec. 471-

73 (2000).

While the PACA reparation forum does not ordinarily have jurisdiction over cold storage fee

claims, there is jurisdiction to adjudicate those claims when the cold storage fees are incident to 

the consignment of a perishable agricultural commodities. Magallon v. Pac. Sun Distrib., Inc.,

69 Agric. Dec. 848, 864-65 (2010).

x. TRANSPORTATION AS PART OF A PRODUCE CONTRACT

Secretary has jurisdiction when transportation is a part of a produce contract. Pappas & Co.,

v. Papazian Distrib. Co., 46 Agric. Dec. 1882, 1886-87 (1987); Shopwell, Inc. v. Royal Packing

Co., 43 Agric. Dec. 902, 905 (1984); Relias v. Frank Kenworthy Co., 16 Agric. Dec. 590, 600 

(1957).

Where complainant sold a carload of tomatoes to respondent, f.o.b., and respondent was legally 

obligated, as between complainant and respondent to pay the freight but did not pay such

freight to the railroad, and where complainant, under applicable tariffs had guaranteed payment 

of the freight to the railroad, and requested reparation for only the freight, it was stated that:

[h]ere there can be no doubt that the sales transaction between the parties is within

the purview of the act. Since respondent, under the sales transaction, became

liable for the freight charges, the payment of such charges became an

‘undertaking (by respondent) in connection with such transaction.’ Where

transportation charges are implicit in a transaction within the purview of the act,

we have consistently held that in determining the rights of the parties under the

transaction the Secretary is authorized to award reparation for such charges, or

dismiss a claim therefor, dependent upon the facts and applicable legal principles

of each case.

(Complaint was dismissed due a finding of accord and satisfaction.) Relias v. Frank Kenworthy

Co., 16 Agric. Dec. 590, 600 (1957).

y. TRANSPORTATION CONTRACT

This forum lacks jurisdiction over the subject matter when there is only a transportation

contract in issue, and the contract is not related to a produce transaction which is in issue. Me.

Banana Corp. v. Walter D. Davis, Inc., 32 Agric. Dec. 983, 986 (1973); Reid & Joyce Packing

Co. v. Touchstone, 15 Agric. Dec. 884, 887 (1956).

In Anonymous, 4 Agric. Dec. 934, 936 (1945), it was held that where complainants and

respondent entered into a contract whereby respondent was to ship carloads of grapes to

complainants and the latter were to receive a commission for arranging for storage space,

payment of the freight charges and gassing the grapes, and respondent failed to ship any
145

grapes, the stipulated compensation was not for grapes bought or sold or contracted to be

bought or sold or consigned, or the purchase and sale thereof negotiated by a broker and,

therefore, respondent’s failure to pay complainants for the kind of services that were to be

rendered was not in violation of the Act.

However, where a dispute “is between two parties dealing in . . . a perishable agricultural

commodity, and involves freight charges which were part of a necessary and usual contract or

agreement relating to the handling of [perishables] . . . liability between the parties for said

freight charges arises out of this transaction.” Frank Kenworthy Co. v. D.L. Piazza Co., 16

Agric. Dec. 844, 849 (1957). Decision cites Relias v. Kenworthy, 16 Agric. Dec. 590, 600

(1957); Sawyer v. Rothstein & Sons, 15 Agric. Dec. 693, 696 (1956).

In Kingsbury Co. v. Metzler, 52 Agric. Dec. 1724, 1727 (1993), respondent, a licensee under

the PACA, acted as a truck broker on behalf of complainant, and secured a truck to transport a

load of chipping potatoes to a third party customer of complainant. The truck was delayed in

transit and on arrival, the potatoes were rejected. Respondent attempted to contact an agent of

the third party in the state where the potatoes were grown for instructions as to disposition of

the load and was unsuccessful in making such contact. No instructions were received from

complainant and after waiting several hours, respondent resold the load for an amount which

netted substantially less than complainant would have realized from its contract with the third

party. We stated:

Respondent is licensed under the Act, and as a licensee would qualify, in a proper

situation, as a commission merchant, dealer, or broker. However, respondent’s sale of 

the chipping potatoes following their rejection was accomplished in his capacity as a 

truck broker for complainant, and did not arise out of a contract between complainant 

and respondent which concerned the sale or consignment of the potatoes as between 

complainant and respondent. Respondent did not receive the potatoes in interstate or 

foreign commerce as a commission merchant, or buy or sell or contract to buy or sell 

or take on consignment the potatoes as between complainant and itself, or negotiate 

as a broker the purchase or sale, as between complainant and any other party, of such 

potatoes. Thus, the dealings of respondent with complainant do not qualify as a 

“transaction” of the type delineated in the Act, and the Secretary does not have 

jurisdiction over an allegation by complainant based upon such malfeasance or 

negligence by respondent as may be shown by the record herein.

In Christian Salvesen Packing & Mktg. Co. v. Waldo H. Lailer & Co., 49 Agric. Dec. 645, 649 

(1990), where a seller-shipper agreed with buyer to take back a load of produce following

arrival and discovery of freezing injury caused by trucker, subsequent communication with the 

trucking company by the seller-shipper stating that the seller was refusing the load, referring to 

the load as belonging to the trucking company and stating that the trucking company would be 

held for the original invoice price, showed a renunciation of ownership in favor of the trucking 

company. The trucking company subsequently refused to convey produce to out of state 

commission merchant as directed by seller and instead conveyed load to local commission

merchant. In action against local commission merchant by seller-shipper to recover proceeds of 

salvage sale, it was held that the Secretary had jurisdiction to adjudicate issue of whether 

shipper had beneficial ownership, and it was found that shipper did not have such ownership. 
146

We stated:

If, as alleged by complainant, the beneficial ownership of the produce belonged to

complainant, and respondent, a licensee under the Act acting in the capacity of a

commission merchant, was put on notice of that beneficial ownership, then

respondent had at least an implied duty arising out of an undertaking in regard to

a transaction involving perishables to pay the proceeds of the load to its beneficial

owner.

“Since the produce transactions at issue in respondent’s alleged freight offset are separate from

the transactions at issue in the complaint, we cannot reach the question of whether the offset is 

proper and can be allowed. Therefore, respondent cannot be allowed to offset the freight costs 

that it allegedly incurred on complainant’s behalf.” E. Produce, Inc. v. Seven Seas Trading Co., 

59 Agric. Dec. 853, 858 (2000).

Respondent broker in negotiating for the consignment of complainant’s cantaloupes to a third

party undertook with complainant to secure vans for the transportation of the melons and then

secured such vans through a distinct corporation which later billed the consignee for freight at a

rate that was $600.00 per van in excess of prevailing freight rates. The consignee deducted such 

freight charges in its accounting to complainant. It was held that the Secretary had jurisdiction 

since complainant was not claiming on the basis of a transportation contract but on the basis of 

the broker’s fiduciary duty. Pappas & Co., v. Papazian Distrib. Co., 46 Agric. Dec. 1882, 

1886-87 (1987).

z. TRUST

Where Complainant claimed that it was entitled to an order declaring that it is a PACA trust

beneficiary of Respondent with valid PACA trust claims, such an order was not issued. Only

the district courts have jurisdiction over actions by private parties seeking to enforce payment

from trust, including actions seeking injunctive relief. It is the purview of the district courts to

issue an order declaring that a Complainant is a PACA trust beneficiary of a Respondent with

valid PACA trust claims. Grasso Foods, Inc. v. Americe, Inc., 69 Agric. Dec. 1547, 1567

(2010).

49. MERCHANTABILITY – WARRANTY OF

a. APPLICABLE ONLY AT SHIPPING POINT UNDER COMMON LAW

The common law warranty of merchantability was applicable only at the shipping point. N. Am. 

Produce Buyers v. Source Produce Distrib. Co., 48 Agric. Dec. 1101 (1989); J.D. Bearden 

Produce Co. v. Pat’s Produce Co., 12 Agric. Dec. 682, 692-93 (1953). See also David M. 

Slaughter & Son v. Vegetable Juices, Inc., 37 Agric. Dec. 188, 194 (1978), where respondent’s

allegation that complainant breached the warranty of merchantability due to insect infestation

and subsequent condemnation by authorities was denied because it could not be proven that the

infestation occurred before leaving complainant’s warehouse.

Where the parties agree to f.o.b. acceptance final terms, the buyer’s only recourse is to prove a 
147

material breach of contract by the seller. For the buyer to establish a breach by the seller of the 

implied warranty of merchantability in such a case, the buyer must establish that the produce

was not merchantable at the time of shipment. While the destination inspection of the romaine 

in question disclosed significant defects (73% average condition defects, including 42% 

average decay), the inspection was performed seven days from the date of shipment and was 

found, on that basis, to be too remote from the time of shipment to establish that the romaine 

was not merchantable when shipped. It was also noted that the tape from the temperature 

recorder placed on the truck was not submitted in evidence by Respondent to establish that the 

romaine was held at proper temperatures between the time of shipment and the time of 

inspection. Without proof of proper temperatures during transit, it is possible that the defects 

found upon inspection were caused by high transit temperatures and not unmerchantable at the 

time of shipment. Fresh Kist Produce LLC v. Superior Sales, Inc., 67 Agric. Dec. 1477, 1484

(2008).

In a 1992 case, it was stated that if the warranty of suitable shipping condition were not

applicable due to the use of f.o.b. acceptance final term, the warranty of merchantability would 

nevertheless be applicable. The case appears to stand for proposition that condition of goods 

may be so bad at destination after short shipment and good transportation that the warranty of

merchantability can be shown to have been breached at shipping point. However, the subject 

goods were in fact found to have been sold f.o.b. Therefore, the suitable shipping condition rule 

was applicable though such was not stated. Garren-teed Co., Inc. v. Mo-Bo Enter., 51 Agric.

Dec. 811, 813 (1992). See Lookout Mountain Tomato & Banana Co. v. Consumer Produce Co.

of Pitts., 50 Agric. Dec. 960, 966-67 (1991).

In order to show a breach of the warranty of merchantability by a destination inspection, the

inspection would have to show condition defects so severe as to render it self-evident and

certain that the commodity was non-conforming at shipping point. The certainty required was, 

however, stated to be reasonable certainty, not certainty that excludes all fanciful doubt. It was 

found that although the results of the inspection rendered it improbable that cantaloupes were 

conforming at shipping point, it was not reasonably certain that they were non-conforming. 

Martori v. Hous. Fruitland, Inc., 55 Agric. Dec. 1331, 1337-38 (1996). See also Malito’s 

Rolling Hills Orchards v. Fort Wayne Produce Co., 37 Agric. Dec. 211, 213 (1978), where an 

inspection made only 24 hours after shipment showed 76% yellowing and 8% decay. It was 

held to be reasonably certain that the warranty of merchantability was breached at shipping

point.

b. QUALITY DEFECTS

A timely inspection showing 37% quality defects in broccoli in the form of hollow stem, with a

range of 7 to 79%, was held to show a breach of the warranty of merchantability where the

broccoli was sold f.o.b. without reference to any grade. Martori v. Olympic Wholesale Produce

& Foods, Inc., 53 Agric. Dec. 887, 891 (1994).
148

Where potatoes were sold as “off-grade” and contained 22% hollow heart, found to meet

warranty of merchantability. Anthony Farms, Inc. v. Bushman’s, Inc., 45 Agric. Dec. 1640,

1643 (1986).

Where seller consigned lettuce for a minimum guaranteed price and the destination inspection

showed 44% quality defects, consisting of poorly trimmed heads and broken midribs, held that 

the shipper breached the warranty of merchantability, and consignee was relieved of the

guaranteed minimum price only owing net proceeds from consignment handling. Wilco

Produce Co. v. Wishnatzki & Nathel, 27 Agric. Dec. 782, 784-85 (1968).

c. MEANING OF

A seller warrants that at the time of sale the goods are such as will pass without objection in the 

trade. Suitable shipping condition extends this warranty to the contract destination agreed upon 

by the parties if transportation service and conditions are normal. Lookout Mountain Tomato &

Banana Co. v. Consumer Produce Co. of Pitts., 50 Agric. Dec. 960, 963-65 (1991).

See U.C.C. ¶ 2-314 for complete statement of the warranty.

“The term ‘merchantable’ has been defined as ‘goods which are reasonably suited for the

ordinary uses and purposes of goods of the general type described by the terms of the sale and

which are capable of passing in the market under the name or description by which they are

sold,’ and though not descriptive of the best quality, neither does it imply goods of the poorest

quality, but covers goods of a fair, average quality.” Hunt Oil Co. v. Kastner, 45 Agric. Dec.

800, 805 (1986); L. Gillarde Sons Co. v. Moritz, 21 Agric. Dec. 590, 595 (1962); Samuel P.

Mandell Co. v. Cantanzaro, 17 Agric. Dec. 21, 25-26 (1958).

d. WARRANTY’S APPLICABILITY TO LATENT DEFECTS

In Hunts Point Tomato Co. v. Md. Fresh Tomato Co., 47 Agric. Dec. 773, 779 (1988), a

purchaser of tomatoes who failed to give notice of an evident breach at time of arrival but who

did give notice six days later following federal inspections of the tomatoes which showed

progressive decay, asserted an analogy with the Brown & Hill (Brown & Hill v. U.S. Fruit Co., 

20 Agric. Dec. 891, 894 (1961)) case. In finding against the purchaser, we made the following

comments:

The Brown & Hill case presented a very unusual situation in that a federal

inspection showed the tomatoes to have been apparently perfect on arrival. Thus,

the suitable shipping condition warranty applicable in F.O.B. sales was apparently

fully satisfied. However, we found that the peculiar type of decay present in the

tomatoes made the tomatoes inherently defective at time of sale. The Brown &

Hill case is based upon the case of Bearden Produce Co. v. Pat’s Prod. Co., 12

Agric. Dec. 682 (1953), where green tomatoes failed to properly ripen due to late

blight rot. As that case makes clear, a breach was found on the basis of the

implied warranty of merchantability applicable at shipping point, and a breach of

such implied warranty was found due to the fact that tomatoes with the particular
149

type of condition defect were incapable of ripening properly. We have been

extremely cautious in applying the line of reasoning which underlies these two

decisions due to the fact that practically all condition defects in produce can be

attributed to diseases of field origin which are present in the produce when it is

shipped, and due to the fact that probably most of the produce shipped in this

country has such disease spores present. The significant factor in these two cases

is not the field origin of the problem, but rather the fact that the particular defect

makes it inevitable that the produce will not ripen properly, together with the fact

that the defect is undiscoverable until such time as the ripening process begins.

L.E. Jensen & Sons, Inc. v. Huston Produce, Inc., 51 Agric. Dec. 814, 826 (1992). See also

Lookout Mountain Tomato & Banana Co. v. Consumer Produce Co. of Pitts., 50 Agric. Dec.

960, 966-67 (1991); Hunts Point Tomato Co. v. Md. Fresh Tomato Co., 47 Agric. Dec. 773,

779 (1988); Brown & Hill v. U.S. Fruit Co., 20 Agric. Dec. 891, 894 (1961); J.D. Bearden

Produce Co. v. Pat’s Produce Co., 12 Agric. Dec. 682, 692-93 (1953).

See also Strano & Strano v. Sanzone-Palmisano Co., 50 Agric. Dec. 938, 940 (1991), where an 

inspection of tomatoes three days after arrival was held to show a breach due to the presence of 

an inherent defect. Also see Mountain Tomatoes, Inc. v. E. Patapanian & Son, Inc., 48 Agric. 

Dec. 707, 713 (1989), where a follow-up inspection established extensive damage by numerous 

pitted, discolored and/or sunken areas. It was held that these defects are caused by poor 

handling in picking and packing which appear as tomatoes ripen. Breach of contract found on 

the basis of latent defects.

See SUITABLE SHIPPING CONDITION – INHERENT DEFECT – this index.

50. MISREPRESENTATION AND MISTAKE

Upon arrival at 1:00 p.m. on Friday of a load of lettuce, respondent’s buyer called for a federal 

inspection and was told that none would be available until Monday. Respondent’s buyer then 

informed complainant that there was trouble in the lettuce and that an inspection had been 

requested but would not be available until Monday. Respondent’s buyer then went home sick.

A federal inspector finished his other work early and inspected the lettuce at 2:00 p.m. on 

Friday. The inspection showed the lettuce made good delivery and on the basis of the

inspection, respondent’s salesman sent the lettuce to respondent’s customers who returned it

that evening as unacceptable. On Monday, respondent’s buyer returned to work, had the lettuce 

subjected to a federal inspection and reported the results to complainant without disclosing that 

the lettuce had been inspected on Friday. The Monday inspection showed sufficient damage to 

warrant a conclusion that the lettuce did not make good delivery and on the basis of such 

inspection, the parties agreed to a modification of the contract. Held: The lettuce made good 

delivery on basis of the Friday inspection, and the contract modification could be set aside on 

both grounds of misrepresentation and mistake. Extensive discussion oflaw relative to 

misrepresentation and mistake with reference to Restatement, U.C.C., and prior cases. 

Nalbandian Farms, Inc. v. McDonnell & Blankfard, Inc., 46 Agric. Dec. 674, 682-83 (1987).
150

Misrepresentation causes contract modification to be a nullity. McCabe v. Higgins Potato Co.,

17 Agric. Dec. 1022, 1025 (1958).

Misrepresentation as to extent or timing of inspection, though inadvertent, was material.

Party cannot be held to new agreement founded on incorrect information from opposing party.

Modification held voided. DeBruyn Produce Co. v. Battaglia Produce Sales, Inc., 45 Agric.

Dec. 2492, 2494 (1986); Garin Co. v. New Eng. Farms, 41 Agric. Dec. 337, 339 (1982).

Where inspection of only 300 out of 700 cartons of lettuce was insufficient to show breach in

light of amount of condition defects disclosed, a failure to disclose number of cartons inspected 

when reporting results rendered consignment agreement based on report of inspection 

rescindable by shipper. Rights and liabilities determined on basis of original contract. Tom

Bengard Ranch v. Tomatoes, Inc., 41 Agric. Dec. 1637, 1639 (1982).

Where buyer correctly reported percentages of various defects to seller, but did not distinguish 

between condition and quality defects, and seller assumed that all reported defects were 

condition defects and that consequently goods did not make good delivery, whereas the true 

amount of condition defects did not show a failure to make good delivery, it was held that seller 

should have inquired as to whether defects were quality or condition, and there was no

misrepresentation. (Since buyer did denominate the defects as to explicit type, i.e., “insect

damage,” “poorly trimmed,” “decay,” etc., the seller was a victim of his own ignorance in

being unable to categorize the types of damage. Since seller obviously knew he was ignorant he 

should have inquired as to in what category the inspection placed the defects.) Mel Finerman

Co. v. A.J. Sales Co., 36 Agric. Dec. 1422, 1424-25 (1977).

Where the contract was modified following a crop disaster to call for reduced shipments at

higher price, it was stated that, assuming complainant’s version of the facts to be true, namely,

that following the disaster complainant was contacted by respondent who asserted that if a

higher price were not paid to its growers, there would be no potatoes to ship and “that

shipments could not be made under any of the contracts,” such communication did not

constitute misrepresentation because the fact of the partial crop failure due to unforeseen

circumstances was known to both parties at the time of the conversation, and complainant’s

assertions that it was misled by respondent’s alleged contentions that potatoes were unavailable 

from other sources could not be credited in view of the concurrent discussions of the price of 

potatoes purchased on the open market. C.J. Vitner Co. v. G & H Sales, Inc., 50 Agric. Dec. 

944, 948-49 (1991).

Where there was no showing that the particular inspections on the Hunts Point market of the

tomato shipments at issue were falsified, but the inspections were performed by inspectors who 

pleaded guilty to accepting bribes for the falsification of inspection certificates, and the

inspections were performed at the place of business of the buying firm whose employee

pleaded guilty to the bribery of federal inspectors, it was held that the failure of the buying firm 

to disclose the bribery of the federal inspectors to the seller to whom it submitted the

inspections as a basis for adjustments to the original contracts amounted to a misrepresentation,

and that the adjustment agreement was void on that basis. It was also held that the seller made a

mistake as to a basic assumption on which the adjustments were made, and that the adjustment

agreements were also void on the basis of that mistake. Dimare Homestead, Inc. v. Koam 
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Produce, Inc., 59 Agric. Dec. 866, 872-76 (2000).

Complainant sold a load of grapes to respondent, and respondent sold the load to a firm on the

Hunts Point Terminal Market whose employee later pleaded guilty to bribing federal

inspectors. On the basis of inspections performed by inspectors who later pleaded guilty to

accepting bribes, contract modifications were negotiated by the Hunts Point firm with

respondent, and by respondent with complainant. It was held that the modifications negotiated 

between complainant and respondent were based upon a mutual mistake of fact, and were 

voidable by complainant. Spencer Fruit Co. v. L & M Companies, Inc., 60 Agric. Dec. 799, 805

(2001).

51. NOTICE OF BREACH

See major topic NOTICE TO BROKER – this index. See major topic BREACH OF

CONTRACT – sub-topic

The purpose of the notice required by U.C.C. § 2-607(3)(a) is not simply to make the seller

aware of the facts constituting a breach; it is, more importantly, to make the seller aware that 

the buyer, in consideration of the facts constituting a breach, has the intent to seek recourse

from the seller for any damages sustained as a result of the breach. The transmission of the

inspection certificate by the USDA to Complainant for the subject load of pineapples did not 

put Complainant on notice that Respondent considered the results of the inspection as sufficient 

to establish a breach or that it intended to seek any damages resulting from that breach. 

USDA’s transmission of a USDA inspection certificate, without more from the buyer, does not 

satisfy the notice requirement set forth in U.C.C. § 2-607(3)(a). Great West Produce, Inc. v. 

Elite Farms, Inc., 78 Agric. Dec. 428 (2019).

Where Respondent waited four days to look at onions received via railcar from Complainant,

and upon discovery of a breach at that time gave notice to Complainant through the broker,

found that such notice was not timely. We also noted, however, that the load remained intact in 

the railcar under constant refrigeration between the time of arrival and the time the car was

opened. Moreover, after a U.S.D.A. inspection was performed on the onions the following day, 

Complainant had the opportunity, if the results of the inspection were in question, to request an 

appeal. Since the timeliness of the notice provided by Respondent therefore did not appear to 

have prejudiced Complainant’s rights with respect to securing its own evidence of the condition

of the onions following arrival, found the untimely notice of breach provide by Respondent 

should not bar Respondent’s recovery of damages resulting from the breach. Four Rivers

Packing Co. v. Sam Wang Produce, Inc., 76 Agric. Dec. A (U.S.D.A. 2009).

In Sales King Int’l v. Danny & Sons, Inc., 52 Agric. Dec. 715, 736-37 (1993), where

complainant sold potatoes to respondent, and respondent gave notice of material breach as to

number of sacks shipped of particular sizes, and such notice gave complainant no hint that
152

there might be any trouble with any other aspect of the shipment, such notice was not effective

as to other material breach of contract or as to breach of warranty. We stated:

It should also be noted that the notice given in this instance was precisely

restricted to the material breach as to number of cartons shipped of the contracted

sizes. Such notice was inherently self limiting in that it gave complainant no hint

that any other problems might exist with the shipment. A general notice of

trouble or breach would be sufficient to cover all breaches of contract that might

exist. This notice was not.

Reason for requirement: A.C. Carpenter, Inc. v. Boyer Potato Chips, 28 Agric. Dec. 1557,

1559, 7 UCC Rep. Serv. 493 (1969) – good discussion of reasons for requirement; this case

cited by White & Summers, Handbook of the Law Under the U.C.C., § 8-3, p. 262 at n. 34,

(1972).

Quote from A. C. Carpenter case:

The Uniform Commercial Code, Section 2-607(3)(a) provides that “where a

tender has been accepted the buyer must within a reasonable time after he

discovers or should have discovered any breach notify the seller of the breach or

be barred from any remedy.”

. . .

The requirement that notice be given within a reasonable time is important,

especially when the alleged breach concerns perishables. The purpose of the rule,

as stated in the comment to the UCC, is to defeat commercial bad faith. If the

seller is notified of a breach within a reasonable time he has opportunity to

ascertain for himself the nature and extent of the breach by taking advantage of

UCC section 2-515 which gives either party upon reasonable notification to the

other, the right to inspect, test and sample the goods or have a third party perform

similar functions for the purpose of ascertaining the facts and preserving

evidence.

In Hunts Point Tomato Co. v. Md. Fresh Tomato Co., 47 Agric. Dec. 773, 778 (1988), this

approach was in fact taken. However, Hunts Point has now been explicitly overruled as to this 

point. See Diazteca Co. v. Players Sales, Inc., 53 Agric. Dec. 909, 916 (1994), where we said:

Although federal inspections might be thought to “freeze” the condition of

perishable goods so as to create a situation similar to that which exists as to hard

goods, and thus allow a large expansion of the period available for prompt notice,

there are compelling reasons why this should not be the case. The Department

has established an appeal process as to its inspections. The very existence of this

appeal process is an admission by this Department that federal inspections can be

wrong. Failure to give prompt notice as to a breach indicated by a federal

inspection cuts the seller off from access to this appeal process. Moreover, if we
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apotheosize the federal inspection by allowing its conclusions to effectively stand

in place of the perishable product, and transform the situation into one analogous

to that which exists as to hard goods, we open the door to possible corruption of

federal inspectors, or suspicion of corruption. This would be a grave disservice to

a group of civil servants who have been virtually free of any hint of corruption

over the many years of the existence of the inspection service. In spite of the

harshness of decisions such as this, we cannot allow buyers, just because a

product has been inspected, to keep quiet about an apparent breach until all

opportunity to check on the accuracy of an inspection has passed.

White & Summers’ reasons are quoted, and additional reasons are given, in the following case –

“Had such notice been given the New Zealand shippers would have been put on notice that the 

highly perishable berries and asparagus were with some consistency failing to make good

delivery at destination and could have ceased to make the shipments or have sought out more

durable product if available.” Sun Rise Ranches v. Delta Package, Inc., PACA Nos. 2-7201; 2-

7220; and 2-7431, slip op (April 3, 1989).

Must be given promptly to seller so he may perform his own tests of chipping potatoes if he

wishes. Nicolls v. Fairmount Foods Co., 38 Agric. Dec. 469, 472-73 (1979).

Notice of inspection provided to the shipper on the date of inspection after more than half of the

shipment was resold was considered untimely, as the shipper was deprived of the opportunity 

for an appeal inspection. Quail Valley Mktg., Inc. v. Cottle, 60 Agric. Dec. 318, 337 (2000).

Need for quick notice is not as great in the case of frozen goods. E.T.L. Corp. v. Baker’s

Services, Inc., 38 Agric. Dec. 1594, 1598 (1979).

In Sales King Int’l v. Danny & Sons, Inc., 52 Agric. Dec. 715, 736-37 (1993), a slightly longer

period of time than what would be allowed for notice of breach of warranty was allowed for a

notice of material breach, where complainant did not contest the occurrence of the breach since

the breach was not closely related to the perishability of the goods. We stated:

Since a material breach of contract concerns matters not closely related to the

perishability of the goods, and in this instance was uncontested by complainant,

we have allowed a less strict time measure as to reasonableness of notice than

would be allowed in the case of notice as to a breach in regard to “condition” of

perishable goods. However, a material breach is not totally unrelated to the fact

of the goods perishability since proof of the material breach, to a greater or lesser

degree depending on the circumstances, will always relate to the continued

existence of the goods.

Relative perishability of goods must be taken into consideration in determining whether notice

of breach of warranty is timely. Pace v. Sagebrush Sales Co., 56 P2d 789, 114 Ariz. 271 

(1977). (Lumber described as semi-perishable when left outside. Notice four months after 

acceptance was not, as a matter of law, made within a reasonable time.)
154

Where there was the allegation of notice, the other party denied receipt of notice and no

documentation of such notice was supplied, it was found that the required notice had not been

given. Declo Produce, Inc. v. Sun Valley Potatoes, Inc., 59 Agric. Dec. 433, 436 (2000).

Specific times:

Smith v. Fisher, 16 Agric. Dec. 1008, 1011 (1957) – 24 hour rule not applicable.

Bardin Bros. Produce Co. v. Farm Outlet, 38 Agric. Dec. 242, 244 (1979) – 15 days after

shipment not timely as to sweet potatoes.

Produce Specialists of Ariz., Inc. v. Gulfport Tomatoes, Inc., 42 Agric. Dec. 1194, 1197-98

(1983) – 3 days after unloading and discovery of damage not timely as to tomatoes.

Spudco, Inc. v. Yick Lung Co., 36 Agric. Dec. 715-16 (1977) – seven days after arrival

unreasonable as to chipping potatoes.

Hare v. H. Smith Packing Corp., 31 Agric. Dec. 670, 674 (1972) – 17 days after arrival 

untimely as to potatoes.

Alva Produce, Inc. v. Soik Sales, Inc., 51 Agric. Dec. 1480, 1483 (1992). Notice of breach as to 

chipping potatoes given two to three days after shipment from Alvarado, Minnesota, to

Louisville, Kentucky, held timely.

Carmack v. Selvidge, 51 Agric. Dec. 892, 904 (1992) – 16 to 20 days after shipment of 

tomatoes from Tennessee to Texas untimely.

Notice given of breach as to onions six days following availability for survey after arrival in

Taiwan was too long, but four days on a different container was timely. SEL Int’l Corp. v.

Brown, 52 Agric. Dec. 740, 748 (1993).

Bay Area Pie Co. v. Mihok, 25 Agric. Dec. 851, 853-54 (1966) – Notice of breach as to frozen

cherries given more than six months after arrival and more than one month after discovery of

presence of pits was not timely. Decision quotes 3 Williston, Sales, § 484a that, “Time is

counted not simply from the moment when the buyer knows of the defect, but from the time

when he ought to have known it. Prompt exercise of opportunity for discovering defects is,

therefore, essential.”

52. NOTICE OF REJECTION

See major topic NOTICE TO BROKER, this index.

See major topic REJECTION, sub-topic NOTICE, this index.

a. MUST BE CLEAR
155

Notice of rejection must be given in clear and unmistakable terms. Report that there is

“trouble” in goods is not sufficient. (However, it would constitute sufficient notice of a breach.) 

Firman Pinkerton Co. v. Bobinell J. Casey, 55 Agric. Dec. 1287, 1292 (1996); Crowley v. 

Calflo Produce, Inc., 55 Agric. Dec. 674, 677 (1996); River Valley Mktg. Inc. v. Tom Lange 

Co., 53 Agric. Dec. 918, 922 at n. 1 (1994); W.T. Holland & Son. v. C.K. Sensenig Potatoes, 52

Agric. Dec. 1705, 1707-08 (1993); Teixeira Farms, Inc. v. Community-Suffolk, Inc., 52 Agric. 

Dec. 1700, 1702 (1993); Supreme Berries, Inc. v. McEntire, 49 Agric. Dec. 1210, 1216 (1990);

Yokoyama Bros. v. Cal-Veg Sales, 41 Agric. Dec. 535-36 (1982); Farm Mkt. Serv., Inc. v. 

Albertson’s, Inc., 42 Agric. Dec. 429, 431 (1983); Beamon Bros. v. Cal. Sweet Potato Growers,

38 Agric. Dec. 71, 73-74 (1979); Verd’s Fruit Mkt. v. Zaccone, 36 Agric. Dec. 1603, 1605

(1977); Saikhon v. Russell-Ward Co., 34 Agric. Dec 1940, 1942 (1975); Jarson & Zerilli Co. v. 

P. Tavilla Co., 30 Agric. Dec. 1360, 1363-64 (1971); Schley Bros. v. Mercurio Bros., 23 Agric. 

Dec. 862, 866 (1964); United Packing Co. v. Conn. Celery Co., 16 Agric. Dec. 810, 814 

(1957); John C. Lester Co. v. Victory Distrib. Co., 11 Agric. Dec. 376, 383 (1952); San Pat

Vegetable Co. v. Kyman, 5 Agric. Dec. 483, 488-89 (1946).

Notice by a buyer to the seller that the buyer’s customer has rejected is not notice of rejection

by the buyer to the seller, “. . . rejections must be made by each buyer to [its] own seller, and

must be clearly communicated as such.” Phoenix Vegetable Distrib. v. Randy Wilson Co., 55

Agric. Dec. 1345, 1348 (1996).

b. REASONABLE TIME

Notice of rejection must be given within a reasonable time of arrival of the produce. 7 C.F.R. §

46.2(cc)(2).

Having failed to timely reject the shipment, respondent is liable to pay the contract price less

any provable damages sustained as a result of any breach of contract by complainant. Merritt

v. Kleiman & Hochberg, Inc., 47 Agric. Dec. 584, 586 (1988); Wolf v. Mendelson-Zeller Co., 

34 Agric. Dec. 690, 695 (1975).

Where notice of rejection as to a truck shipment was given to the broker after arrival at 8:00

p.m., and broker alleged only that he gave notice to seller on the following morning, it was held 

the eight-hour notice required by the Regulations [Requirements] should have been 

communicated to the seller by 4:00 a.m. on the following morning and that the broker’s 

allegation fell short of proof of seasonable notice. Robert Ruiz, Inc. v. Hale Bros., 43 Agric. 

Dec. 572, 574 (1984).

San Tan Tillage Co. v. Kaps Foods, Inc., 38 Agric. Dec. 867, 871 (1979).

Twenty-four hour time for notice in regard to rail shipments begins to run, not at time of

arrival, but at the time of notice to the receiver of arrival. G & S Produce Co. v. Niagara
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Frontier Services, Inc., 38 Agric. Dec. 722, 726 (1979); Pac. Lettuce Co. v. M & C Produce

Co., 24 Agric. Dec. 532, 534 (1965).

53. NOTICE TO BROKER

Notice to the broker is not notice to a party unless the broker is authorized to act on behalf of

the party. A broker in a produce transaction is not normally a general agent of either party and 

after negotiation of the contract any and all duties of the broker come to an end. After

negotiation of the contract a broker entrusted with a message by a party is the agent of the party 

which gave the broker the message only for the purpose of delivering the message. If the 

broker fails to deliver the message entrusted to it, the failure is attributed to the party which 

gave the broker the message. Therefore, notice to a broker is not normally notice to the other 

party unless it is shown that the broker actually conveyed the message to the other party. Hunts 

Point Tomato Co. v. Md. Fresh Tomato Co., 47 Agric. Dec. 773, 779 (1988); Robert Ruiz, Inc. 

v. Hale Bros., 43 Agric. Dec. 572, 574 (1984); Mut. Vegetable Sales v. Lampros Bros., Inc., 37 

Agric. Dec. 667, 669-70 (1978); Fowler Packing Co. v. Assoc. Grocers Co. of St. Louis, 36

Agric. Dec. 87, 91 (1977); Stonoca Farms v. Clary, 33 Agric. Dec. 956, 959 (1974); Sanders v.

Greenberg Fruit Co., 32 Agric. Dec. 1856, 1859-60 (1973).

Where the buyer rejected goods, it did not have the duty to notify the shipper directly when it

did not know who the shipper was. Notification to the broker considered adequate under the

circumstances. C & E Enter., Inc. v. Edward G. Rahll & Sons, 44 Agric. Dec. 1693, 1695

(1985).

54. NOTICE WITHIN AN ORGANIZATION

U.C.C. § 1-202 (formerly U.C.C. § 1-201(27)) gives the rules for determining when, and under 

what circumstances, an organization or company is deemed to have received effective notice. 

See Nalbandian Farms,Inc. v. McDonnell & Blankfard, Inc., 46 Agric. Dec. 674, 679-80 

(1987).

55. OFFICIAL NOTICE

Section 7(d) of the Administrative Procedure Act (APA) states, “When an agency decision rests 

on official notice of a material fact not appearing in the evidence in the record, a party is

entitled, on timely request, to an opportunity to show the contrary.” Due to the fact that

reparation proceedings are subject to a subsequent trial de novo in federal court, such

proceedings are excepted from this provision of the APA. However, it has been held that

“many of the provisions of the APA, including the provision in question, are based upon

fundamental principles of due process enunciated long before the passage of the APA.” It was 

further stated that, “it would not be expedient or proper to put the parties involved in this

proceeding to the necessity of a further proceeding in federal district court in order to submit

evidence in rebuttal to the matters of which the Secretary has taken official notice.” The party

objecting to matters of which the Secretary had taken official notice was given opportunity to

make a showing as to evidence which would be submitted if the matter was reopened and was

informed that in order to rebut prices shown in Market News Service Reports of which

Secretary had taken official notice, such party would need to submit evidence of numerous
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(four to seven) specific transactions at different prices than shown in the reports. James

Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 1477, 1484-86 (1979).

Official notice may be taken of federal inspection certificates since they are documents issued

by the Department. Anonymous, 13 Agric. Dec. 1010, 1014 (1954).

Official notice may be taken of publications of the Department. Anonymous, 7 Agric. Dec. 486,

492-93 (1948). (Technical bulletins on market quality of cantaloupes were cited.)

Official notice may be taken of another proceeding. James Macchiaroli Fruit Co. v. Ben Gatz

Co., 38 Agric. Dec. 1477, 1484 (1979).

Official notice taken of freight tariff rules. Relias v. Frank Kenworthy Co., 16 Agric. Dec. 590,

600 (1957).

Official notice may be taken of the records of the Department (timely informal complaint that

was not a part of the record in the proceeding). Colace Bros. v. Thomas J. Holt Co., 27 Agric.

Dec. 932, 1302 (1968).

Official notice may be taken of the Department’s Market News reports. Macchiaroli v. Gatz, 38 

Agric. Dec. 565, 573 (1979).

56. OFFSETS

a. AGAINST AN UNPAID REPARATION AWARD

If a party fails to pay a reparation award, the other party may offset such unpaid amount by

deducting it from an unpaid produce debt more than nine months after the original award. Far

South, Inc. v. He-Bo Farms, Inc., 47 Agric. Dec. 1081 (1988) (summarized); Meadows v.

Radio Indus., 222 F. 2d 347 (7th Cir. 1955); Lide v. Cline, 537 F. Supp. 643 (E.D. Ark., 1982).

b. DEDUCTIONS FOR ANOTHER TRANSACTION

A party may offset losses from one transaction by deducting them from payment due on

another. Weller v. George, 41 Agric. Dec. 294, 296-97(1982); McMillan v. Bushman Growers

Sales, Inc., 32 Agric. Dec. 950, 955-56 (1973).

c. THIRD PARTY

Where Respondent admitted to accepting produce from Complainant, and cited as a defense

against paying for that produce an offset agreement reached between Respondent and a third

party, and the third party denied the existence of such an agreement (as did Complainant),

Respondent could not offset the debt for accepted produce owed to Complainant with the debt

owed by the third party under a previous growing arrangement between the third party and

Respondent. Rou v. Severt Sons Produce, Inc., 70 Agric. Dec. 489, 496 (2011).
158

57. OPEN PRICE

See PRICE AFTER SALE – this index. U.C.C. § 2-305(1) Open Price Term:

(1) The parties if they so intend can conclude a contract for sale even though the price is not

settled. In such a case the price is a reasonable price at the time for delivery if

(a) nothing is said as to price; or

(b) the price is left to be agreed by the parties and they fail to agree; or

(c) the price is to be fixed in terms of some agreed market or other standard asset or 

recorded by a third person or agency and it is not so set or recorded.

Tomatoes were sold on an open price basis with the prices to be determined on a date certain by 

reference to Market News quotes. The fact that the seller offered further allowances on

subsequent transactions held inapplicable to the transaction in question. Homestead Tomato

Packing Co. v. Acme Pre-Pak Co., 47 Agric. Dec. 485-486 (1988).

“Open Price” assumes parties will negotiate a price after the goods are sold. If they do not the

reasonable value of the goods should be imputed. A.P.S. Mktg. v. R.S. Hanline & Co., 59 Agric.

Dec. 407, 411 (2000); James Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 565, 571-

73 (1979). See also Anonymous, 5 Agric. Dec. 494, 499 (1946).

The buyer cannot expect a seller to share in any losses which might be incurred in an open sale.

Sharyland L.P. v. C.H. Robinson Co., 55 Agric. Dec. 1341, 1343 (1996).

The term “open” is a generic term used to describe a SALE without a price being agreed to

when the contract is first made. Other similar terms (which all fit under the generic term

“open”) are “price after sale,” “price arrival,” “deferred billing,” and “price after.” These terms 

should be examined with care because they do not all have the same meaning. For instance, 

“price after sale” usually means that the parties will agree to a price after the buyer completes 

its resales at destination, whereas “price arrival” means that the parties will agree on a price 

when the goods arrive at destination after opportunity for inspection (See 7 C.F.R. § 46.43(cc)). 

The terms “price after” and “deferred billing” are so vague that one must look solely to the 

context of the transaction and perhaps guess at what the parties intended. See Eustis Fruit Co. 

v. Auster Co., 51 Agric. Dec. 865, 877 (1992) (“The term ‘price after sale’ usually 

contemplates the parties agreeing to a price following the prompt resale of the produce. Such a 

sale is either f.o.b., delivered, or some variation thereof, in accordance with the agreement of 

the parties. If the parties do not specify f.o.b. or delivered then the Department assumes that the 

sale is f.o.b.”). See also Bonanza Farms, Inc. v. Tom Lange Co., 51 Agric. Dec. 839, 846 

(1992); M. Offutt Co. v. Caruso Produce, Inc., 49 Agric. Dec. 596, 602 (1990); Dennis

Produce Sales, Inc. v. Caruso-Ciresi, Inc., 42 Agric. Dec. 178, 182-84 (1983); Nw. Fruit Sales, 

Inc. v. Norinsberg Corp., 39 Agric. Dec. 1556, 1560 (1980); Slayman Fruit Co. v. Wholesale

Produce Supply, Inc., 30 Agric. Dec. 1751, 1755 (1971).
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a. ABSENT AGREEMENT

When the original contract does not contain a price term, it is assumed a reasonable price was

intended. Syracuse & Jenkins Produce Co. v. Tom Lange Co., 46 Agric. Dec. 85, 88 (1987);

Sessions v. Universal Fruit & Produce Co., 19 Agric. Dec. 1177, 1182 (1960).

b. BUYER’S DUTY TO SELLER

In an “open” sale, the seller usually expects that the buyer and seller will agree on a price at

some point following delivery, often following resale by the buyer. It is therefore implicit in

such a contract that the seller expects to be dealing with a particular receiver, namely, the

receiver disclosed to the seller at the time of sale. For a buyer in such a sale to convey the

goods to a third party for resale without the permission of the seller is a breach of the contract

between seller and buyer. Growers Mktg. Serv., Inc. v. J & J Distrib. Co., 53 Agric. Dec.

892, 895-96 (1994).

c. DUTY TO ASSIGN LOT NUMBERS

“Since an ‘open’ sale is a sale, there is, strictly speaking, no requirement that the purchaser of

goods on an ‘open’ basis assign lot numbers so as to distinguish between the resale of the

goods subject to the ‘open’ sale, and other similar goods on hand. A party buying ‘open’

should, however, be very hesitant to rely on the preceding sentence for several practical

reasons. First, . . . it will frequently turn out to have been very much to a buyer’s advantage to

have assigned lot numbers to produce sold ‘open,’ since, in determining a reasonable price after 

the parties default in agreeing on a price, there are a number of circumstances where we will

give great weight to a proper accounting of the resale of the produce sold ‘open.’ Second, . . . if 

a party buying ‘open’ intends to render an accounting as a basis for arriving at an agreement as 

to price with the seller then lot numbers must be assigned.” Bonanza Farms, Inc. v. Tom Lange

Co., 51 Agric. Dec. 839, 848 (1992).

See CONSIGNMENTS – SALE ON OPEN BASIS DISTINGUISHED FROM –

DIFFERENCE BETWEEN CONSIGNMENT AND OPEN – this index.

d. COMPUTATION OF REASONABLE PRICE IN OPEN SALE WHERE PARTIES

FAIL TO AGREE

Market price is not necessarily the same as reasonable price. See J. White & R. Summers,

Handbook of the Law under the Uniform Commercial Code, § 3-7, p. 100 (1972). It would

seem that if the buyer under “open” terms paid the freight, then freight would have to be

deducted from destination market price, and also, since Market News prices on the destination

market are sales to the buyer’s customers, a strict pass through to the seller of the market price

would deny any profit to the buyer. This result would not be within the contemplation of the

parties or reasonable. Therefore, a deduction of 15% (we now allow 20% as more closely

approximating the normal expectations of buyers – See A.P.S. Mktg. v. R.S. Hanline & Co., 59

Agric. Dec. 407, 411 (2000), and C.J. Prettyman, Jr., Inc. v. Am. Growers, Inc., 55 Agric.

Dec. 1352, 1375 (1996)) for profit and handling is suggested. See M.J. Duer & Co. v. J.F.
160

Sanson & Sons Co., 49 Agric. Dec. 620, 625 (1990) where, in a “deferred billing” transaction,

an accounting based on the erroneous assumption of breach was rendered. The parties failed to 

agree on a price, and we awarded a “reasonable price” based on market price for good product 

with the allowance of freight in the actual amount incurred (the same as claimed in the 

accounting), and a reasonable profit of 15%, or $930.00 (the accounting claimed a commission 

of $226.14). The accounting claimed inspection fees of $112.20 and a handling charge of

$80.00. These charges were disallowed without comment.

In a recent case that involved a number of price after sale transactions where the shipper

contended for the use of market price in determining how much the receiver should pay but

failed to supply relevant market quotations, the receiver’s resales were used as “the best

evidence of the reasonable value . . . at time of delivery.” Due to unusual circumstances, no

relevant market quotations were available, but the decision indicates that even where such

quotations are available, the results of a prompt and proper resale should be given

consideration, i.e., they should be looked at, and if circumstances indicate that use of such

results would enable us to arrive at a more accurate figure, they should be factored in. One

situation which would render such results especially useful even in the presence of relevant

market reports, would be where the produce arrived in poor condition. M. Offutt Co. v.

Caruso Produce, Inc., 49 Agric. Dec. 596, 605 (1990).

Flawed accounting accorded no weight in arriving at a price after parties’ failure to agree on a

price in price after sale transactions. Market News prices used exclusively. Eustis Fruit Co. v.

Auster Co., 51 Agric. Dec. 865, 879-80 (1992).

The Regulations [Requirements] do not place a duty to account upon a buyer who purchases on 

an open basis. However, should the parties fail to reach an agreement as to price, the receiver 

fails to account accurately and in detail at his own risk. Carmack v. Selvidge, 51 Agric. Dec.

892, 898 (1992).

In absence of market reports, results of personal audit by Department’s investigator were used 

to determine amount due in an open sale after modification to correct erroneous assumption

made by investigator. Carmack v. Selvidge, 51 Agric. Dec. 892, 901 (1992).

In the absence of market reports where goods were sold open, we used the buyer’s highest

reported resale price for the value the goods would have had if they had been as warranted. See 

C.J. Prettyman, Jr., Inc. v. Am. Growers, Inc., 55 Agric. Dec. 1352, 1375 (1996). Also in this

case, we allowed 20% profit for an open sale.

Where the tomatoes were originally sold at a f.o.b. price, the contract was modified to an

“open” sale, a federal inspection made several days after arrival showed they met contract

terms, and where the receiver did not account for the sales of the tomatoes, held that original

f.o.b. price was an acceptable measure of the reasonable value of the fruit. Whizpac, Inc. v.

Franklin Produce Co., 46 Agric. Dec. 726, 729 (1987).

In an open sale transaction, dumping of any portion of the produce must be substantiated by a

dump certificate or other appropriate evidence. Carmack v. Selvidge, 51 Agric. Dec. 892,

901-02 (1992).
161

In an “open” sale “to be priced on next week’s market,” the appropriate price was the average 

of the entire next week’s shipping point prices as reported by the Federal State Market News

Service. A. Duda & Sons v. Pete Pappas & Sons, 45 Agric. Dec. 2141, 2145 (1986).

58. PRACTICE AND PROCEDURE

a. ALTERNATIVE PLEADING

Requires dismissal where there is award on primary claim. See A.J. Tebbe & Sons v. Fruit &

Prod. Prepack, 34 Agric. Dec. 1226, 1228-29 (1975). See also Rule 8(a), F.R.C.P.

b. AMOUNT AWARDED LIMITED BY PLEADING

A party’s limitation of its claim in its pleading to a lesser amount than is eventually found due

will be given effect in awarding reparation. Mendelson-Zeller Co. v. M.K. Hall Produce, 28

Agric. Dec. 1169, 1170 (1969); Lockerman v. Jones, 16 Agric. Dec. 1002 (1957); Parkhill

Produce Co. v. Zeidenstein Bros., 16 Agric. Dec. 997, 1002 (1957). However, where the

“prayer” to the formal complaint specifies that the complainant desires to recover the amount

the Secretary finds due, the Secretary’s findings will determine the amount of the award even

where the complainant has specified a lesser amount in the text of its complaint.

A reparation award is usually limited to the amount claimed by a party in its pleading,

regardless of the fact that the amount found due as reparation by the Secretary is greater than

the amount claimed in the party’s pleading. In this case, although Respondent’s Answering

Statement contained a calculation of damages in a precise dollar amount, the prayer for relief in

its counterclaim specified that it desired to recover that amount determined to be due by the

Secretary. In view of the language in Respondent’s prayer for relief, the Secretary’s findings

were utilized as the amount of the reparation award even though Respondent had calculated a

lesser damage amount. Perco USA, Inc. v. Eagle Fruit Traders LLC, 67 Agric. Dec. 658,

670-71 (2008).

When parties fail to agree on a price for disputed transactions thereby requiring the Department

to determine a reasonable price, we will not award additional damages beyond the amount 

sought in the complaint even when the complaint contains a prayer for relief requesting we 

award such additional damages. We do not deem it appropriate to assign a higher value to the

produce at issue than that assigned to them by the complainant. Ayco Farms, Inc. v. Melon One, 

Inc., 78 Agric. Dec. 214 (2019).

c. AUTOMATIC STAY PROVISION OF § 47.24 OF RULES

Jurisdiction to hear petitions filed before the order becomes final, but not within the ten-day

automatic stay period where the stay order was not issued until more than 30 days following

issuance of the order or not at all. Homestead Tomato Packing Co. v. Ben E. Keith Co., 42

Agric. Dec. 2143-44 (1983).
162

See also Ligon Produce Co. v. Spinale Bros., Inc., 13 Agric. Dec. 515, 516 (1954), where it 

was said that § 47.25(b) does not restrict granting of extensions to cases in which request is

made prior to regular time for filing.

See STAYS – ISSUANCE MORE THAN 30 DAYS AFTER ORDER – this topic.

d. BONDING REQUIREMENT FOR FOREIGN COMPLAINANTS –

JURISDICTIONAL

Provincial Fruit Co. v. Brewster Heights Packing, Inc., 39 Agric. Dec. 1514-16 (1980);

dismissal order (“Failure of non-resident of the United States to post bond deprives the

Secretary of jurisdiction.”) Provincial Fruit Co. v. Brewster Heights Packing, Inc., 40 Agric.

Dec. 171 (1981).

e. CONFLICTS OF INTEREST

No conflict of interest existed that would preclude the Secretary from adjudicating a reparation 

complaint involving an allegation that damage resulted to complainant from fraudulent

inspections performed by former Department employees. Procacci Bros. Sales Corp. v. B.T. 

Produce Co., 60 Agric. Dec. 341, 345 (2001).

f. COUNTERCLAIMS

A counterclaim must be filed within nine months after the accrual of the cause of action on

which it is based unless it arises out of the same transaction as that in the complaint. Sara’s, 

Inc. v. Cont’l Farms, Inc., 46 Agric. Dec. 1260, 1262 (1987); Sanders & Drake v. Gardner

Bros., 31 Agric. Dec. 128, 131-32 (1972).

Failure to file a reply to a counterclaim or set-off within 20 days after the service of the answer 

will constitute a waiver of hearing on the counterclaim or set-off and an admission of the

allegations therein. 7 C.F.R. § 47.9.

g. COUNTERCLAIM – WHERE COMPLAINANT NOT LICENSED OR SUBJECT

TO LICENSE

Where complainant was not licensed or subject to license and a counterclaim arose out of same 

transactions as those in the complaint although no positive award could be made thereon, it was 

held that amounts claimed in the counterclaim could be set-off against amounts found due to 

complainant in its complaint. E.S. Harper Co. v. Magic Valley Growers Ltd., 46 Agric. Dec.

1864, 1866 (1987); V.V. Vogel & Sons Farms v. Cont’l Farms, 44 Agric. Dec. 886, 891 (1985).

Where complainant was not licensed or subject to license, and counterclaiming respondent was

found to be due $7,381.09 from complainant, no award could be made in respondent’s favor, 

and both the complaint and counterclaim were dismissed. Reeder v. E. Growers & Shippers,

Inc., 48 Agric. Dec. 693, 695 (1989).

h. CROSS-CLAIM AGAINST CO-RESPONDENT
163

THE FIRST THREE CITED CASES SHOULD BE CONSIDERED MODIFIED BY THE

LAST CASE BELOW.

“There is no provision in the Rules of Practice [Administrative Procedures] for the filing of a 

cross-claim by one respondent against another.” Ben Gatz v. A. Levy & J. Zentner Co., 32

Agric. Dec. 1873, 1898-99 (1973).

The Secretary does not have jurisdiction to hear a cross-claim by one respondent against

another respondent where such claim was not filed within nine months after the cause of action 

relative to such cross-claim accrued even though the cross-claim arises out of the same cause of 

action as a timely complaint filed in the same proceeding. Larry Merrill Produce Co. v. L & P

Vegetable Corp., 51 Agric. Dec. 802-803 (1992) (order dismissing cross-claim).

A cross-claim, arising out of the same nucleus of fact as that involved in the complaint, filed by 

one respondent against another respondent, was found to be outside the Secretary’s jurisdiction 

because it was filed more than nine months after the causes of action relative to such claims 

accrued. Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1768-69 (1994).

But: United States for the Use of Bros. Builders Supply Co. v. Old World Artisans, Inc.; Ticor 

Construction Co.; and the Central Nat’l Insurance Co. of Omaha, 702 F.Supp. 1561 (N.D. GA

1988) held:

The issue of whether a cross-claim may relate back is resolved by federal

common law in actions based upon federal question jurisdiction, and upon state

law when the cause of action is based upon a state statute. . .

In determining whether a cross-claim may relate back to the date of the original

complaint, the federal courts distinguish between those wherein the defendant

seeks to reduce the amount a plaintiff can recover, such as by recoupment,

contribution, or indemnity, and those wherein the defendant is seeking affirmative

relief. . .

The cross-claim, to the extent that it seeks indemnity or contribution for sums it

may owe to Builders Supply, relates back to the date of the filing of the original

complaint and is therefore timely filed under the Miller Act. That part of the

cross-claim that seeks payment for other labor, materials or damages, independent

of the material for which Builders Supply seeks payment, is an independent cause

of action. That part of the cross-claim does not relate back to the date of original

complaint, and because it was not filed within the one-year period of the Act, it is

barred.
164

i. DEATH OF INDIVIDUAL RESPONDENT

The Secretary has no jurisdiction to enter an award of reparation against a deceased individual

respondent or the administrator or executor of the deceased. Substitution refused. Analogy with

Federal Rules rejected. Barbera Packing Corp. v. McCaffrey Bros. Co., 19 Agric. Dec. 123,

125 (1960).

j. DEFAULT

Where two or more respondents are joined by the complaint, and one respondent defaults in the 

filing of an answer, no default order is issued, and the defaulting respondent’s liability is

determined on the basis of the record made by the other parties. Adams Bros. Produce Co. v.

Peeples, 36 Agric. Dec. 1588, 1590 (1977); Coachella-Imperial Distrib. v. Tri-City Grocery

Co., 35 Agric. Dec. 1429, 1430-32 (1976); Maloney v. Frank’s Food Fair, Inc., 20 Agric. Dec.

259, 263 (1961).

k. DE NOVO TRIAL IN DISTRICT COURT

Based on constitutional concern to protect right to trial by jury. Potato Sales, Inc. v. Perfection

Produce, 38 Agric. Dec. 273, 280 (1979).

l. ELECTION OF REMEDIES

See ELECTION OF REMEDIES – this index.

Section 5(b) of the PACA requires that an election of remedies be made by a PACA

complainant as between pursuit of reparation and pursuit of a civil suit in either state or federal 

court. Kurt Van Engel Comm’n Co., Inc. v. Schultz Sav-O Stores, Inc., 48 Agric. Dec. 731-33 

(1989); Rigbee Potato Co. v. Belson Bros., 12 Agric. Dec. 750, 753 (1953). In Gilliland & Co. 

v. San Antonio Comm’n Co., 2 Agric. Dec. 492, 495 (1943), we refused to find an election of 

remedies where a state court claim had been filed by a PACA claimant but had been dismissed 

by such claimant prior to the rendering of a decision on the merits by the state court and prior

to the filing of the PACA complaint.

Suspension of state administrative proceedings at the request of a PACA complainant was

deemed a sufficient basis for us to deny a motion for dismissal based on the allegation that

complainant had made an election of remedies. No determination was made as to whether state 

administrative forum was a court of competent jurisdiction within the meaning of the PACA.

Magic Valley Produce, Inc. v. E & R Brokerage, 40 Agric. Dec. 449, 450 (1981).

Where the PACA complainant is a party to a proceeding involving the same parties and subject 

matter in another forum by reason of having filed a compulsory counterclaim, no election of 

remedies will be deemed to have taken place. Velderrain v. Dixon Tom-A-Toe Produce, Inc., 38 

Agric. Dec. 51-52 (1979).
165

Where a PACA claimant is in another forum because of having filed a compulsory

counterclaim, then both forums have concurrent jurisdiction and can both proceed with the

litigation in their respective forums. The first order to become final will be res judicata.

Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric. Dec. 1955, 1957-58 (1983).

Where the PACA forum and a state forum have exercised concurrent jurisdiction over the

parties and subject matter due to the PACA claimant having been compelled to file a

counterclaim in the state forum, and the state forum has entered final judgment prior to a

PACA order becoming final, a reparation order will be issued in the claimant’s favor based on

the state court judgment. Extensive discussion. M.S. Thigpen Produce Co. v. Park River

Growers, Inc., 48 Agric. Dec. 695, 697 (1989).

On motion of respondent, action before the Secretary was stayed pending disposition of state

court action brought by a Packers and Stockyards Division complainant involving the same

parties and subject matter as before the Secretary. Stafford Bros. v. Center, 24 Agric. Dec.

819, 821 (1965). (Cites U.S. Supreme Ct. and Ct. of Appeals cases.)

Where respondent was in default, and before issuance of the default order, the Department

learned that complainant had obtained a judgment in state court involving the same parties and 

transaction, the complaint was dismissed. Fitzgerald v. Noger, 23 Agric. Dec. 897 (1964).

In H.C. MacClaren v. M-T Fruit & Produce, Inc., 22 Agric. Dec. 1048, 1051-53 (1963), it was 

held that where respondent’s complaint in state court against complainant, involving the same 

transactions as before the Secretary, was dismissed on procedural grounds, such dismissal

would not be res judicata of the issues before the Secretary.

After filing of a state court action, parties have been given the option of electing to proceed

before the Secretary by dismissing such action. Valley Packing Serv. v. Fresno Frozen Foods,

Inc., 22 Agric. Dec. 1179-80 (1963).

m. EXTENSIONS OF TIME

“Section 47.25(b) [of the Administrative Procedures] provides for extensions of time and does 

not, as contended by complainant, restrict the granting of extensions to cases in which the 

request is made prior to the regular time for filing.” Ligon Produce Co. v. Spinale Bros., Inc.,

13 Agric. Dec. 515, 516 (1954).

n. INFORMAL COMPLAINTS

See 7 U.S.C. § 499f and 7 C.F.R. § 47.3.

The Department’s informal complaint procedure was challenged in B.V. Int’l Fruit Co. v.

Seald-Sweet Int’l, Inc. ̧ dismissed on request of complainant, 37 Agric. Dec. 957 (1978). Seald

Sweet admitted the informal complaint was filed within nine months after the cause of action

accrued, but alleged that no informal complaint procedure was contemplated by the PACA
166

and that such procedure was in conflict with the PACA. In a letter to Seald Sweet’s counsel 

June 18, 1976, the Presiding Officer denied Seald Sweet’s motion for dismissal of the

complaint and gave an explanation and defense of the informal complaint procedure. This letter

ruling is quoted extensively in 10 N. Harl, Agricultural Law § 72.10[2] at note 41.

See also Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric. Dec. 1955, 1957 at n. 2

(1983).

o. LATE FILING

In spite of § 47.20(j) which provides for waiver of right to file a document when not filed

within prescribed time, the examiner has power to receive a late document in evidence on own 

motion, even where no petition for an extension of time has been filed. G. & S. Produce Co. v. 

Sol Salins, Inc., 36 Agric. Dec. 1412, 1413 (1977).

p. HANDLING AND FILING FEES

Where two respondents both violated the PACA, they were held jointly and severally liable for 

the handling fee. Big Apple Pineapple Corp. v. Fashion Fruit Co., 58 Agric. Dec. 1106, 1118

(1999).

The failure to pay both the filing fee and the handling fee was noted as a problem in connection

with the attempted filing of a counterclaim over which it was held the Department lacked 

jurisdiction. However, the decision could as readily rest on the failure to file a timely claim as 

upon the failure to file the statutory fees. C.H. Robinson Co. v. Kay Gee Produce Co., 60 Agric. 

Dec. 314, 316 (2001).

q. HEARING CASE – ADMISSIBILITY OFPLEADINGS

Not admissible over objection of opposing counsel. Potato Sales, Inc. v. Perfection Produce, 38

Agric. Dec. 273, 280 (1979).

r. HEARINGS – WHEN ALLOWED

An oral hearing need not be granted when the amounts claimed in neither the complainant nor

counterclaim exceed the statutory amount, even though such amounts when added together do

exceed such amount. K & M Potato Co. v. Potato Processing Co., 28 Agric. Dec. 1088 (1969).

Hearing may be granted on grounds that such is desirable and necessary for proper disposition

of case, even though amount involved does not meet the statutory amount. Green Valley Farms

v. Larry Miskell Co., 38 Agric. Dec. 57, 59 (1979).

s. NECESSARY PARTIES
167

Neither the Secretary nor employees of the Secretary who performed fraudulent inspections of

produce are necessary parties to a reparation complaint against a firm alleged to have procured

fraudulent inspection. Procacci Bros. Sales Corp. v. B.T. Produce Co., 60 Agric. Dec. 341, 345

(2001).

Where the counterclaim submitted by Respondent concerned produce that was part of a joint

venture, and one of the joint venture partners had not and could not be joined in the proceeding, 

determined that the counterclaim must be dismissed, as any amount due Complainant or 

Respondent under the venture was dependent, at least in part, upon the contribution of and the 

proceeds due the third party, so an adequate judgment could not be rendered without the 

presence of the third party, (a necessary party to the action), to provide evidence and testimony 

in this regard. Westberry Farms Ltd. v. Sungate Mktg. LLC, 71 Agric. Dec. w, kk (USDA

2012), published in 72 Agric. Dec. w, kk (USDA 2013).

t. PAY-WHEN-PAID AGREEMENT

The Regulations [Requirements] under the PACA (7 C.F.R. § 46.2(aa)(5)) require payment for 

produce by abuyer within ten (10) days after the day on which the produce is accepted. 

Respondent’s invoices to its third-party customer indicate that payment was due Respondent 

from that customer within twenty-one (21) days. We found it reasonable under the pay-whenpaid agreement for Respondent to have collected the funds within twenty-one (21) days and to

have paid Complainant within thirty-one (31) days after the day on which the produce was

accepted. Coastal Mktg. Serv., Inc. v. Vibo Produce LLC, 71 Agric. Dec. n, v (USDA 2012), 

published in 72 Agric. Dec. n, v (USDA 2013).

u. PLACE OF HEARING

Where a case consisted of two separate claims: A v. B and B v. A, and B’s claim against A was

only defense interposed in claim of A v. B, the hearing was held at the place of business of A

on the basis that only substantive issues in litigation pertained to the B v. A claim. Harvey

Kaiser, Inc. v. Raymond Bolzan, Inc., 39 Agric. Dec. 51, 52-53 (1980).

v. PLEADINGS – TECHNICAL PERFECTION NOT REQUIRED

A technical error in a pleading is not fatal to its validity. B. G. Sales v. Sin-Son Produce Co., 43

Agric. Dec. 1991, 1996 (1984); Armand Co. v. FTC, 84 F.2d 973 (2d Cir., 1936), cert. denied,

299 U.S. 597 (1936).

Where a formal complaint alleged sale at a price and informal complaint alleged consignment

and evidence showed sale on open price basis, it was held that pleadings apprised respondent of 

the essential nature of the claim and did not have to meet technical requirements. Good

discussion, and citation of second circuit case. Carmack v. Selvidge, 51 Agric. Dec. 892, 896-

97 (1992).

w. PLEADINGS – VERIFICATION – NOT NECESSARY UNLESS PLEADING TO

BE CONSIDERED IN EVIDENCE UNDER DOCUMENTARYPROCEDURE
170

While an unverified pleading is not in evidence, it does serve to form the issues between the

parties. Oshita Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric. Dec. 968, 972 (1991);

Chapman Fruit Co. v. Tri-State Sales Agency, 44 Agric. Dec. 1366-67 (1985). See also Perell,

Inc. v. Anthony Abbate Fruit Distrib., 32 Agric. Dec. 1900, 1902 (1973) and H. & M. Fujishige

v. Mike Phillips Enter., Inc., 30 Agric. Dec. 1095, 1097 (1971).

Unverified answer not in evidence. P. Tavilla Co. Miami v. Sanco Distrib., Inc., 45 Agric. Dec. 

734-35 (1986). H. & M. Fujishige v. Mike Phillips Enter., Inc., 30 Agric. Dec. 1095, 1097

(1971). Unsworn answer has no evidential value. Bianchi & Sons Packing Co. v. G. & J.

Produce, Inc., 45 Agric. Dec. 842, 843 (1986). Unverified complaint had no evidentiary value, 

and the buyer who filed sworn pleadings prevailed as to contract terms. Agri-Nat’l Sales Co. v. 

Caamano Bros., Inc., 46 Agric. Dec. 983, 985 (1987).

Pleadings are not in evidence in a hearing case even if verified. See 7 C.F.R. § 47.20(a).

Compare 7 C.F.R. § 47.15 (f)(1) and (f)(4). See also Potato Sales, Inc. v. Perfection Produce,

38 Agric. Dec. 273 (1979). (Note: the parties may, of course, stipulate to such being in

evidence, and sometimes do so stipulate.)

x. PROPER PARTY

“Rule 17 (b) of the Federal Rules of Civil Procedure provides that individual partners need not 

be named as parties, and a partnership may sue in its common name to enforce a substantive 

right existing under the Constitution or laws of the United States. This rule has been applied in 

cases arising under the act.” Sam Egalnick Co. v. Ben Cole Produce Co., 9 Agric. Dec. 1037, 

1041-42 (1950).

See STANDING AND PRIVITY OF CONTRACT – this index.

y. RECONSIDERATION

The purpose of a petition to reconsider is to question facts and the legal conclusions of the

decision, not to introduce new evidence. Evergreen Farms v. P. Tavilla Co., 29 Agric. Dec.

1262, 1264 (1970); Arnold J. Rodin, Inc. v. McKenzie, 27 Agric. Dec. 1165-66 (1968).

New evidence cannot be considered in connection with a petition for reconsideration. Dave

Walsh Co. v. Liberty Fruit Co., 38 Agric. Dec. 1130, 1131 (1979); Valley Packing Co. v.

DeMase & Manna, 29 Agric. Dec. 101-02 (1970); Shelby Farms v. Wellworth Pickle Co., 21

Agric. Dec. 399, 400-01 (1962).

Requirement that a petition to reconsider be filed no more than ten days after service on a party

may be waived by the Secretary if it is filed prior to 30 days after the date of the Order.

Homestead Tomato Packing Co. v. Ben E. Keith Co., 42 Agric. Dec. 2143-44 (1983).

Second petition for reconsideration dismissed. “The Rules of Practice [Administrative 

Procedures] contemplate that a party may file, as a matter of right, a petition for reconsideration

of an order that has been entered. The rules make no provision for filing more than one such 

petition. We think it is within our discretion whether to permit a party to file a second petition 
170

for reconsideration after the first one has been disposed of. At some point the administrative

consideration of the case must be brought to a conclusion.” Wescott v. Yonk Rubin & Son, 10 

Agric. Dec. 358-59 (1951).

“The [Administrative Procedures] do not specifically prohibit the filing of a second petition for

reconsideration. However, as stated by Story, Circuit Justice, in Jenkins v. Elderedge et al., 13 

Fed. Cas. 504, No. 7267 (C.C.D. Mass 1845), ‘If rehearings are to be had, until the counsel on 

both sides are entirely satisfied, I fear, that suits would become immortal, and the decision

postponed indefinitely.’” We have heretofore held that a reasonable interpretation of the

Administrative Procedures under the PACA would not sanction a multiplicity of petitions for 

rehearing, reargument, or reconsideration, and that the Department would not be inclined to 

accept them. Ernest E. Fadler Co. v. Apache Distributors, 9 A.D. 1266.” Z.R. Hallock Co. v. 

Sawyer, 15 Agric. Dec. 163-64 (1956).

z. REHEARING – RIGHT OF NON-PARTY TO REQUEST

Granted after entrance of final order on application of non-party who claimed to be responsibly 

connected with respondent corporation. A. D’Amico & Sons v. Rivas & Sons, 37 Agric. Dec. 

1482 (1978).

aa. REOPENING

The record may only be reopened to take further evidence prior to the issuance of a final order.

7 C.F.R. § 47.24(b). (However, see last paragraph - this subheading.)

After the issuance of the final order, new evidence cannot be considered even if it is material.

Valley Packing Co. v. DeMase & Manna, 29 Agric. Dec. 101-02 (1970). Evidence was

submitted along with a petition to reconsider; there was no petition to reopen.

Where counsel petitioned to take further evidence after the hearing claiming that he was misled 

into believing party would be present at hearing and such party was not present, the petition 

was denied. Green Valley Farms v. Larry Miskell Co., 37 Agric. Dec. 1767-68 (1978).

Reopening to receive evidence in rebuttal to matter of which official notice was taken in the

original opinion was required, not by APA, but by the fundamental principles of due process

enunciated long before the passage of the APA. James Macchiaroli Fruit Co. v. Ben Gatz Co.,

38 Agric. Dec. 1477, 1485 (1979).

Reopening to take further evidence not permitted where evidence could have been submitted at 

original hearing. Monc’s Consol Produce, Inc. v. Black Diamond Fruit & Produce Co., 36

Agric. Dec. 97-98 (1977).
171

In Israel Klein Co. v. S. Otis Sullivan & Co., 17 Agric. Dec. 910 (1958) (Order on Admission 

of Liability); 17 Agric. Dec. 500 (1958) (Order on Merits Dismissing Complaint); 17 Agric.

Dec. 595 (1958) (Stay Order - pending issuance of further order); 17 Agric. Dec. 910 (1958)

(Order Granting Petition to Rehear); 18 Agric. Dec. 54 (1959) (Final Order on Merits

Awarding Reparation to Complainant), a proceeding was reopened to take further evidence

after issuance of a decision and order on the merits.

bb. REOPENING AFTER DEFAULT

A motion to reopen after default should set forth reasons for the failure to file a timely answer, 

and it should also appear that the respondent is able to offer a valid defense to the allegations of

the complaint. Winter-Mex. Produce Co. v. Ellsworth & Boyd, 22 Agric. Dec.1299-300 (1963).

cc. RECOVERY OF UNPAID OBLIGATIONS ALLOWED

Where Complainant sought recovery of the f.o.b. plus freight contract price of lettuce sold to

Respondent, but Complainant admitted that it had not yet paid the freight, we found that where

the freight invoice was in evidence, and the record lacked any evidence to substantiate

Respondent’s claim of freeze damage in transit, Complainant remained obligated to pay the

freight invoice and was therefore entitled to recover the full f.o.b. plus freight price of the

lettuce from Respondent. Charles Johnson Co. v. Alphas Co., 68 Agric. Dec. 544, 554 (2008).

dd. REPLY

See – COUNTERCLAIM – this subject heading.

ee. SET-OFF

Set-off of reparation awarded in prior proceeding (as between same two parties) and remaining 

unpaid was allowed against reparation awarded against opposite party in later proceeding. Far 

South, Inc. v. He-Bo Farms, Inc., PACA Docket No. 2-7042; Order Granting Relief issued Jan 

9, 1989.

ff. TIME FOR PAYMENT

The PACA requires full payment promptly for perishable agricultural commodities purchased 

in the course of interstate or foreign commerce. The parties’ request to allow the reparation

award to be satisfied in allotments must therefore be denied. New Mundo Exp. Fruits, Inc. v.

San Diego Point Produce, Inc., 67 Agric. Dec. 888, 893 (2008).

See COUNTERCLAIM – this subject heading.

See JURISDICTION – LOSS OF 30 DAYS AFTER ISSUANCE OF AN ORDER – this

index.
172

59. PRICE AFTER SALE

The term “price after sale” is not defined in either the Uniform Commercial Code or the PACA

and Regulations [Requirements] (Other Than Rules of Practice [Administrative Procedures]) 

under the PACA (7 C.F.R. § 46.43(j)). It is considered a subcategory of the “open price term” 

(U.C.C. § 2-305(1)), and is generally understood as meaning that the parties will agree on a 

price following the prompt resale of the produce. See Eustis Fruit Co. v. Auster Co., 51 Agric. 

Dec. 865, 877 (1991). If the parties are unable to agree upon a price, U.C.C. § 2-305(1) 

provides that the price shall be a reasonable price at the time for delivery. Titanium Fabrics 

LLC v. Watermelons, Inc., 76 Agric. Dec. T (U.S.D.A. 2015).

Neither the U.C.C. nor the PACA recognize the term “Price After Sale.” The term is a

subcategory of “Open Price.” A.P.S. Mktg. v. R.S. Hanline & Co., 59 Agric. Dec. 407, 410-11

(2000); Sucasa Produce v. A.P.S. Mktg., Inc., 59 Agric. Dec. 421, 424 (2000); Well Pict, Inc. v. 

Ag-West Growers, Inc., 39 Agric. Dec. 1221, 1227-28 (1980). See Eustis Fruit Co. v. Auster

Co., 51 Agric. Dec. 865, 877 (1991). (The term “price after sale” usually contemplates the 

parties agreeing to a price following the prompt resale of the produce. Such a sale is either 

f.o.b., delivered, or some variation thereof, in accordance with the agreement of the parties. If 

the parties do not specify f.o.b. or delivered then the Department assumes that the sale is f.o.b.) 

Bonanza Farms, Inc. v. Tom Lange Co., 51 Agric. Dec. 839, 846 (1992); M. Offutt Co. v.

Caruso Produce, Inc., 49 Agric. Dec. 596, 602 (1990).

See CONSIGNMENTS – SALE ON OPEN BASIS DISTINGUISHED FROM – this index.

See also OPEN PRICE – this index.

60. PRICE ARRIVAL

See 7 C.F.R. § 46.43(cc). A subcategory of “Open Price.”

Contemplates is not a reference to actual sales of produce after arrival but rather contemplates

that the parties will agree upon a price at time of arrival with reference being to market price at 

such time. James Macchiaroli Fruit Co. v. Ben Gatz Co., 38 Agric. Dec. 1477, 1480-81 (1979). 

See also Homestead Pole Bean Coop., Inc. v. So Fresh Produce Co., 48 Agric. Dec. 684, 686 

(1989).

Where the parties agreed that the price would be set by reference to the market for the

following week, the average of that week’s Market News quotes was utilized to determine the

amount due. Homestead Tomato Packing Co. v. M. & M. Ponto, Inc., 46 Agric. Dec. 522-24

(1987).

Where the parties did not come to an agreement as to the price on a “price arrival” contract,

respondent was found liable to complainant for the reasonable price as determined by the net

proceeds realized by respondent on resale of the oranges. Sunny Valley Citrus v. Premium

Produce Corp., 46 Agric. Dec. 1035, 1040 (1987).
173

See CONSIGNMENTS – SALE ON OPEN BASIS DISTINGUISHED FROM – this index.

See also OPEN PRICE – this index.

61. PROFITS

FORMER RULE:

The prevailing party was not entitled to lost profits unless it notified the other party prior to

entering the contract of the profits it expected to derive. Ben Gatz Co. v. S. Albertson Co., 28

Agric. Dec. 1192, 1198 (1969).

NEW RULE:

“Consequential damages resulting from the seller’s breach include (a) any loss resulting from

general or particular requirements and needs of which the seller at the time of contracting had

reason to know and which could not reasonably be prevented by cover or otherwise; and (b)

injury to person or property proximately resulting from any breach of warranty.” U.C.C. § 2 -

715(2). Until recently, our test for awarding consequential damages (also termed special

damages or loss of profits) required actual knowledge on the part of the seller of a specific

contract of the buyer with a third party for the resale of the goods. Under a recent decision, a

less restrictive test was adopted. See Pandol Bros., Inc. v. Prevor Mktg. Int’l, Inc., 49 Agric.

Dec. 1193, 1199-03 (1990). Note that to be awarded consequential or special damages, it is still 

necessary for a buyer to show a loss resulting from general or particular requirements and 

needs of which the seller at the time of contracting had reason to know. As was stated in

Pandol, “. . . such damages must be proven in the normal manner, and comment 4 to section 2

– 715 states that ‘[t]he burden of proving the extent of loss incurred by way of consequential

damage is on the buyer...’” In addition, the buyer must also show that the loss could not have

“reasonably” been “prevented by cover or otherwise.”

62. PROMISSORY NOTES

See JURISDICTION – PROMISES TO PAY – this index.

63. PROTECTION

“Protection” and “full protection” sometimes are given different meanings. “In certain

transactions, ‘protection’ may be intended to apply only to a certain defect. In this case,

complainant, i[n] stating it granted ‘protection,’ states that it exclusively protected respondent

against any loss resulting from light weight. With ‘full protection,’ no exclusivity to one type of 

defect would be distinguished from another when determining losses.” Charles Johnson Co. v.

Hoversen, 57 Agric. Dec. 756, 761 (1998). (The terms usually have the same meaning

- see PROFIT & HANDLING NOT ALLOWED; FREIGHT ALLOWED – this topic

supra.)

a. AGAINST LOSS
174

When a seller protects the buyer against loss, the buyer must only pay the net proceeds received

from a prompt resale. Dick Monroe Co. v. Fred Karen & Sons, 30 Agric. Dec. 546, 549 (1971);

Colina Banana Brokerage v. Washington, 27 Agric. Dec. 1303, 1306 (1968); W.M. Produce 

Co. v. Harrisburg Daily Mkt., 20 Agric. Dec. 773, 778 (1961) (brokerage and phone charges 

specifically disallowed).

See Vener Co. v. McCaffrey Bros. Co., 15 Agric. Dec. 405, 409-10 (1956), where “full

protection” was granted as to foods found to be defective on delivery. “The meaning of the

term is self-evident, that is, that the one suffering the protection will save the other party

harmless from any loss which may result from the defective condition of the merchandise. The 

contract . . . as modified . . . is not the same as a consignment transaction. The most [the buyer] 

would be obliged to pay [would be the f.o.b. contract price]. However, if the net returns derived

from the resale of the [goods] were less than the contract price, the protection agreement would 

take effect and [the buyer] would be responsible only for the net proceeds obtained from such 

resale, exclusive of any commission.”

See also Anonymous, 11 Agric. Dec. 754, 759 (1952).

See also Nw. Ark. Produce Co., v. Creasey Co., 27 Agric. Dec. 760, 762 (1968), where

protection was granted to the buyer prior to acceptance because the buyer’s personal inspection 

of watermelons on arrival revealed a percentage of green melons. The buyer later dumped a 

large poundage of melons because of alleged decay which was not supported by a prompt 

federal inspection. The buyer was required to pay at contract rate for all melons, except the 

buyer was allowed a deduction for 149 melons returned because they were green and as to 

which it had issued credit slips to its customers.

b. DISTINGUISHED FROM CONSIGNMENT

“A protection agreement has reference to a base price, and concerns goods that are sold,

whereas in the case of a consignment there is no sale of the produce, and the shipper at all times 

retains title to the produce.” Border Fruit Co. v. Fruit Distrib. Corp., 45 Agric. Dec. 2453,

2455 (1986); See also Dave Walsh Co. v. Liberty Fruit Co., 38 Agric. Dec. 533, 536 (1979).

c. FAILURE TO KEEP RECORDS VOIDS

“...it is incumbent upon a receiver who has such an agreement to keep records which

substantiate its resales and losses... ‘failure to keep such records voids the protection

agreement.’” (Citing Dave Walsh Co. v. Liberty Fruit Co., 38 Agric. Dec. 533, 536 (1979)).

Roger Harloff Packing, Inc. v. John Livacich Produce, Inc., 45 Agric. Dec. 1280, 1282 (1986); 

DeMarco Produce Co. v. J.R. Cortes & Co., 39 Agric. Dec. 1256, 1259 (1980). (While the 

voiding of the protection agreement throws us back to the original contract, DeMarco held that 

it would be pointless to discuss whether there was a breach under such contract by the shipper 

since the failure of the buyer to keep records of the resales precluded the award of damages.

However, since the decision in G & T Terminal Packaging Co., Inc. v. Joe Phillips, Inc., 798 F.

2d 579 (2d Cir. 1986), we have endeavored to assess damages by useof percentage of condition 

defects or some other means.
175

However, where there was no inspection and there is no other evidence of the extent of

damages, the voiding of a protection agreement by a failure to keep records necessitates the

award of the original contract price. Albert Fisher Sales/Pompano v. T. B. Fruit & Vegetable,

Inc., 54 Agric. Dec. 1448, 1450 (1995). See also Merrill Farms v. Tom Lange Co., 45 Agric.

Dec. 2488, 2491 (1986).

The seller was held to have been released from a protection agreement entered into after arrival 

of asparagus in apparent poor condition by the buyer’s failure to resell produce in a

commercially reasonable manner. Oshita Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric.

Dec. 968, 973 (1991).

In a case where full protection was granted, the duty to render an accounting was abrogated by

contract. Am. Growers, Inc. v. Cal. Citrus Selectors, 59 Agric. Dec. 430, 432 (2000).

d. PROFIT & HANDLING NOT ALLOWED; FREIGHT ALLOWED

Where the seller granted protection against loss due to condition and quality, the buyer’s charge 

for “handling” was not allowed because it was not clear that such a charge did not come under 

the category of overhead or sales commission which, it was stated, would not be proper 

expenses. Freight was allowed. AJM Farms, Inc. v. Am. Fruit & Produce Corp., 47 Agric. Dec.

461, 464 (1988); Manzo v. Jarson & Zerrilli Co., 9 Agric. Dec. 1230, 1234 (1950).

Protection means that the party being protected will be saved harmless from any loss. Such

party “would be responsible only for the net proceeds obtained from . . . resale, exclusive of

any commission.” Vener Co. v. McCaffrey Bros. Co., 15 Agric. Dec. 405, 409 (1956); David

Pepper Co. v. Harris Packing Co., 14 Agric. Dec. 185, 187 (1955).

Rationale for Denying Profit, Commission, and Handling Charge, and for Allowing Freight:

In a protection against loss situation, the protected party is not getting the goods on

consignment (in which case they would remain the property of the shipper). Rather the

protected party is buying and taking title to the goods, and the original contract price remains

the baseline price. Following a breach, such party still has the potential (though perhaps

remote) to make a profit on the goods. Suppose, for instance, that the goods arrive in poor

condition and the parties negotiate a protection agreement. Even though the goods are in poor 

condition, the market might, under certain conditions, rise precipitously and the protected party 

might sell for double the original contract price. In such case, he would be liable to the seller 

only for the original price and would be able to keep all the profit. The protected party’s 

protection extends only to protection against loss. There is ever present a potential for profit, 

not a right to profit (the potential is contained in the original contract which has been modified, 

but not extinguished), and realization of the potential depends upon the protected party

reselling for more than the original contract price. Thus, the protected party under a protection 

agreement is not entitled to a profit when the resales turn out to be so low as to invoke 

protection nor is such party entitled to a commission (which is a substitute for profit in a 

consignment transaction), nor a handling fee (which, unless explained, might be a euphemism

for profit.) See Charles Johnson Co. v. Hoversen, 57 Agric. Dec. 756, 760 (1998); Oshita

Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric. Dec. 968, 973 (1991).
176

“Protection,” “full protection,” and “protection against loss” usually have the same meaning

and should be distinguished from “market protection,” or “price protection.” A protection

agreement is a modification of the original sale contract which leaves the original sale price as

the base line price for determining whether the buyer makes a profit, or is entitled to protection. 

The potential for profit remains after the conclusion of the protection agreement, and this 

potential can only be realized in the same manner as it is realized in any sale contract, namely 

by the buyer reselling at prices above the original price plus expenses. Therefore, when a buyer 

with protection fails to resell at such favorable prices and experiences a loss, the protection 

should only compensate for the loss and should not include a profit in the form of a 

commission or handling fee. Romney & Assoc., Inc. v. Super Fresh, Inc., 57 Agric. Dec. 1670,

1682-83, recon. dismissed, 1683 (1998).

Freight: The fundamental object of the protection agreement, which is to protect the buyer

against any loss, requires that no monetary loss occur. This means that a buyer who has paid

freight must be credited with the freight paid. If gross proceeds of the buyer’s resale exceed the 

f.o.b. contract price plus freight, then the buyer gets to keep the excess as profit. (The buyer 

would pay the freight to the carrier, the f.o.b. price to the seller, and keep the excess.) On the 

other hand, if gross proceeds of the resale are less than the buyer’s costs (f.o.b. price, plus 

freight), then the buyer deducts freight costs from such gross proceeds and remits the balance, 

thus suffering no loss. If gross proceeds are not enough to cover freight, then the seller who

grants full protection must chip in and pay the remainder of the freight costs. Any attempt to 

leave freight out of the equation will result in a loss to the buyer and thus infringe on the 

protection against loss granted by the seller. See Manzo v. Jarson & Zerrilli Co., 9 Agric. Dec. 

1230, 1234 (1950).

64. PURCHASE AFTER INSPECTION

The Requirements, § 46.43 (7 C.F.R. § 46.43) provide in relevant part that:

The following terms and definitions, when used in any contract of communication

involving any transaction coming within the scope of the Act, shall be construed as

follows:

. . .

(ff) “Purchase after inspection” means a purchase of produce after inspection or 

opportunity for inspection by the buyer or his agent. Under this term the buyer has no right 

of rejection and waives all warranties as to quality orcondition, except warranties expressly

made by the seller.

a. FAILURE TO USE TERM IN CONTRACT NEGOTIATIONS SIGNIFICANT
177

“Purchase after inspection” is a trade term defined in the Regulations [Requirements] and must 

be employed by the parties to be applicable. Under the U.C.C., an actual inspection of the very

goods shipped, or a sample thereof, voids implied warranties, but the suitable shipping 

condition warranty made applicable by use of f.o.b. terms is an express warranty, and 

inspection of the goods shipped will not void such warranty in the absence of proof that it was 

the intent of the parties to do so. Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 

981 (1997). See also Rich-SeaPak Corp. v. Pro-Ag, Inc., 56 Agric. Dec. 1958, 1968 (1997), 

where the sale was delivered, but the breach was of an express warranty.

The inspection of individual packages of a shipment by buyer’s agent, coupled with failure to

object, was found to have waived objections to any problems with the produce under U.C.C. §

2-316 where inspection was at time of arrival under a delivered sale. Produce Connection, Inc. 

v. Lincis, 59 Agric. Dec. 442, 444 (2000). (This issue was incorrectly categorized under U.C.C.

§ 2-316(3)(b), which applies only to inspections made before entering into the contract.

However, it could have been correctly categorized under U.C.C. § 2-607(3)(a) for failure to

give notice of breach with the same result. An inspection at shipping point by the buyer’s agent 

prior to entering into a delivered sale contract would succeed in voiding implied warranties

under U.C.C. § 2-316(3)(b).)

“. . . ‘purchase after inspection’ is a trade term which the Regulations [Requirements] 

contemplate being expressly used by the parties in their communication with each other when 

the contract is formed. Whether or not there was an express usage of the term or of words of

similar import,has been deemed highly significant in past decisions. See Ritepak Produce v. 

Green Grove Mkts., 29 Agric. Dec. 165, 169 (1970); Goldstein Fruit & Produce v. E. Coast

Distrib., 18 Agric. Dec. 493, 496 (1959).” Jim Hronis & Sons v. Luna Co., 47 Agric. Dec. 

1497, 1499-01 (1988). (These cases have been superceded by the Primary Exp. case, but show 

the direction in which the law was headed before that case was decided.)

See also G.D.I.C., Inc. v. Misty Shores Trading, Inc., 51 Agric. Dec. 850, 860 (1992), which

follows Jim Hronis & Sons.

b. INSPECTION OF SPECIFIC COMMODITY VOIDS IMPLIEDWARRANTY

Where lettuce was inspected by a commercial lettuce inspector on behalf of the buyer prior to

the parties finalizing their contractual agreement, and it was clear that such inspection was an

inspection of the specific lettuce in question and not simply an inspection of the general run of

goods available, it was held that U.C.C. § 2-316 (3)(b) provides that there is no implied

warranty, and that the long-standing decisions of the Secretary are in accord. N. Am. Produce

Buyers v. Source Produce Distrib. Co., 48 Agric. Dec. 1101 (1989). See also Hyder v.

Williamson, 48 Agric. Dec. 721-22 (1989); Frosteg v. Dade Tomato Co., 48 Agric. Dec. 701,

702 (1989).

NOTE: The f.o.b. suitable shipping condition warranty has now been held to be an

express warranty, and where f.o.b. terms are used, inspection of the specific commodity

sold does not negate such warranty. Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec.
178

969, 980-81 (1997). The above cases, however, might have applicability to the implied 

warranty of merchantability.

c. MORE THAN INSPECTION OF GENERAL RUN OF GOODS REQUIRED

Where buyer’s agent inspected the general run of goods, but not the load under dispute and the 

sale was f.o.b., it was held to not be a purchase after inspection. Malone v. Al Kaiser & Bros.,

18 Agric. Dec. 1214, 1218-19 (1959), aff’d. on reconsideration 19 Agric. Dec. 84, 85 (1960);

aff’d on reconsideration 19 Agric. Dec. 367, 369 (1960); aff’d on reconsideration 19 Agric.

Dec. 444, 445 (1960).

Where the buyer’s agent looked at four or five cartons of B. R. brand lettuce at cooler and later 

ordered a carload of the same brand by phone, it was held that the inspection of the four or five

cartons was for the purpose of checking the quality and condition of the general run of B. R.

brand lettuce and not an inspection of quality and condition of a specific quantity. Kirby &

Little Packing Co. v. United Fruit & Produce Co., 16 Agric. Dec. 1066, 1069 (1957).

65. QUALITY AND CONDITION

“‘Quality’ and ‘condition’ are terms of art as used in inspection certificates, U.S. Grade

Standards and within the produce industry. ‘Grade’ is often, but not always used as a synonym

for ‘quality.’” Supreme Berries, Inc. v. McEntire, 49 Agric. Dec. 1210, 1216 at n. 4 (1990).

“. . . Generally ‘condition’ defects are those which are subject to change due to an inherent

worsening of the defect with decay being the prime example, whereas ‘quality’ or ‘grade

defects’ are generally not subject to change. An example would be field scaring...” 10 N. Harl,

Agricultural Law § 72.10(4)(b) at note 82 (1983).

“. . . In general, the more permanent of the inherent properties of a product are classed as

quality, while its state of preservation, including deterioration, decomposition or changes of a

progressive nature which may have developed or occurred since the product was packed, is

classed as condition.” General Market Inspection Instructions for Use of Fresh Fruit and

Vegetable Inspectors, Specialty Crops Inspection Division, Specialty Crops Program,

Agricultural Marketing Service, United States Department of Agriculture, p. 148, para. 425

(April, 1988). See the same publication, pp. 150-157, for a listing of condition factors for

different commodities.

Shipping point and destination inspectors, when stating a percentage of grade (for example

“85% U.S. No. 1 quality”), lump condition and quality together to come up with a percentage

statement. This is an aberrant usage of the term “quality.” Generally, in shipping point

inspections, there is no breakdown of the quality and condition factors except that a factor such

as decay must be specified.

66. REAL PARTY IN INTEREST
179

See STANDING AND PRIVITY OF CONTRACT

67. REJECTION

See ACCEPTANCE OF REJECTION – this index. See NOTICE OF REJECTION – this 

index.

See COMMERCIAL UNIT – this index.

a. IN GENERAL

Where the buyer rejected two lots of onions and communicated such rejection to the seller in a 

timely fashion, the rejections were effective and title was revested in the seller. The seller took 

possession of the onions and had them resold. However, the seller only had one lot inspected. It 

was held that complainant seller had the burden of proof as to whether rejections were 

wrongful, and that the inspection of one lot showed that the buyer’s rejection of that lot was 

wrongful, but that there was no showing that the rejection of the other lot was wrongful.

Damages could not be awarded on the basis of the difference between resale price and contract 

price because complainant did not submit an accounting of the resale into evidence. Damages 

were awarded on the basis of the difference between market price and contract price. McKay v. 

Lusk Onion, Inc., 54 Agric. Dec. 721, 723 (1995). See also Nikademos Dist. Co. v. D & J

Tomato Co., 50 Agric. Dec. 1884, 1888-89 (1991).

Complainant sold a load of melons which were to be of specific sizes and brand, and which,

under the contract, could go to any point between Maryland and Massachusetts, but the load

was billed to respondent’s customer in Maryland. While the load was en route, respondent

learned that the sizes were not as specified and diverted the load to Massachusetts, where it was

inspected and found not to have been in suitable shipping condition when shipped.

Respondent then rejected the load, and complainant stated that it did not acquiesce in the

rejection, but nevertheless disposed of the load to protect its value. It was held that the

diversion was an acceptance, and that respondent’s rejection of the load following its act of

acceptance was a rejection without reasonable cause. Complainant signaled to respondent that 

it did not agree with its rejection of the load, but in order to preserve the value of the load,

complainant arranged for the disposal of the melons. This was stated to have been entirely

proper under the circumstances. Jen Sales, Inc. v. S. Friedman & Sons, Inc., 53 Agric. Dec.

810, 814 (1994).

In G. Tanaka Farms v. Garden State Farms, Inc., 48 Agric. Dec. 729, 730 (1989), complainant 

seller asserted that it would never have agreed to “accept Respondent’s rejection” had it not 

been for the fact that respondent misrepresented the temperatures shown by the Ryan 

temperature tape. We stated that complainant’s acceptance of the rejection was immaterial 

since we have held many times that a seller always has the duty of accepting a procedurally 

effective rejection even if the rejection is wrongful. Citing Cal-Mex Distrib., Inc. v. Tom Lange 

Co., 46 Agric. Dec. 1113, 1121 (1987); Yokoyama Bros. v. Cal-Veg Sales, 41 Agric. Dec. 535, 

537 (1982); Pope Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric.

Dec. 101, 104 (1979); Produce Brokers & Distrib. v. Monsour’s, Inc., 36 Agric. Dec. 2022,

2025 (1977); Bruce Church, Inc. v. Tested Best Foods Div., 28 Agric. Dec. 377, 382 (1969).
180

Respondent buyer received frozen potatoes and did not reject them within 24 hours as specified

by 7 C.F.R. 46.2(cc)(1), so there was no effective rejection. Global Reliance, Inc. v. Pinnacle

Food Groups LLC, 73 Agric. Dec. 342, 353 (2014).

b. DIFFERENT TYPES

The U.C.C. makes a distinction between procedurally effective and substantively wrongful

rejections. Subsection 4 of U.C.C. § 2-401 provides:

A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, 

or a justified revocation of acceptance revests title to the goodsin the seller. Such revesting 

occurs by operation of law and is not a “sale.” (Emphasis supplied)

(See White & Summers on U.C.C., 1972 ed., at §§ 7-3, 8-3 at p. 264, last paragraph on page for

explanation of effective and ineffective rejections.) A rejection was held to have been

procedurally effective but substantively wrongful in Pope Packing & Sales, Inc. v. Santa Fe

Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101, 104 (1979).

An ineffective rejection has the same legal consequence as acceptance. Dew-Gro, Inc. v. First

Nat’l Supermarkets, Inc., 42 Agric. Dec. 2020, 2025 (1983).

c. DUTIES OF RECEIVER AFTER

A buyer, post-rejection, is only to act in good faith in an attempt at reworking. A buyer

assuming the duty acts as the seller’s agent for disposition. However, the type of agency here

enforced upon a buyer is restricted, and the buyer is only required to act in good faith. Good

faith means honesty in fact and the observance of reasonable commercial standards of fair

dealing in the trade. Main St. Produce, Inc. v. W. Veg. Produce, Inc. and Main St. Produce, Inc.

v. Florance Distrib. Co., 74 Agric. Dec. 193, 226 (2015).

After rejecting produce, a receiver has a duty to dispose of the goods in commercial channels

upon the request of the shipper or in lieu of instructions from the shipper. Derrick Ranches, Inc. 

v. Purity Supreme, Inc., 46 Agric. Dec. 1245, 1247 (1987); Yokoyama Bros. v. Cal-Veg Sales,

41 Agric. Dec. 535, 537 (1982).

See Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 677 (1996), briefed below under

SELLER’S DUTY TO TAKE POSSESSION AFTER REJECTION.

See U.C.C. § 2-603.

d. GROUNDS
181

Failure “in any respect” to conform to the contract justifies rejection. U.C.C. § 2-601.

The perfect tender requirement of U.C.C. § 2-601 was applied in Harvey Kaiser, Inc. v. Kay

Packing Co., 52 Agric. Dec. 762, 765 (1993). The case involved tender of cabbage in wooden

boxes when the contract excluded wooden boxes because customers would object.

Untimely delivery - La Mantia-Cullum-Collier v. Sol Salins, Inc., 41 Agric. Dec. 307, 309

(1982).

75 cartons out of 608 were wrong brand - Garin Co. v. Mitchell, 30 Agric. Dec. 1534, 1539

(1971).

e. MUST BE CLEARLY STATED

For a rejection to be effective, it must be made in clear, unmistakable terms, and a mere

complaint is insufficient. Firman Pinkerton Co. v. Casey, 55 Agric. Dec. 1287, 1292 (1996);

Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 677 (1996); River Valley Mktg. Inc. v.

Tom Lange Co., 53 Agric. Dec. 918 (1994); W.T. Holland & Son. v. C.K. Sensenig Potatoes, 52

Agric. Dec. 1705, 1707-08 (1993); Teixeira Farms, Inc. v. Community-Suffolk, Inc., 52

Agric. Dec. 1700, 1702 (1993); Supreme Berries, Inc. v. McEntire, 49 Agric. Dec. 1210, 1216

(1990); Yokoyama Bros. v. Cal-Veg Sales, 41 Agric. Dec. 535, 536 (1982); Farm Market Serv., 

Inc. v. Albertson’s, Inc., 42 Agric. Dec. 429, 431 (1983); Saikhon v. Russell-Ward Co., 34

Agric. Dec 1940, 1942 (1975); Jarson & Zerilli Co. v. P. Tavilla Co., 30 Agric. Dec. 1360,

1363-64 (1971); Schley Bros. v. Mercurio Bros., 23 Agric. Dec. 862, 866 (1964); United

Packing Co. v. Conn. Celery Co., 16 Agric. Dec. 810, 814 (1957); John C. Lester Co. v.

Victory Distrib. Co., 11 Agric. Dec. 376, 383 (1952); San Pat Vegetable Co. v. Kyman, 5

Agric. Dec. 483, 488-89 (1946). (None of these cases states the reason for this rule, but it

should be obvious upon reflection. A complaint, no matter how vociferous, may not be

intended to communicate rejection, but merely notice of breach. Rejection and notice of breach

are very different things with very different consequences. It is therefore necessary that we

uphold a very clear distinction between the notices required for each.)

Terminology “not acceptable” could be merely an expression of displeasure such as would

qualify as notice of breach but not as notice of rejection. Beamon Bros. v. Cal. Sweet Potato

Growers, 38 Agric. Dec. 71, 73-74 (1979). “The need for a clear and unmistakable rejection is

doubly necessary where there is a subsequent unloading of the produce by the receiver with a

claim that the produce was to be handled for the shipper’s account.” Id. at 74. See also Ritclo

Produce, Inc. v. Mich. Repacking & Produce Co., 45 Agric. Dec. 1577, 1580 (1986).

f. NOTICE

A rejection is not effective unless the buyer seasonably notifies the seller and the burden of

proving seasonable notice rests upon the buyer. San Tan Tillage Co. v. Kaps Foods, Inc., 38

Agric. Dec. 867, 871 (1979); Sun World Mktg. v. Bayshore Perishable Distrib., Inc., 38 Agric.

Dec. 480, 482-83 (1979).
182

Notice by a buyer to the seller that the buyer’s customer has rejected is not notice of rejection

by the buyer to the seller. “. . . rejections must be made by each buyer to their own seller and

must be clearly communicated as such.” Phoenix Vegetable Distrib. v. Randy Wilson Co., 55

Agric. Dec. 1345, 1348 (1996).

See major topic NOTICE OF REJECTION – this index.

g. PARTIAL LOAD

See 7 C.F.R. § 46.43(ii) and U.C.C. §§ 2-105(6) and 2-606(2). See COMMERCIAL UNIT –

this index.

h. PRECLUDED BY ACCEPTANCE DOWN THE CHAIN, BUT NOT UP THE

CHAIN

Where A sold to B, B sold to C, and C sold to D, a rejection by D to C was effective even

though it occurred following C’s acceptance of the lot of produce, because the lot was accepted 

by unloading at C’s warehouse, and D was on hand to reject when the lot was unloaded.

However, following C’s acceptance, C could not reject to B, nor could B reject to A. It was 

found that, in fact, no such rejection had been attempted, but that C and B had merely

communicated the fact that D had rejected to C. A’s subsequent repossession of three-fourths of

the lot of produce was wrongful and precluded A from entitlement to the contract price as to 

more than the one-fourth of a lot left in C’s possession even though the entire lot had been 

accepted. Phoenix Vegetable Distrib. v. Randy Wilson Co., 55 Agric. Dec. 1345, 1349-50

(1996).

The buyer claimed to have rejected potatoes to the seller following failure to ship on arrival but 

showed only that the potatoes were rejected by the buyer’s customer to the buyer and failed to 

show rejection by the buyer to the seller. Alva Produce, Inc. v. Soik Sales, Inc., 51 Agric. Dec. 

1480, 1484 (1992).

i. SELLER’S DIVERSION OF LOAD TO ANOTHER MARKET FOLLOWING

REJECTION

Where a carload of lettuce sold f.o.b., without reference as to grade, was inspected on arrival in 

Chicago on October 27th, and found to contain an average of 2% damage by tipburn, 10%

damage by reddish brown discoloration following bruising affecting outer leaves and three to

five head leaves, and 2% decay, Respondent buyer rejected. The lettuce was found to have

made good delivery, and the rejection was found to be wrongful. Notice of rejection was given 

on October 27th, and on the following day the parties exchanged telegrams in an unsuccessful 

effort to reach an understanding. On October 29th, the seller turned the load over to a third 

party to resell, and the third party diverted the load to New York where it arrived on November 

3rd. The load was there determined to be in too deteriorated condition to bring freight charges,

and was abandoned to the carrier. The seller sought to recover the contract price, and the buyer 

contended that the seller failed to use due diligence in mitigating damages following rejection. 

We said:
183

There is no evidence of any negligence, delay, or bad judgment in the attempted

resale of this shipment. The diversion of the shipment to another market for

resale is not shown to have been unreasonable. Complainant testified that it is

often difficult or impossible to resell a shipment of lettuce on the same market

where it has been rejected by the original buyer. We have previously held that if,

in the seller’s judgment, a resale can be made to a better advantage by diverting it

to another market than that at which it was rejected, and there is no indication of

bad faith or lack of diligence in so doing, the validity of the seller’s action will be

upheld. The S. A. Gerard Company v. Metzler and Sons, Inc., 12 Agric. Dec. 781,

786. It is concluded that the diversion and attempted resale of this shipment was

handled in a reasonable and diligent manner.

Navajo Mktg. Co. v. Kaiser, 19 Agric. Dec. 894, 898-99 (1960).

j. SELLER’S DUTY TO TAKE POSSESSION AFTERREJECTION

A seller always has the duty of accepting a procedurally effective rejection, whether the

rejection is rightful or wrongful. Main St. Produce, Inc. v. W. Veg. Produce, Inc. and Main St.

Produce, Inc. v. Florance Distrib. Co., 74 Agric. Dec. 193, 219 (2015).

A seller must take possession of rejected goods (assuming rejection was procedurally effective) 

even if the rejection is wrongful. Yokoyama Bros. v. Cal-Veg Sales, 41 Agric. Dec. 535, 537

(1982); Produce Brokers & Distrib. v. Monsour’s, Inc., 36 Agric. Dec. 2022, 2025 (1977).

The fact that a seller takes back product and resells it after an unwarranted rejection does not, in 

and of itself, establish that there was a mutual rescission of the original contract of sale. G & S 

Produce Co. v. L.R. Morris Produce Exch., 31 Agric. Dec. 1167, 1170 (1972).

Where the buyer made an effective rejection of load of strawberries, the title automatically

reverted to the seller, and the seller had the burden of proving contractual warranty

inapplicable. The seller’s refusal to accept the rejection was meaningless, and the seller had a

primary duty to dispose of the goods. Where the seller did not dispose of the goods, the buyer’s 

duty to dispose of the goods was contingent upon the seller having no agent or place of 

business in the market of the rejection, and the burden of proof was on the seller to establish 

that it had no such agent or place of business. However, where the buyer assumed the duty of 

resale, it was assumed that duty did rest on the buyer, but the buyer was held only to good faith 

standards in making the resale. Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 681

(1996). See also U.C.C. § 2-603.

See also U.C.C. § 2-703.

k. TITLE
184

An effective rejection revests title to goods in the seller. Bruce Church, Inc. v. Tested Best

Foods Div., 28 Agric. Dec. 377, 382 (1969).

Where the buyer rejected two lots of onions and communicated such rejection to the seller in a

timely fashion, the rejections were effective and title was revested in the seller. McKay v. Lusk

Onion, Inc., 54 Agric. Dec. 721, 723 (1995).

See also U.C.C. § 2-401(4).

l. WITHOUT REASONABLE CAUSE

Section 46.2(bb) of the Regulations [Requirements] (7 C.F.R. § 46.2(bb)) defines “reject 

without reasonable cause” as a refusal or failure without legal justification to accept produce 

within a reasonable time (eight hours for truck shipments), in reality states the time limits 

within which a rejection of produce may be made. A rejection attempted after the described 

periods will be ineffective. “Reject without reasonable cause” is thus, in some cases, a 

description of an ineffective rejection. Thus, a receiver could allow a truck to sit at its dock 

without looking at its contents or taking any other action indicating acceptance. After eight 

hours expires, a “rejection without reasonable cause” will have taken place, but since no 

communication of such rejection has been made, the rejection is ineffective, and the legal 

consequences are the same as an acceptance. See 7 C.F.R. § 46.2(dd)(3). See also Fresh W. 

Mktg., Inc. v. McDonnell & Blankfard, Inc., 53 Agric. Dec. 1869, 1874 (1994); River Valley

Mktg. Inc. v. Tom Lange Co., 53 Agric. Dec. 918, 922-23 (1994).

A rejection after acceptance is usually a rejection without reasonable cause. See 7 C.F.R. §

46.2(bb).

Where the buyer “rejected” following acceptance, the seller rightly refused to accept the

“rejection” but nevertheless had the goods resold to preserve their value. The seller was

awarded the contract price less the net proceeds of the resale. The seller was credited with the

freight, which it paid as a result of having taken possession of the goods. Salinas Lettuce

Farmers Coop. v. Ag-West Growers, Inc., 50 Agric. Dec. 984, 989 (1991).

Where respondent gave notice of rejection following the unloading of produce, the rejection

was ineffective, and the load was deemed to have been accepted. Lionheart Group, Inc. v. Sy

Katz Produce, Inc., 59 Agric. Dec. 449, 456 (2000).

However, revocation of acceptance is allowed in a proper case. See Cal-Swiss Foods v. San

Antonio Spice Co., 37 Agric. Dec. 1475, 1480 (1978); Highland Grape Juice Co. v. T.W.

Garner Food Co., 38 Agric. Dec. 1001, 1008 (1979).

A rejection of goods is wrongful when it is done without reasonable cause. Turtle Valley Farms

v. Riehm Produce Co., 20 Agric. Dec. 43, 49 (1961).

68. RESCISSION OF CONTRACT
185

See U.C.C. § 2-720. See also A. Corbin, Corbin on Contracts, § 1236-37, pp. 989-93 (one vol.

ed. 1952).

A party may repudiate its rescission of a contract if its action resulted from material

misrepresentations of fact by the other party to the contract. Salinas Mktg. Coop. v. Fred

Meyer, Inc., 48 Agric. Dec. 1107, 1109-10 (1989); Tom Bengard Ranch v. Tomatoes, Inc., 41

Agric. Dec. 1637, 1639 (1982).

Facts indicating rescission, burden of proof and exercise of control over commodity as

indicating – E. Potato Dealers of Me., Inc. v. Commodity Mktg. Co., 36 Agric. Dec. 2017, 2022

(1977); Grower Sales, Inc. of Wash. v. Indep. Potato Co., 36 Agric. Dec. 1757, 1761 (1977).

69. RES JUDICATA

The terminology now generally used is claim preclusion. For collateral estoppels, the term is

issue preclusion.

In H.C. MacClaren v. M-T Fruit & Produce, Inc., 22 Agric. Dec. 1048, 1051-53 (1963), it was 

held that where respondent’s complaint in state court against complainant involving the same 

transactions as before the Secretary was dismissed on procedural grounds, such dismissal

would not be res judicata of the issues before the Secretary.

Where a Colorado state administrative forum was limited in its jurisdiction to hearing claims 

for alleged injury resulting by reason of “fraud, deceit, or willful negligence,” and made an

award not on the basis of such finding, but rather on the basis of an offer of compromise that it 

deemed an admission of liability by one of the parties, such award was found not to be res

judicata of breach of contract issues relative to the same transactions before the Secretary.

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 301 (1980).

State court final judgment used as basis for award of reparation where issue had been before

state court on compulsory counterclaim and no election of remedies had taken place. M.S.

Thigpen Produce Co. v. Park River Growers, Inc., 48 Agric. Dec. 695, 699-70 (1989). (The

case discusses the distinction between res judicata and collateral estoppel. Note that identity of 

parties is required for both.) See also Weyman v. Wash. Fruit & Produce Co., 32 Agric. Dec.

1748, 1753 (1973).

In Woods v. Conogra Inc., 50 Agric. Dec. 1018, 1026 (1991), where a claim was previously

filed with the California Department of Food and Agriculture, such Department’s determination 

of the claim in a letter was not res judicata in regard to the issues in the proceeding before the 

Secretary. The letter evidenced a lack of finality. In any event, respondents’ counsel were 

stated not to have shown that “the California Department of Food and Agriculture is accorded 

such jurisdiction under California law, in matters such as this, as would make it fall within the 

category of “a court of competent jurisdiction” within the meaning of that phrase as used in 

Section 5(b) of the Act.”
186

In Tom Lange Co., Inc. v. Atl. Produce Co., 52 Agric. Dec. 1675, 1677 (1993), a previous

default order did not include freight bills pertaining to the shipments, and complainant sought 

to recover such freight charges in the subsequent action. It was held that the subsequent action

was barred by res judicata, and we quoted Moore’s Federal Practice as follows:

As a general principle, then, the plaintiff must assert in his first suit all the legal

theories that he wishes to assert and his failure to assert them does not deprive the

judgment of its effect as res judicata. So, too, with the demand for relief. The

plaintiff must seek in his first suit all the relief to which he is entitled, and the

judgment in that suit bars a second suit seeking different or additional relief.

J. Moore, J. Lucas & T. Currier, Moore’s Federal Practice, § 410(1) (2nd Ed., 1992).

In Powell v. Georgia Sweets Brand, Inc., 58 Agric. Dec. 1136, 1143 (1999), it was held that a

state administrative forum in Georgia was a court of competent jurisdiction within the meaning

of section 5(b) of the Act, and that complainant had made an election of remedies by filing with 

that forum. It was determined that an administrative forum can be found to be a court of 

competent jurisdiction when (A) the administrative tribunal has authority over the parties and 

can render a decision on the merits that would be res judicata of the factual issues presented in 

the reparation case; and/or (B) the administrative tribunal has the authority to issue an 

enforceable monetary judgment based upon a breach of a contractual duty.

In C.H. Robinson Co. v. Buddy’s Produce, Inc., 61 Agric. Dec. 838, 843-44 (2002),

complainant filed a trust action in federal district court involving the same parties and subject

matter as in a reparation action before the Secretary, and the trust action was opposed by

respondent so as to bring the merits of the matter before the District Court. We held that there

was no election of remedies under section 5(b) of the PACA. However, a voluntary dismissal

with prejudice in the trust action by order of the District Court upon stipulation of the parties

was res judicata of all the issues before the Secretary and precluded maintenance of the claim

before the Secretary. The complaint was dismissed.

See Trans W. Fruit Co. v. Ameri-Cal Produce, Inc., 42 Agric. Dec. 1955, 1957-58 (1983).

70. REVOCATION OF ACCEPTANCE

Respondent took samples of the frozen potatoes, performed microbiological testing in its own

lab, and submitted samples to an independent lab for chemical testing. When buyer later

attempted to revoke the acceptance based on the lab results, complainant seller refused to

reclaim the potatoes without retesting. Respondent buyer made two of the four lots available

for retesting, and withheld the other two lots. Complainant did not refute buyer’s evidence

through evidence from retesting, so buyer’s revocation of acceptance was justified for the two

lots it made available. Since buyer’s evidence was controverted, its revocation of acceptance

was not justified for the two lots it withheld from retesting. Global Reliance, Inc. v. Pinnacle

Food Groups LLC, 73 Agric. Dec. 342, 358 (2014).
187

To revoke its acceptance, the buyer must show the produce failed substantially to conform to

the contract; that its acceptance was based on an assumption the problem would be cured or

that it received an inducement to accept the produce; and that the revocation occurred in a

reasonable time after discovery of the non-conformity and before other substantial damage

occurred. Highland Grape Juice Co. v. T.W. Garner Food Co., 38 Agric. Dec. 1001, 1007-14

(1979); Cal-Swiss Foods v. San Antonio Spice Co., 37 Agric. Dec. 1475, 1479-80 (1978); 

Pappageorge Produce Co. v. Dixon Produce Co., 33 Agric. Dec. 1160, 1162 (1974).

Respondent returned a portion of a lot that it had previously purchased and accepted, and

sought to prove that Complainant agreed to a contract modification assenting to the return of

the commodities. As a result of Respondent’s failure to obtain an inspection, failure to revoke 

its acceptance in a timely manner, and failure to prove its allegations of a prior course of

dealings whereby Complainant issued credits for returned merchandise, Respondent failed to

prove that it properly revoked its acceptance of the commodities. As a consequence, damages

were awarded to Complainant. D.M. Rothman Corp., Inc. v. Good Luck Produce, Inc., 66

Agric. Dec. 1472, 1482-83 (2007).

Once a proper revocation of acceptance is made, the buyer has the same rights and duties with

regard to the goods involved as if they originally were rejected. Grasso Foods, Inc. v. Quaker

Oats Co., 46 Agric. Dec. 188, 190 (1987) on reconsideration.

See U.C.C. § 2-608.

71. STANDING AND PRIVITY OF CONTRACT

Failure to show existence of contract. Phila. Fruit Exch., Inc. v. Garden State Farms, Inc., 41

Agric. Dec. 1793, 1796 (1982); Sawyer Fruit & Vegetable Co. v. Phoenix Pie Co., 18 Agric.

Dec. 946, 949 (1959); Food Sales Co. v. Smeltzer Orchard Co., 18 Agric. Dec. 1209, 1211-12

(1959).

a. BROKERS

To have a cause of action, a complainant must ordinarily prove it had a contractual relationship 

with the respondent. Evidence showed that complainant was a broker with no title to the 

produce. Adams v. Cal. Wine Growers Co., 48 Agric. Dec. 703, 704 (1989); Montgomery v. 

V.F. Lanasa, Inc., 41 Agric. Dec. 556, 558 (1982); C.H. Robinson, Inc. v. Tomato Sales Co., 15

Agric. Dec. 486, 489 (1956), where complainant had advanced paymentto the principal and was 

found to have standing that otherwise would not exist. See also Allen, Inc. v. Willard, 15 Agric.

Dec. 388, 393 (1956), where complainant broker was allowed to provide assignment of interest 

from the principal, thereby obtaining title to the debt.

In Harrisburg Daily Mkt., Inc. v. S. Boova & Co., 19 Agric. Dec. 689, 695 (1960), we stated:

It has been held in previous decisions under the act that the complainant in a

reparation proceeding must be a real party in interest as recognized by established

legal principles. [Anonymous], 15 A.D. 5[1]. The real party in interest is the
188

person who can discharge the claim upon which the suit is brought and control the

action brought to enforce it, and who is entitled to the benefits of the action, if

successful, and can fully protect the one paying the claim by other persons.

Caughey v. George Jensen & Sons, 258 P. 2d 357 (1953). A person who acts

merely as a broker or agent in a purchase and sale cannot maintain an action

against the buyer for the purchase price in the absence of an assignment from his

principal or other legal basis. Anonymous, 14 A.D. 766; Moise Products

Company v. William Faehndrich, Inc., 140 N.Y.S. 2d 49 (1955); and Awner v.

Moscowitz, 176 N.Y.S. 737 (1919).

Where complainant was a broker relative to transaction in perishables and was authorized by its 

principal, the seller, to invoice the buyer, collect and remit to the principal, the agency contract 

did not contemplate that such broker would be enabled to bring a legal action to collect the

debt. Complainant was under no obligation to pay its principal if complainant was not paid and 

was not the real party in interest for the purpose of bringing a reparation action against the 

buyer. PurePac Brokers, Inc. v. Procacci Bros. Sales Corp., 54 Agric. Dec. 734 (1995).

Where complainant was a broker relative to a transaction in perishables and was authorized by 

its principal, the seller, to invoice the buyer, collect and remit to the principal, the agency

contract did not contemplate that such broker would be enabled to bring a legal action to collect 

the debt. The fact that the principal was undisclosed at the time of contracting did not alter this 

rule, where the existence of the principal was later disclosed. Complainant was under no

obligation to pay its principal if complainant was not paid and was not the real party in interest 

for the purpose of bringing a reparation action against the buyer. Produce Serv. &

Procurement, Inc. v. Vestal, 55 Agric. Dec. 1284, 1286-87 (1996).

Broker who guaranteed its suppliers that cost of produce sold to respondent buyer would be

paid, and upon failure of respondent buyer to pay the suppliers, paid such suppliers itself, had

standing to file a reparation complaint. We stated that, “[w]hen a guarantor had made payment 

to its principal(s), it is subrogated to the principal’s right to recover amounts owed from the 

debtor who necessitated the indemnification.” C.H. Robinson Co. v. Olympia Produce Co., 49 

Agric. Dec. 1204, 1206 (1990).

b. COOPERATIVE ASSOCIATIONS

A cooperative does not have standing to bring an action for damages for injury to its members

where all the members may not have suffered injury, and suffered it in equal degree.

Complainant, a produce cooperative, filed a reparation case on behalf of its farmer members 

and some non-member farmers whose produce was sold by respondent, a growers’ agent.

Complainant failed to prove that the individual farmers effectively assigned their rights

authorizing complainant to initiate a reparation complaint on their behalf. Complainant was

only able to prove that an effective assignment took place in reference to one non-member

farmer and three farmer members who represented complainant at the oral hearing. As to the

remaining individual farmers who did not effectively assign their rights to complainant,
189

complainant has the burden of proving that it possesses the requisite standing to file a

reparation action on behalf of those individual farmers. We set forth a three-prong test to

determine whether a cooperative has standing. The prerequisites, set forth by the United States

Supreme Court in Warth v. Seldin, 422 U.S. 490 (1975) and later in Hunt v. Washington Apple 

Advertising Comm’n, 432 U.S. 333 (1977), require that an association has standing to bring suit 

on behalf of its members when (a) its members would otherwise have standing to sue in their 

own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) 

neither the claim asserted nor the relief requested requires the participation of individual 

members in the lawsuit. Complainant failed to prove that it satisfied all of the requirements as 

to the individual farmers (members and non-members) necessary to establish its associational 

standing to initiate a reparation complaint on behalf of those who had not effectively assigned

their rights to complainant. Pee Dee Produce Coop. v. Sun Valley, 55 Agric. Dec. 684, 700 

(1996).

c. FACTORING COMPANY

Where evidence in the file indicated that some of the invoices at issue in the complaint were

sold to a factoring company, it was determined that for those transactions that were factored,

Complainant had forfeited its right to recover the invoice amount from Respondent. The

factoring company is the real party in interest on the factored invoices. Bedland Produce Assoc.

LLC v. Platinum Produce Inc., 67 Agric. Dec. 672, 676-77 (2008).

Where invoices issued by Complainant to Respondent bore a prominent statement advising the 

account was sold to a factoring company and that the invoice amount should be remitted to the 

factoring company, found that Complainant had standing to sue in the absence of evidence 

showing the factoring company, as part of its agreement to purchase the receivables, assumed 

the risk of non-payment by the account debtor. In other words, the purchase of the receivables 

by the factoring company effectively placed a lien on any monies collected by Complainant 

from Respondent for the subject invoices, but did not prevent Complainant from pursuing such

collection. Fresh Harvest Int’l, Inc. v. Tomahawk Produce, Inc., 69 Agric. Dec. 841, 845

(2010).

d. INTERVENING PARTY

Where complainant sold produce to a third party which in turn sold the produce to respondent,

complainant had no standing to bring a reparation action against respondent. Ro-Bee Produce

Co. v. Quaker City Produce Co., 32 Agric. Dec. 283, 285 (1973).

Where a reparation action was brought against a produce receiver involved in the bribery of

federal inspectors on the Hunts Point Market instead of against the firm that purchased the

produce from complainant and negotiated an adjustment with complainant, it was held that

there was no privity of contract between complainant and respondent, and no jurisdiction under

the PACA. Pac. Tomato Growers v. B.T. Produce Co., 60 Agric. Dec. 348 (2001).

72. STATUTE OF FRAUDS
190

a. APPLICATION OF STATE LAW

Whether state law or PACA law prevails as regards the necessity for a writing depends on

whether the applicable state statute of frauds is substantive or procedural. Rothenberg v. H.

Rothstein & Sons, 183 F.2d 524 (3rd Cir., 1950).

In Branch v. Mission Shippers, Inc., 35 Agric. Dec. 726, 731-32 (1976), we stated our policy

relative to the applicability of State statutes of frauds to reparation proceedings:

In matters involving the statute of frauds under the Perishable Agricultural

Commodities Act, the Department has long followed the guidelines laid down in

Joseph Rothenberg v. A. Rothstein & Sons, 183 F.2d 524 (3rd Cir. 1950), 9 A. D.

1272. In that case the court made it clear that a federal district court hearing a

case on appeal from the Secretary under the Act does not sit as another court of

the state and is not governed by the rule of Erie R. Co. v. Tompkins, 304 U.S. 64

(1938). Such a case is rather “to be determined under the same rules of

substantive and procedural law as were involved in the Secretary’s proceedings.”

(Rothenberg, supra). By the same token, Rothenberg also makes it clear that

where the Act or regulations [Requirements] of the Secretary do not provide a 

solution to a problem of the validity of a contract, then state law is applicable. In 

the Rothenberg case the Court of Appeals, recognizing that Pennsylvania law was

applicable, determined that since the statute of frauds of Pennsylvania was

procedural rather than substantive it would not be applicable in a reparation

proceeding. The court reasoned that “the federal act intends to grant a new

remedy which is not dependent upon but is in addition to such other remedies as

may be available to the parties at common law or by the statute of any state”, and

that where the statute of frauds of a particular state only precluded enforcement of

an oral contract as a remedy, but left it otherwise valid, though unenforceable,

such a procedural statute would have no effect upon a proceeding before the

Secretary or a subsequent appeal therefrom.

In Woods v. Conogra, Inc., 50 Agric. Dec. 1018, 1021 (1991), where the California statute of

frauds (drawn from U.C.C. § 2-201) was in issue, we found that the statute relates to the

enforceability of an existent contract, and that Rothenberg applied. We stated:

We feel that the substantive - procedural distinction as drawn in Rothenberg is

valid and should remain applicable in reparation proceedings before the Secretary

. . . we feel warranted in holding that in future cases the burden of showing that a

particular statute of frauds is a part of the substantive law of a state in the sense

that it renders an agreement null and void as a contract and not merely

unenforceable should be upon the party claiming the benefit of the statute.

In Faris Farms v. Lassen Farms, 59 Agric. Dec. 471, 478-79 (2000), the statute of frauds

embodied in the U.C.C. was stated to be procedural and not substantive and, therefore, oral

modifications of the written contract were a matter for proof in a reparation proceeding.
191

See also Nathan’s Famous, Inc. v. Merberg, 36 Agric. Dec. 243, 247-50 (1977).

Where employees of respondent dealt exclusively with complainant regarding his crop of

potatoes and, in so doing, induced him to delay delivery beyond the dates provided in the

written contract, respondent was held to have given such agents apparent authority to modify

the contract on its behalf. It was held that an oral modification of the written contract did not

violate the statute of frauds. Further, having relied to his detriment on the promises of

respondent’s agents, complainant may claim that respondent is estopped to deny that the

contract was modified. Willoughby v. Frito-Lay, Inc., 45 Agric. Dec. 1245, 1259-60 (1986).

See also CONFLICT OF LAWS – this index.

b. WRITTEN CONFIRMATION

A written confirmation of sale meets any requirements which may be imposed under the Statute

of Frauds. Rothenberg v. H. Rothstein & Sons, 183 F. 2d 524 (3rd Cir. 1950); Whitfield

Brokerage Co. v. City Wide Distrib., Inc., 44 Agric. Dec. 936, 945 (1985); Branch v. Mission

Shippers, Inc., 35 Agric. Dec. 726, 731 (1976).

See U.C.C. § 2-201.

73. STATUTE OF LIMITATIONS

Complainant filed more than nine months after accrual of cause of action was timely when it

came within special legislation extending time limit for claims alleging false inspections on

Hunts Point Terminal Market. Procacci Bros. Sales Corp. v. B.T. Produce Co., 60 Agric.

Dec. 341, 344-45 (2001).

See JURISDICTION, subheading NINE MONTH STATUE OF LIMITATIONS – this

index.

See CAUSE OF ACTION – this index

74. SUITABLE SHIPPING CONDITION

See F.O.B. – this index.

See GOOD DELIVERY – this index. See TRANSPORTATION – this index.

Harvest Fresh Produce, Inc. v. Clark-Ehre Produce Co., 39 Agric. Dec. 703, 708-09 (1980)

explores the history and basic working of the suitable shipping condition rule more succinctly

than perhaps any other resource.

a. ABNORMAL DETERIORATION
192

The warranty of suitable shipping condition warrants that the produce was in a condition when 

loaded such that under normal shipping conditions, it would arrive at contract destination 

without abnormal deterioration. What is abnormal deterioration, which would constitute a 

breach of the warranty, “will be determined by PACA standards and regulations,” and not by

the laws and regulations of the foreign country which is the ultimate destination. Good v. 

Europacific Fruit Exp., Inc., 66 Agric. Dec. 891, 910 (2007).

b. CONTRACTUAL EXCLUSION OF A DESTINATION

Shipment of four loads of grapes to a destination that the parties agreed to exclude, but that was 

equidistant from the contract destination, was held not to cause the warranty of suitable

shipping condition to be inapplicable but to instead be a material breach of the contract in Quail 

Valley Mktg., Inc. v. Cottle, 60 Agric. Dec. 318, 338, pet. recon. denied with discussion at 338 

(2001).

c. DEFINED

See 7 C.F.R. § 46.43(i).

Major case which explains concept and many aspects of the rule. Harvest Fresh Produce, Inc.

v. Clark-Ehre Produce Co., 39 Agric. Dec. 703, 708-09 (1980).

The Regulations [Requirements],

4 in relevant part, define f.o.b. as meaning “that the produce 

quoted or sold is to be placed free on board the boat, car, or other agency of the through land 

transportation at shipping point, in suitable shipping condition . . . , and that the buyer assumes 

all risk of damage and delay in transit not caused by the seller irrespective of how the shipment 

is billed.” Suitable shipping condition is defined,5 in relevant part, as meaning, “that the

commodity, at time of billing, is in a condition which, if the shipment is handled under normal 

transportation service and conditions, will assure delivery without abnormal deterioration at the 

contract destination agreed upon between the parties.” The suitable shipping condition

provisions of the Regulations [Requirements] (7 C.F.R. § 46.43(j)) which require delivery to 

contract destination “without abnormal deterioration,” or what is elsewhere called “good

delivery” (7 C.F.R. § 46.44), are based upon case law predating the adoption of the Regulations 

[Requirements].

6 Under the rule it is not enough that a commodity sold f.o.b., U.S. No. 1, 

actually be U.S. No. 1 at time of shipment. It must also be in such a condition at the time of 

shipment that it will make good delivery at contract destination. It is, of course, possible for a

commodity that grades U.S. No. 1 at time of shipment, and is shipped under normal 

transportation service and conditions, to fail to make good delivery at destination due to age or

other inherent defects which were not present, or were not present in sufficient degree to be 

cognizable by the federal inspector, at shipping point. Conversely, since the inherently

perishable nature of commodities subject to the act dictates that a commodity cannot remain 

forever in the same condition, the application of the good delivery concept requires that we 

4 7 C.F.R. § 46.43 (i). 5 7 C.F.R. § 46.43(j). 6 See Williston Sales § 245 (rev. ed. 1948).
193

allow for a “normal” amount of deterioration. This means that it is entirely possible for a 

commodity sold f.o.b. under a U.S. grade description to fail, at destination, to meet the 

published tolerances of that grade, and thus fail to grade at destination, and nevertheless make 

good delivery.7 This is true because under the f.o.b. terms the grade description applies only at 

shipping point, and the applicable warranty is only that the commodity thus sold will reach 

contract destination without abnormal deterioration, not that it will meet the grade description 

at destination.8 If the latter result is desired then the parties should effect a delivered sale rather 

than an f.o.b. sale. For all commodities other than lettuce (for which specific good delivery 

standards have been promulgated) what is “normal” or abnormal deterioration is judicially

determined.9

d. DELAY IN SHIPMENT

Where the buyer’s carrier was late (a breach by the buyer of the express terms of the contract) 

in picking up the lettuce sold f.o.b. and on arrival at destination, the lettuce had total defects

that exceeded the good delivery standards by one percentage point, there was nevertheless a

breach of the warranty by the seller. “Complainant should have taken some action, either by

attempting to renegotiate the contract terms to reflect the change of circumstances or by

refusing to ship if it was the complainant’s opinion that the lettuce was no longer in suitable

shipping condition.” W. Vegetable Sales v. W. Coast Produce, Inc., 37 Agric. Dec. 195, 199-

200 (1978); See also Shopwell, Inc. v. Royal Packing Co., 43 Agric. Dec. 902, 906 (1984); Joe

Phillips, Inc. v. Produce Brokers & Distrib., Inc., 37 Agric. Dec. 791, 793 (1978).

See dicta in J.R. Norton Co. v. Phil Dattilo & Co. of Ohio, 37 Agric. Dec. 1940, 1944 (1978).

“However, even had the evidence indicated that the shipping delay was the fault of respondent, 

complainant’s argument must fail since where a shipper has actual knowledge of a buyer’s 

tardiness prior to shipment of the produce and allows the produce to be shipped without

altering contract terms, the shipper cannot then raise the buyer’s tardiness as evidence of 

abnormal transportation service negating good delivery requirements.”

Where a load was delayed in transit two to three days due to misdirection by the seller such

delay was discounted in determining whether there was abnormal transportation. Woods Co.

v. PSL Food Mkt., 50 Agric. Dec. 976, 981 (1991).

7 See Pinnacle Produce, Ltd. v. Produce Prod., Inc., 46 Agric. Dec. 1155, 1157 (1987); G & S Produce v. Morris 

Produce, 31 Agric. Dec. 1167, 1170 (1972); Lake Fruit Co. v. Jackson, 18 Agric. Dec. 140, 143 (1959); and Haines

Ass’n v. Robinson & Gentile, 10 Agric. Dec. 968, 972 (1951). 8 As an illustration, the United States Standards for Grades of Lettuce (7 C.F.R. § 51.2510 et seq.) allow lettuce to grade 

U.S. No. 1 with 1% decay at shipping point or 3% decay at destination. The good delivery standards, however, allow an 

additional “2 percent decay. . . in excess of the destination tolerances provided . . . in the U.S. Standards for Grades of 

Lettuce.” Thus, lettuce sold as U.S. No. 1, f.o.b., could have 4% decay at destination and therefore fail to grade U.S. No. 

1, but nevertheless make good delivery since the amount of decay would not exceed the total of 5% allowed by the good 

delivery standards. Of course, in the case of other commodities for which specific good delivery standards have not been 

promulgated, the concept of good delivery allows a similar expansion of any destination grade tolerances under the 

judicial determination of good delivery. See cases cited in note 16, supra. 9 See Harvest Fresh Produce, Inc. v. Clark-Ehre Produce Co., 39 Agric. Dec. 703, 708-09 (1980).
194

e. DETERMINING CONTRACT DESTINATION

In an f.o.b. transaction, when the parties do not agree as to the contract destination, the

significant factors in determining the intended contract destination are: 1) indication in writing, 

such as a broker’s memorandum or other memorandum, of the agreed contract destination; 2) 

indication of knowledge on the part of the seller as to the ultimate destination; and 3) the 

absence of an intermediate point of acceptance by the buyer. Mirabella Farms, Inc. v. Fruit 

Patch Sales, LLC, 67 Agric. Dec. 621, 635 (2008).

Contract destination is not necessarily identical with the destination specified in the freight

contract. See Ont. Int’l, Inc. v. Nunes Co., 52 Agric. Dec. 1661, 1669-72 (1993).

Where the parties do not agree on a contract destination, the suitable shipping condition

warranty is inapplicable. Ga. Vegetable Co. v. Battaglia Produce Sales, Inc., 41 Agric. Dec.

969, 974 (1982); Joseph F. Byrnes Produce, Inc. v. Kaleck Distrib. Co., 40 Agric. Dec. 997,

999 (1981); Florance Distrib. Co. v. M. Offutt Brokerage Co., 35 Agric. Dec. 1276, 1279

(1976).

Where the seller shipped broccoli to an intermediate cold storage facility where it was accepted 

by the buyer and then shipped to the buyer’s customers in the Orient, and there was no 

documentation as to an agreed contract destination but the seller admitted knowing that the

broccoli was destined for the Orient, it was found that the acceptance at the cold storage facility 

by unloading the broccoli into a common storage with other previous or subsequent shipments 

from other transactions between the parties indicated that the seller did not intend the contract 

destination to be the Orient. This was stated to be especially true absent a showing that the 

seller had knowledge that the shipments were segregated in storage, and promptly shipped to a 

known destination for each shipment. The decision makes the following comments as to what

factors are important in determining contract destination:

Neither knowledge of the ultimate destination by a seller, nor the destination

specified in a freight contract is a conclusive consideration. Particularly pertinent

to the transactions in this case is the fact that acceptance by a buyer at shipping

point, or at an intermediate point, does not necessarily relieve a seller of

responsibility to the ultimate destination. The crucial and ultimate question is

what did the parties consider to be the contract destination as to the contract

between themselves. Or, put another way, did they intend that the seller was to

assume the obligation of shipping goods that would carry, without abnormal

deterioration, to the ultimate destination, or only to the intermediate point? If we

were to list the significant factors for determining intended contract destination in

descending order of importance they would rank as follows:

1). Indication in writing, such as a broker’s memorandum or other contract

memorandum, of the agreed contract destination.
195

2). Indication of knowledge on the part of the seller as to the ultimate destination.

This might be shown by a freight contract, phytosanitary certificates, or other

documents, or it might be admitted.

3). The absence of an intermediate point of acceptance by the buyer.

Clark Produce v. Primary Exp. Int'l, Inc., 52 Agric. Dec. 1715, 1720-21 (1993).

On the other hand, where strawberries were billed to intermediate destination for consolidation 

with other produce and accepted at such destination by the buyer, but invoice and bill of lading 

stated more a distant destination in addition to the intermediate destination, it was held that the 

acceptance at the intermediate point did not void the suitable shipping condition rule and that 

such rule was applicable to the more distant destination. A breach found on the basis of an

inspection at the ultimate destination which was three thousand miles removed from the 

intermediate acceptance point. Bud Antle, Inc. v. Pac. Shore Mktg. Corp., 50 Agric. Dec. 954, 

958 (1991). Here, unlike the preceding case, the contract documents stated the more distant 

destination.

In an f.o.b. sale of four truckloads of sweet corn, the invoices stated that the produce was to be 

shipped to respondent at Bainbridge, Georgia, and the bills of lading stated the destination as 

respondent, but did not give an address. The contract was negotiated between a grower’s agent, 

representing complainant, and an employee of respondent. The parties offered no testimony as 

to the contractual agreement, but complainant’s representative admitted that the truck driver 

requested of complainant’s dock foreman that phytosanitary certificates be issued as to three of 

the loads because they were going to Canada. The dock foreman was unprepared for the request 

and the certificates were supplied later to respondent. It was held that the contract destination 

was Bainbridge, Georgia. Alger Farms, Inc. v. Foster, 57 Agric. Dec. 1655, 1661-65 (1998).

Knowledge of a seller as to the ultimate destination of a load may, under certain circumstances, 

be incidental, and not form a part of the contract so as to make the warranty applicable to the 

known destination. Ritclo Produce, Inc. v. Benavidez, 43 Agric. Dec. 1594-95 (1984); James

Burns & Son v. Chi. Potato Exch., 19 Agric. Dec. 1062, 1067-68 (1960).

Complainant sold a load of melons which were to be of specific sizes and brand and which,

under the contract, could go to any point between Maryland and Massachusetts, but the load

was billed to respondent’s customer in Maryland. While the load was en route, respondent

learned that the sizes were not as specified and diverted the load to Massachusetts where it was

inspected and found not to have been in suitable shipping condition when shipped.

Respondent then rejected the load, and complainant stated that it did not acquiesce in the

rejection but nevertheless disposed of the load to protect its value. It was held that the diversion 

was an acceptance, and that the subsequent rejection was wrongful. Contract destination was

found to be any point between Maryland and Massachusetts for purposes of the suitable 

shipping condition rule. Jen Sales, Inc. v. S. Friedman & Sons, Inc., 53 Agric. Dec. 810, 813-14

(1994).
196

Where respondent sold complainant two Sealand containers of apples in response to

confirmation requiring that apples meet all requirements for export to Holland and, at

complainant’s request, supplied phytosanitary certificates showing that the apples were to be

exported to Holland, but the containers were billed by respondent to complainant in

Pennsylvania, and complainant billed the containers on the same day with respondent’s

knowledge to Port of Elizabeth, Elizabeth New Jersey for shipment to Holland. It was held that 

the contract destination was Holland. Raymond “Mickey” Cohen & Son, Inc. v. Great Lakes

Fruit & Produce, Inc., 52 Agric. Dec. 1686, 1697 (1993).

f. DIVERSION

The warranty of suitable shipping condition may be found inapplicable if produce is diverted

while in transit to a more distant destination. Valley Avocado Sales, Inc. v. Walsh Tropical

Fruit Sales, 35 Agric. Dec. 1776, 1779 (1976); A.A. Corte & Sons v. J. Lerner & Son, 14 Agric.

Dec. 320, 324 (1955); Anonymous, 13 Agric. Dec. 699, 703-04 (1954); Anonymous, 10

Agric. Dec. 1334, 1340-41 (1951); Gillarde Co. v. Frankenthal Co., 10 Agric. Dec. 1284,

1289-90 (1951); Assoc. Fruit Distribs. of Cal. v. Mailloux Fruit & Produce Co., 5 Agric. Dec.

290, 293 (1946); Anonymous, 3 Agric. Dec. 425, 430 (1944).

The receiver’s diversion of the tomatoes to a gassing and de-greening facility after they left the 

shipper’s location represented abnormal transit conditions and voided the warranty of suitable 

shipping condition. Six L’s Packing Co. v. Tray-Wrap, Inc., 46 Agric. Dec. 1266, 1270-71

(1987).

See WHEN APPLICABLE AT A SECONDARY DESTINATION – this topic.

g. EXCEPTION TO NORMAL TRANSPORTATION REQUIREMENT

A judicial exception to the requirement that transportation be normal in order for the warranty 

to apply has been long recognized. This exception allows a buyer to prove a breach of the

seller’s warranty of suitable shipping condition, in spite of the presence of abnormal

transportation if the nature of the damage found at destination is such as could not have been

caused or aggravated by the faulty transportation service. The exception was explained in

Anonymous, 12 Agric. Dec. 694, 698 (1953) as follows:

It is a well established rule that evidence of abnormal deterioration of the

commodity upon its arrival at destination is evidence of breach of the warranty of

suitable shipping condition only in cases in which the transportation was normal

. . .

The reason for the rule is obvious. Whether the commodity, at time of billing,

was in good enough condition to travel to destination without abnormal

deterioration can be determined only from the condition in which it did arrive at

destination, and where the carrier provides such faulty service as may have

damaged the commodity in transit, it becomes impossible to attribute the

abnormal deterioration found at destination to the condition at time of billing.
197

The rule does not necessarily assume that abnormal transportation service caused

the damage. It merely acknowledges such possibility, and even though the

possibility of unsuitable condition at time of billing remains, it bars a recovery for

want of proof that the damage resulted therefrom.

Since this is the rational of the rule, it has been held, as an exception to the rule,

that a buyer may prove breach of the seller’s warranty of suitable shipping

condition in spite of proof of abnormal transportation service if the nature of the

damage found at destination is such as could not have been caused by or

aggravated by the faulty transportation service.

The exception has also been applied where, even though the faulty transportation service would 

have most certainly aggravated the damage found at destination, the damage is nevertheless 

deemed to be so excessive that the commodity would clearly have been abnormally 

deteriorated even if transit service had been normal. See Sharyland Corp. v. Milrose Food

Brokers, 50 Agric. Dec. 994, 998-99 (1991); Mut. Vegetable Sales v. Hite, 42 Agric. Dec. 1576,

1583 (1983); Garin Co. v. Santisi Produce Co., 35 Agric. Dec. 1452, 1455 (1976); Royal 

Packing Co. v. Quaker City Produce Co., 37 Agric. Dec. 1486, 1492 (1978); Sanbon Packing 

Co. v. Spada Distrib. Co., 28 Agric. Dec. 230, 234 (1969). See also Tony Misita & Sons

Produce v. Twin City Produce, 41 Agric. Dec. 195, 201 (1982), where we said:

Abnormal transportation service or condition voids the warranty of suitable

shipping condition applicable in f.o.b. sales . . . unless the abnormal deterioration

found at destination is of such a nature or extent that it could not have been

caused or substantially aggravated by the faulty transportation.

A transit period of three and one-half to four days was held to be abnormal where the usual

transit period was one and one-half to two days. However, under the judicial exception to the

abnormal transportation rule, the seller was found to have breached the contract. Pac. Tomato

Growers v. Am. Banana Co., 60 Agric. Dec. 352, 377-78 (2001).

See also Nikademos Dist. Co. v. D & J Tomato Co., 50 Agric. Dec. 1884, 1890-92 (1991);

Admiral Packing Co. v. Sam Viviano & Sons, 40 Agric. Dec. 1993, 1998-99 (1981) (exception

discussed and not applied where lettuce had average 24% rot in advanced stages, load was

delayed two days, temperature tape showed 40-45o F, and arrival temperatures were 54-60o F.

We stated such factors “prevent us from concluding that the damage in the lettuce was so

excessive that we can say with certainty that the commodity would have been abnormally

deteriorated even if transit services and conditions had been normal.”); and Inter Harvest, Inc.

v. Vegetable Mkt. of Cleveland, Inc., 34 Agric. Dec. 697, 700 (1975).

Related case which deals with standard of proof in similar situation. Martori v. Hous.Fruitland,

Inc., 55 Agric. Dec. 1331, 1338-39 (1996).

h. HELD TO BE AN EXPRESS WARRANTY
198

Under the U.C.C., an actual inspection of the very goods shipped, or a sample thereof, voids

implied warranties, but the warranty of suitable shipping condition is made applicable by the 

use of f.o.b. terms, an express warranty, and inspection of the goods shipped will not void such 

warranty in the absence of proof that it was the intent of the parties to do so. Primary Exp. Int’l 

v. Blue Anchor, Inc., 56 Agric. Dec. 969, 980-81 (1997).

i. INHERENT DEFECT

This subject does not properly fall under suitable shipping condition, but under the warranty of 

merchantability. In Lookout Mountain Tomato & Banana Co. v. Consumer Produce Co. of

Pitts., 50 Agric. Dec. 960, 967 (1991), we stated:

It must be remembered that the warranty of suitable shipping condition is an

extension of the common law warranty of merchantability. The warranty of

merchantability is applicable only at shipping point. The suitable shipping

condition warranty allows us to look at the condition of perishables at contract

destination and to conclude on the basis of their condition at destination whether

there was a breach (when they were loaded at shipping point). The question is

always: were the perishables, at shipping point, in suitable condition for shipment

to a specific destination? If no destination was specified in the contract the

warranty does not apply because the seller is deemed to be giving a warranty only

that the perishable goods will last so as to arrive at the agreed destination without

abnormal deterioration. It is a given that perishables deteriorate. Under the

warranty we must consider whether the deterioration was normal in degree or

abnormal. Thus when we speak of “inherent” defects it must first be understood

that there is a fundamental sense in which all perishables could be thought of as

inherently defective. Furthermore, the warranty of suitable shipping condition

takes us to a second level of inherent defect, i.e. to consideration of the question

of whether there was abnormal deterioration. Admittedly, we have on rare

occasions, gone to a third level of consideration of the question of inherent

defect--the only level on which we use the term “inherent defect” as a special

legal category. However, this has thus far been restricted to one situation only,

namely, that of green tomatoes which arrive green, and in apparent good

condition, but which fail, when set aside for ripening, to ripen properly.10 To find

an inherent defect in the present case would take us to a fourth level.

For Latent Defects – see MERCHANTABILITY – WARRANTY OF, subheading –

WARRANTY’S APPLICABILITY TO LATENT DEFECTS – this index.

10 See Brown & Hill v. U.S. Fruit Co., 20 Agric. Dec. 891, 894 (1961); J.D. Bearden Produce Co. v. Pat’s Produce Co., 

12 Agric. Dec. 682, 692-93 (1953). It is interesting that the Bearden case, which was the first in which the question was 

considered, explicitly refused to find a breach of the warranty of suitable shipping condition, and instead went back to 

the common law warranty of merchantability as embodied in the Uniform Sales Act of Colorado which was deemed 

applicable under the relevant choice of law rule. In Welch Fruit Sales v. Jos. Notarianni & Co., 38 Agric. Dec. 589 

(1979), it was acknowledged that the concept might be applied to other commodities if the situation were truly 

analogous.
199

j. INSPECTION BY BUYER

Formerly, it was held that if a buyer, directly or through its agent, inspects specific produce

prior to its purchase, the warranty of suitable shipping condition does not apply, as the buyer is 

deemed to have made a purchase after inspection at shipping point. Goldstein Fruit & Produce

v. E. Coast Distrib., 18 Agric. Dec. 493, 496 (1959); Anonymous, 9 Agric. Dec. 146, 149

(1950). However, in Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 981 (1997), it 

was held that while under the U.C.C. an actual inspection of the very goods shipped, or a

sample thereof, voids implied warranties, the suitable shipping condition warranty, made

applicable by use of f.o.b. terms, is an express warranty, and inspection of the goods shipped

will not void such warranty in the absence of proof that it was the intent of the parties to do so.

(Remember that this does not apply to the implied warranty of merchantability.)

k. RELATIONSHIP TO GRADE STANDARDS

See GOOD DELIVERY – GRADE STANDARDS AS REFERENCE POINT FOR

DETERMINING – this index.

A commodity sold as U.S. No 1, f.o.b., may be inspected at destination and fail to grade U.S.

No. 1, but still make good delivery. See Sunfresh, Inc. v. Brown, 49 Agric. Dec. 626, 630

(1990); Pinnacle Produce Ltd. v. Produce Prod., Inc., 46 Agric. Dec. 1155, 1157 (1987); G & S

Produce v. Morris Produce, 31 Agric. Dec. 1167, 1170 (1972); Lake Fruit Co. v. Jackson, 18

Agric. Dec. 140, 143 (1959). (The case involved the sale of oranges U.S. No. 1, f.o.b.

Separate destination tolerances existed for oranges, and the federal inspection at destination,

after normal transit, found that the oranges failed to grade. It was nevertheless held that the

oranges made good delivery. “Complainant did not warrant that the oranges would be U.S. No. 

1 at destination, but under the f.o.b. contract did warrant that they were in suitable shipping 

condition at time of shipment.”) Haines City Growers Ass’n v. Robinson & Gentile, 10 Agric.

Dec. 968, 972 (1951); Robert E. Fadler Co. v. J. Dicola & Co., 8 Agric. Dec. 1251-53 (1949).

l. VOID WHEN FINAL DESTINATION NOT SPECIFIED

The warranty of suitable shipping condition is void when a final destination is not agreed upon

in the contract. B & L Produce, Inc. v. Florence Distrib. Co., 37 Agric. Dec. 78, 80-81 (1978);

Brannan, Chapman & Edwards, Inc. v. Silverstreak Distrib., Inc., 26 Agric. Dec. 1152, 1154

(1967).

Warranty inapplicable where buyer took possession of commodity at shipping point and no

destination was specified in the contract of sale. Turtle Valley Farms v. Riehm Produce Co., 20

Agric. Dec. 43, 49 (1961); James Burns & Sons v. Dakota Chief Sales Co., 19 Agric. Dec. 110,

113 (1960); McCabe v. Higgins Potato Co., 17 Agric. Dec. 1022, 1025-26 (1958).

See 7 C.F.R. § 46.43 (j).

m. WHEN APPLICABLE AT A SECONDARY DESTINATION
200

The following cases are set forth in a progressive fashion so as to show the development of this 

subject. The definitive case is Alger Farms, Inc. v. Foster, 57 Agric. Dec. 1655, 1665 (1998),

which is digested near the end of this sub-topic.

In Magic Valley Potato Shippers, Inc. v. C.B. Marchant & Co., 42 Agric. Dec. 1602-04,

(1983), we said (dicta) “the diversion of the car to a different destination than that specified in

the contract would not necessarily leave respondent totally without benefit of the warranty

since the condition of the commodity at that different point may be relevant in determining

whether the commodity would have been abnormally deteriorated at the destination specified.” 

The statement was truly dicta because transportation was found to be abnormal on other

grounds, however, three cases were cited for the dicta:

The first case was A & R Lettuce Co. v. John L. Senini Co., 15 Agric. Dec. 997, 1003 (1956),

where the shipping point was Salinas, California, and the contract destination for two cars of

lettuce was Kansas City, Missouri. The two loads were shipped to Chicago where they were

inspected, and then to Boston where they were inspected again. We stated, “. . . the condition of 

the produce at the more distant point may be relevant in determining whether the produce was 

abnormally deteriorated at the destination specified in the contract.” The private inspections in 

Chicago were not deemed usable because they did not show an average percentage of decay. 

The inspections in Boston showed serious decay but were deemed too remote in time (six days

after the Kansas City arrival) to be used.

With the second cited case, A.A. Corte & Sons v. J. Lerner & Son, 14 Agric. Dec. 320, 324

(1955), we come to a significant and definitive decision. Two carloads of potatoes were

shipped from Summerdale, Alabama, to contract destination in Chicago. Shortly after

shipment, the buyer diverted them to Pittsburgh. After stating that the “scheduled shipping time 

from Summerdale, Alabama, to Pittsburgh is one day longer than the scheduled time from

Summerdale to Chicago), the Judicial Officer said:

It is a misinterpretation of the regulation quoted above to hold that the diversion

of a shipment to any point other than the destination specified in the contract of

sale automatically and arbitrarily voids the implied warranty of suitable shipping

condition. If it can be established by reliable evidence that a shipment which has

been so diverted is so deteriorated upon arrival that it can be concluded with

assurance that it would also have been abnormally deteriorated had it been

delivered at the destination specified in the contract, the requirements of the

regulation are met and the implied warranty is applicable. Cf. United Packing Co.

v. Schoenburg, 13 A.D. 175. (Emphasis supplied).

The first car arrived in Pittsburgh on time (one day beyond arrival time for Chicago) and

showed 13% average slimy soft rot. On this basis, it was found that the warranty of suitable

shipping condition was breached. The second car arrived in Pittsburgh three days after they

would have arrived in Chicago. Although the inspection found an average of 20% slimy soft rot

the Judicial Officer said, “. . . it cannot be said with certainty that they would have been
201

abnormally deteriorated at Chicago three days earlier . . .” emphasis supplied), and no breach

was found.

In the third case, United Packing Co. v. Schoenburg, 13 Agric. Dec. 175, 180 (1954), two

carloads of cantaloupes were shipped from California to Chicago and diverted by the buyer to

Atlanta. It was stated that the cars arrived in Atlanta only one day later than when they should

have arrived in Chicago, the degree of deterioration did not indicate a breach of the warranty of

suitable shipping condition.

In Kirby & Little Packing Co. v. United Fruit & Produce Co., 16 Agric. Dec. 1066, 1069

(1957), “. . . the contract destination of the shipment was St. Louis, with respondent diverting 

en route to Chicago. While the warranty of suitable shipping condition does not apply where a

shipment is to go beyond the contract destination, A.A. Corte & Sons v. J. Lerner & Son, 14

Agric. Dec. 320, 324 (1955), it was established at the oral hearing that the shipping time from

Salinas to Chicago was the same as that from Salinas to St. Louis. Accordingly, the implied

warranty of suitable shipping condition still applies.” We found a breach on the basis of the

inspection in Chicago and awarded damages.

Similarly, in Stake Tomatoes v. World Wide Consultants, 52 Agric. Dec. 770, 773 (1993),

where the contract destination was Dallas, Texas, and tomatoes were instead diverted to

Cleveland, Ohio, it was held that since the travel time from Ruskin, Florida to Cleveland, Ohio, 

was no greater distance than the travel time from Ruskin, Florida to Dallas, Texas, the 

diversion did not contribute to the breach, and the express warranty as to the color of the

tomatoes was upheld.

Where the contract destination was Minneapolis, Minnesota, and the goods were diverted by 

the buyer to Philadelphia and New York, it was stated that, “it cannot be said that the condition 

of the fruit at the more distant points establishes that the fruit would have been abnormally 

deteriorated if delivered directly to Minneapolis.” Sunny Roza Fruit & Produce Co. v. 

Northwest, 20 Agric. Dec. 1193, 1197 (1961).

In Justice v. E. Potato Dealers of Me., Inc., 30 Agric. Dec. 1352, 1359 (1971), the potatoes

were sold and shipped from Horntown, Virginia, to Horsey, Virginia, but the seller testified

that he knew the potatoes were going to eastern markets. The buyer accepted the potatoes in

Horsey and sold and shipped them to eastern markets where they arrived showing considerable 

decay. We said, “[i]f respondent wished to have the warranty of suitable shipping condition

apply to a farther destination than Horsey, Virginia, in connection with the f.o.b. shipments, it

should not have made Horsey, Virginia, the contract destination.” See also Martin Produce, 

Inc. v. Basil Co., 30 Agric. Dec. 836, 844-45 (1971); John Moon Produce Co. v. Wolverine 

Fruit Co., 27 Agric. Dec. 938, 943-44 (1968); Fla. Planters, Inc. v. A.A. DeLorenzo & Assoc., 

Inc., 27 Agric. Dec. 795, 798 (1968).

The warranty was held not applicable where respondent took delivery under an f.o.b. contract 

at shipping point (bill of lading said ship to respondent at shipping point city), and the

commodity was shipped to a distant destination. Prompt inspection at a distant destination

showed substantial condition defects in tomatoes, but respondent was held liable for the full

price. Rancho Vergeles, Inc. v. Shelton, 46 Agric. Dec. 1031, 1034 (1987). The same result was
202

reached where product was sold f.o.b. and the destination on the invoice and bill of lading was

in a nearby city in the same state (Florida), but the product was carried to New York.

Lindeman Produce, Inc. v. Ben Litowich & Son, Inc., PACA R-91-068, slip op (November 12, 

1991). See also Burnand & Co. v. Essential Produce Int’l Corp., 34 Agric. Dec. 1021, 1026 

(1975), where Mexican tomatoes were shipped from Nogales to respondent in Nogales, and by 

respondent to Tennessee and Ohio. The inspection in Youngstown was not considered. We 

said, “[o]ne of the express conditions rendering the warranty applicable to an f.o.b. sale is an 

agreement between the parties concerning the contract destination of the goods. Since we have 

already found that complainant did not agree, or even know, that Youngstown was the 

destination of the goods at the time of sale to EPIC, the warranty is not applicable to this 

transaction.”

On the other hand, where strawberries were billed to an intermediate destination for

consolidation with other produce and accepted at such destination by the buyer, but the invoice 

and bill of lading stated a more distant destination in addition to the intermediate destination, it 

was held that the acceptance at the intermediate point did not void the suitable shipping 

condition rule and that such rule was applicable to the more distant destination. A breach found 

on the basis of an inspection at the ultimate destination which was three thousand miles

removed from the intermediate acceptance point. Bud Antle, Inc. v. Pac. Shore Mktg. Corp., 50 

Agric. Dec. 954, 958 (1991).

By analogy to the judicial exception to the requirement that transportation be normal in order

for the warranty of suitable shipping condition to apply, it was found that Canadian inspections 

could be used to attempt proof that corn shipped to Georgia was not in suitable shipping 

condition. This proof would relate to the condition of the corn that would have been shown by a 

timely inspection following a timely arrival at the contract destination in Bainbridge, Georgia,

and would have to demonstrate the breach of the warranty at that point with reasonable 

certainty. There was no question of application of the warranty at the alternative destination, 

but it was purely a question of proof of condition at contract destination. It was found that, 

although the condition factors shown by the Canadian inspections were extensive, the standard 

of reasonable certainty had not been met. Alger Farms, Inc. v. Foster, 57 Agric. Dec. 1655, 

1665-69 (1998).

A related case which deals with the standard of proof in a similar situation is Martori v. Hous.

Fruitland, Inc., 55 Agric. Dec. 1331, 1337 (1996). For synopsis of holding, see EVIDENCE –

SELF-EVIDENT AND CERTAIN – this index.

It thus appears that most of the cases that state the principle allowing the use of a distant

inspection end up not finding a breach. The one case that did find a breach, the 1955 A. A.

Corte & Sons case, speaks of “assurance” and “certainty” being necessary for finding a breach. 

This case and the 1998 Alger Farms case give the most extensive treatment of the rationale for 

use of an inspection made at a distant point. The latter case requires that it be “self-evident and 

certain” that the commodity would have been non-conforming at the contract destination. The 

reason for this stricture is to preserve the intent of the parties. The suitable shipping condition 

rule is applicable by its express terms only to the contract destination agreed upon by the 

parties. If we use an inspection at a different destination it must be only for the purpose of 

determining the condition at the contract destination. The vagaries that inevitably attach to 
203

making such a determination dictate that we adopt a rule requiring certainty, or the “contract 

destination” provision of the suitable shipping condition warranty becomes meaningless.

n. WHEN TRANSPORTATION NOT NORMAL

See EXCEPTION TO NORMAL TRANSPORTATION REQUIREMENT – this topic.

See TRANSPORTATION – this index.

The warranty of suitable shipping condition is void when there is abnormal transportation with

respect to time (or temperature, etc.). Raymond “Mickey” Cohen & Son, Inc. v. Great Lakes

Fruit & Produce, Inc., 52 Agric. Dec. 1686, 1698-99 (1993); C & E Enter., Inc. v. Santa Maria 

Sales, Inc., 48 Agric. Dec. 727, 728 (1989); Bodine Produce Co. v. Cusumano Bros. Co., 37 

Agric. Dec. 1569, 1576 (1978); Pacific Farm Company v. John E. Russo Produce Co., Inc., 37

Agric. Dec. 428 (1978); Freshpict Foods, Inc. v. Navilio, 32 Agric. Dec. 1600, 1604 (1973); 

Hatcher & Holland v. Bell Tomato Co., 29 Agric. Dec. 1057, 1063 (1970); Berman, Propper &

Co. v. Luft Produce Co., 9 Agric. Dec. 863, 866-67 (1950).

Where tomatoes were packed in the field and not pre-cooled, it was found that the failure of the 

refrigeration equipment to bring the temperature down to the temperature specified on the bill 

of lading did not constitute abnormal transportation. A transit period of three and one-half to

four days was held to be abnormal where the usual transit period was one and one-half to two 

days. However, under the judicial exception to the abnormal transportation rule, the seller was 

found to have breached the contract. Pac. Tomato Growers v. Am. Banana Co., 60 Agric. Dec. 

352, 377-78 (2001).

75. SUSPENSION AGREEMENT

Imported Mexican tomatoes were diverted from the original contract destination specified by 

the first buyer and inspected by USDA in New York City, New York. The tomatoes were

subject to the 2013 Suspension Agreement for Fresh Tomatoes from Mexico (Suspension

Agreement). The contract price could not be adjusted, because the shipment was not inspected 

at the destination contracted by the first buyer as required by the Suspension Agreement. IPR

Solutions LLC v. Star Produce US LP, 75 Agric. Dec. 350, 354 (2016).

Where tomatoes were purchased by Respondent from Complainant pursuant to the December 

4, 2002 Suspension Agreement on Fresh Tomatoes Imported from Mexico, Respondent’s claim 

that the tomatoes were not merchantable due primarily to the quality defects disclosed by a 

USDA inspection cannot be considered because the Suspension Agreement permits

adjustments to the sales price for the condition defects listed in the Agreement and for no other 

defects. The language used in the Suspension Agreement is sufficiently explicit to bring the 

exclusion of warranties to the buyer’s attention and make plain that there are no implied
204

warranties. Omega Produce Co. v. Boston Tomato & Packing LLC, 64 Agric. Dec. 1156, 1164

(2005).

Where the parties to a contract covering tomatoes imported from Mexico agreed, following

their arrival at destination, to the tomatoes being handled pursuant to the May 2, 1997,

Clarification of the October 28, 1996 Suspension Agreement on Fresh Tomatoes from Mexico

(termed the “Commerce Dept. Rules”), it was held that, although such rules used portions of

the accustomed terminology of the U.C.C., this Department’s Regulations [Requirements] and 

decisions under the PACA in a way that is foreign to the usual meaning accorded those terms, 

the Secretary would seek to give effect to the intent of the parties as evidenced by their 

agreement to abide by such rules. Accordingly, the “Commerce Dept. Rules” were interpreted 

in a manner deemed to be consistent with the intended meaning of such rules rather than in 

accord with the meaning usually accorded to the terms used therein. Ta-De Distrib. Co. v. R.S. 

Hanline & Co., 58 Agric. Dec. 658, 670-71 (1999).

Where the December 4, 2002, Suspension Agreement for Fresh Tomatoes from Mexico was

found to be applicable to the sale by Complainant of one truckload of tomatoes to Respondent, 

and Respondent secured an inspection of the tomatoes at a destination in Canada, determined 

that Respondent was not entitled to an adjustment of the sales price of the tomatoes, because a 

USDA inspection certificate was not provided. Cimino v. Nature’s Way Farms LLC, 66 Agric. 

Dec. 1519, 1525 (2007).

Where the sale of Mexican grown tomatoes falls under the terms of the Suspension Agreement

for Fresh Tomatoes from Mexico, 73 FR 4831 (2008). Appendix D of the Suspension

Agreement provides specific procedures for adjusting the sale price following a breach of

contract by the seller. Only tomatoes with specific condition defects, documented by a timely

unrestricted USDA inspection, are considered defective tomatoes. The seller may reimburse the 

buyer for defective tomatoes and specific reasonable expenses. Uninspected portions of a lot of

tomatoes are not eligible for an adjustment. Wm. Consalo & Sons Farms, Inc. v. Abdallah, 68

Agric. Dec. 1277, 1286 (2009).

Where the calculation of damages for a material breach involves tomatoes sold subject to the

2002 Suspension Agreement (Suspension of Antidumping Investigation: Fresh Tomatoes from

Mexico), the Agreement provides that any adjustments made to the sales price, other than those 

allowed for certain changes in condition following shipment, must be factored into the 

determination of the price of the tomatoes accepted, and that price must not fall below the

reference price. Del Campo Supreme, Inc. v. CH Rivas LLC, 69 Agric. Dec. 831, 840 (2010).

76. TRANSPORTATION

See SUITABLE SHIPPING CONDITION – EXCEPTION TO NORMAL 

TRANSPORTATION REQUIREMENT.

BASIC LAW:
205

“. . . In an f.o.b. transaction, the buyer is responsible for paying the freight and the buyer has

the risk of loss in transit. [Footnote omitted] A delivered sale is the opposite of an f.o.b. sale,

i.e., it is one in which the seller is responsible for paying the freight and the seller has the risk of

loss in transit. [Footnote omitted]

“In an f.o.b. sale, since the buyer is responsible for paying the freight, if the seller initially finds

a trucker, pays the freight and invoices the buyer for the freight, the seller is, as a matter of law, 

the agent of the buyer, and the law of agency is applicable. Under the law of agency, such a 

seller is in a fiduciary capacity and cannot make a secret profit on the freight. The seller can, of 

course, charge the buyer whatever fee or service charge is agreed upon to compensate him for 

procuring the truck and paying the freight, but this must be disclosed to the buyer. In the 

absence of an agreement and disclosure, the buyer has a right to assume that the amount of 

freight shown on the invoice is the amount of freight paid by the seller on the buyer’s behalf. 

(Footnote: “Different considerations would be involved if the seller was also in the trucking 

business and used his own trucks and employees to haul the produce. But that is not involved 

here. [The law of agency would still apply if the sale was f.o.b.].”)

“Similarly, in an f.o.b. sale, since the buyer has the risk of loss in transit, if the seller procures 

an adjustment because of transportation loss, the seller is, as a matter of law, the agent of the

buyer, and the seller must pass on to the buyer all of the proceeds of the adjustment, less any

agreed and disclosed service charge.”

“However, in a delivered sale, since the seller is responsible for paying the freight and has the

risk of loss in transit, if the seller shows the freight charge separately on the invoice, it is

merely the amount the seller is including in the total charge for hauling the produce to the

buyer. The seller is not paying the freight on behalf of the buyer, and the seller is free to charge 

what the traffic will bear. Any adjustments the seller receives for loss in transit belong to the

seller.” In re Ben Gatz Co., 38 Agric. Dec. 1038, 1039 (1979).

a. ABNORMALITY

In the absence of abnormality of transportation service being raised, either on the face of the

record, or by a party, such transportation is assumed to be normal. Dave Walsh Co. v. Rozak’s,

39 Agric. Dec. 281, 284 (1980); Veg-A-Mix v. Wholesale Produce Supply, 37 Agric. Dec. 1296,

1922 (1978); Hartsell v. Angel Produce Co., 29 Agric. Dec. 153, 156 (1970).

The seller has the burden of proving that transportation services and conditions were abnormal

so as to void the warranty where the goods were effectively rejected. Bud Antle, Inc. v. J.M. 

Fields, Inc., 38 Agric. Dec. 844, 847 (1979).

Ethylene gas emanating from cantaloupes loaded on same truck with lettuce created abnormal

transit conditions. Suitable shipping condition rule held inapplicable. Cantaloupes were loaded

on truck by buyer after truck left seller’s place of business. D’Arrigo Bros. Co. of Cal. v. 

Colonial Stores, 42 Agric. Dec. 173, 176-77 (1983). See also D’Arrigo Bros. Co. of Cal. v.

Plainville Produce, 43 Agric. Dec. 663, 666 (1984).
206

b. NORMALITY

Indicated by presence of good lots on same load as bad lot. This is only a factor to be

considered, as all lots could have been in suitable shipping condition, but good lots may have

had especially good keeping quality. Discussed in Tony Misita & Sons Produce v. Twin City

Produce, 41 Agric. Dec. 195, 201 (1982).

A foreign survey that lumped together apples from three sea-land containers was utilized to

determine whether apples arrived with abnormal deterioration even though this method of

survey made it impossible to associate the apples surveyed with the transit conditions

applicable to each container. This was permitted because the temperature history for the three

containers was sufficiently similar and sufficiently within normal parameters that transit

conditions could safely be said not to void the suitable shipping condition warranty as to any of

the containers. Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 981 (1997).

c. RISK OF LOSS

In an f.o.b. transaction, the buyer assumes the risk of all in transit damage, delays or

mishandling not caused by the seller. Woods Co. v. PSL Food Mkt., 50 Agric. Dec. 976, 980

(1991); Six L’s Packing Co. v. Sloan Produce, Inc., 29 Agric. Dec. 615, 620-21 (1970).

Where buyer requested that trucker remain overnight after arrival of lettuce so that inspection

could be made next day and trucker instead took lettuce away, an inspection seven days later

was too remote in time to show a breach and the delay in inspection was chargeable to the

buyer. Woods Co. v. PSL Food Mkt., 50 Agric. Dec. 976, 980 (1991).

A shipper failed to remain open until 12:00 p.m. as he had promised the buyer, and left lettuce

uncooled on the dock. No one was present to load the lettuce when the buyer’s truck arrived at 

11:30 p.m., and the lettuce was not loaded and shipped until the following morning. Held:

Suitable shipping rule was still applicable. Decision was against the shipper even though the

destination inspection was not made until three days after arrival and good delivery standards

were exceeded by only a moderate amount. J.R. Norton Co. v. Phil Dattilo & Co. of Ohio, 37

Agric. Dec. 1940, 1943 (1978).

Where the shipper placed a barrier between cabbage and melons and pineapples so as to block

the flow of cool air through the trailer, as a result of which the melons and pineapples arrived

out of grade, the shipper was held responsible for deterioration because it has the duty to load

goods properly for shipment. Val-Mex Fruit Co. v. Tom Lange Co., 46 Agric. Dec. 1042, 1044

(1987).

Where the shipper failed to properly load the lettuce, it suffered freezing injury. Held that the

shipper was responsible for the condition of the lettuce upon arrival and was liable to the

receiver for damages. Cal-Veg Sales, Inc. v. Sears-Schuman Co., 40 Agric. Dec. 476, 478

(1981).
207

In an f.o.b. transaction, the seller gives an implied warranty that it will use reasonable care and 

judgment in selecting the transportation service. The shipper therefore had an affirmative

obligation to notify respondent that its use of an unrefrigerated truck to transport the produce

was inadequate, and its failure to do so was a breach of duty on its part. Complainant will not 

be later heard to complain about the receiver’s choice of transport vehicle as a means of

proving abnormal transportation. Firman Pinkerton Co. v. Casey, 55 Agric. Dec. 1287, 1294-95

(1996).

d. TEMPERATURES

Lettuce – Recommended transit temperature is 32oF; however, temps. are normally specified a

little higher (33oF or 34oF) because the freezing point is 31.7oF. 45oF is at the borderline for

abnormal transportation.

Where pulp temperatures were used as a reason for rejecting lettuce, held that temperatures

cannot be used by themselves to show a breach, as they would not solely account for the

condition defects in the lettuce. R.T. Englund Co. v. Jos. Notarianni & Co., 36 Agric. Dec. 

1385 (1977).

The temperature recorder read 50oF, pulp temperatures on a prompt inspection were 44o to

46oF. Held that “[p]ulp temperatures of lettuce at 45oF are considered to be usual. The fact that 

some of the lettuce was one degree higher in temperature was not sufficient for us to conclude 

that during transit the lettuce was subjected to abnormal transportation conditions. Eckel v. Sam

Wang Food Corp., 47 Agric. Dec. 324, 326 (1988).

Carrots – The temperature recorder in the rail car revealed transit temperatures of 40oF. Since

the desired transit temperatures for carrots is 32-36oF, it was ruled that the 5% decay was

caused by abnormal transportation. Bodine Produce Co. v. Cusumano Bros. Co., 37 Agric. Dec.

1569, 1576 (1978).

42o to 61oF shown by the inspection certificate at destination coupled with 13% decay in 1⁄2 of 

the load. Held transportation abnormal - no breach of warranty. Garin Co. v. Preciosa 

Packing House, Inc., 41 Agric. Dec. 2276, 2278 (1982).

The seller’s claim that the warranty of suitable shipping condition did not apply because the

carrier did not maintain proper temperatures based on a destination inspection showing pulp

temperatures of 40oF not accepted. The buyer showed through testimony from a pomologist 

that a thermostat setting of 36oF would cause pulp temperatures from 36o to 41oF. Also

established that any transit temperature below 40oF would not be considered too warm. 

Borsellino & Perlisi Grape Co. v. Delcor Fruit Sales, 34 Agric. Dec. 909, 912-13 (1975).

44o to 48oF shown by inspection certificate at destination coupled with 6% decay. Held

transportation abnormal – no breach of warranty. Green Valley Produce Coop. v. Ben H.

Roberts Produce, Inc., 41 Agric. Dec. 531, 534 (1982).
208

Temperature recorder showed 35o to 40oF for most of a five-day trip with a rise to about 42oF 

after 30 hours where it remained for about six hours, another rise to 44oF after 68 hours where 

it remained for about nine hours, and a third rise to 42oF after 98 hours where it remained for 

about three hours. Pulp temperature shown by inspection at destination was 38° to 49oF. Decay 

was 7%. Transportation held abnormal – no breach of warranty. Tom Bengard Ranch v.

Prevor-Mayrsohn Int’l, 40 Agric. Dec. 1781, 1787 (1981).

Where other products on the load were found to have been frozen in transit and the commodity 

in question showed extensive decay, it was found that after thawing rapid deterioration set in 

prior to the inspection being made. Agra, Inc. v. J.A. Wood Co., 44 Agric. Dec. 1684, 1689 

(1985).

Although the transit temperatures were abnormal for a period of time, the below freezing

temperature did not adversely affect the condition of the grapes as shown by the inspection.

Consequently, the f.o.b. warranty of suitable shipping condition was applicable. Everkrisp

Vegetables, Inc. v. J. Randazzo & Sons, 46 Agric. Dec. 1536, 1538 (1987).

Strawberries – Recommended temperature 32oF. Any substantial period of transit above 40oF is

clearly abnormal. G. Tanaka Farms v. Garden State Farms, Inc., 48 Agric. Dec. 729, 731

(1989).

Strawberries shipped in a Tectrol atmosphere will warm somewhat in transit as a result of their

own respiration. In light of this, we found that a USDA inspection performed while the

strawberries were still on the truck, which listed pulp temperatures of 40 to 42oF, was not

evidence of abnormal transportation where there was no evidence that the strawberries were

exposed to such elevated ambient air temperatures for more than a brief period in transit.

Corona Fruits & Veggies, Inc. v. Class Produce Group LLC, 68 Agric. Dec. 1245, 1258

(2009).

e. TEMPERATURES – DISCREPANCY BETWEEN AIR AND TAPE

Complainant sold and shipped a truckload of lettuce to respondent on an f.o.b. basis. Following 

acceptance on arrival, a prompt federal inspection in respondent’s warehouse showed pulp 

temperatures substantially lower than ambient air temperatures shown by the tape from the 

temperature recorder. The pulp temperatures were found to show that transit was normal and

good delivery standards were therefore applicable. Sahara Packaging Co. v. N.P. Deoudes,

Inc., 45 Agric. Dec. 810, 812-13 (1986).

For the subject shipment of strawberries, which travelled from California to Maryland, we

found that the temperatures in transit, which predominantly ranged from 31 to 37oF as indicated 

by the ambient air temperatures recorded by instruments placed in the nose and tail end of the 

truck, were normal. Although the bill of lading specified a transit temperature of 32oF, stated

that the mechanics of refrigeration are such that a trailer with a reefer unit set to run at 32oF will 

necessarily show fluctuations in temperature due to factors such as outside temperatures, 

loading patterns, and the respiration of the product itself. We held that these fluctuations are

permissible as long as temperatures do not remain at or exceed 37oF for an extended period of 

time. Corona Fruits & Veggies, Inc. v. Class Produce Group LLC, 68 Agric. Dec. 1245, 1255-
209

56 (2009).

f. TEMPERATURE TAPES

Where no temperature recorders are placed on trucks in transit, inspections performed after

arrival in transit are accorded little weight. La Valenciana Avocados Corp. v. Tomato

Specialties, LLC, 74 Agric. Dec. 503, 513 (2015).

Analysis of temperature tape to determine abnormality of transit conditions. Garin Co. v. Tom

Lange Co., 36 Agric. Dec. 705, 708 (1977).

“. . . the failure of a receiver who should have access to temperature tapes to offer the tapes in

evidence is a factor to be considered in determining whether such receiver has met its burden of 

proving, after acceptance, that transportation services and conditions were normal.” Louis

Caric & Sons v. Gatz, 38 Agric. Dec. 1486, 1500-01 (1979). See also Sharyland, L.P. v. Miller,

57 Agric. Dec. 762, 767 (1998); G.D.I.C., Inc. v. Misty Shores Trading, Inc., 51 Agric. Dec.

850, 863-64 (1992); Mendelson-Zeller Co. v. Tom Lange Co., 46 Agric. Dec. 182, 185 (1987);

Monc’s Consol. Produce Inc. v. A.J. Produce Corp., 43 Agric. Dec. 563, 566 (1984); Joe

Phillips, Inc. v. G & T Terminal Packaging Co., 41 Agric. Dec. 1803, 1810 (1982).

“There are commonly only two parties with the opportunity, or motive, to wrongly ‘lose’ a

temperature recorder or tape, namely the receiver and the trucker. In both cases the only motive 

would be that the tape disclosed improper transportation. Therefore if a shipper proves by

submitting a bill of lading signed by the trucker (as the shipper in this case did) that a

temperature recorder was placed on the truck, it is hard to imagine an adequate excuse for a

receiver’s failure to produce the tape. In this case respondent has offered no excuse. A receiver

may, indeed, be entirely innocent, in that the recorder may have been thrown away by the 

trucker before arrival of the truck. However, since a trucker would thus dispose of a recorder 

only if transportation was bad, one is inevitably led to the presumption that transportation 

temperatures were abnormal.” Sharyland, L.P. v. Miller, 57 Agric. Dec. 762, 767 (1998). See 

also the Monk’s Consolidated Produce case cited above.

g. WHEN SHIPPER RESPONSIBLE

Where a load of onions sold f.o.b. arrived at the contract destination showing elevated

temperatures following shipment in an unrefrigerated truck, and the shipper claimed abnormal

transit, it was found that warranty of suitable shipping condition remained applicable, as the

seller had a duty of reasonable care to inform the buyer that the use of a dry van to ship the

onions was unacceptable, the seller did not do so. Muller Trading Co. v. Fresh Group Ltd., 67

Agric. Dec. 695, 700 (2008).

The shipper is responsible for problems during transit in a f.o.b. transaction when it causes

them, does not use reasonable care in the selection of the trucker, or does not give the trucker

proper instructions. Progressive Groves v. Bittle, 31 Agric. Dec. 436, 439 (1972); Gilmer

Packing Co. v. D.L. Piazza Co., 21 Agric. Dec. 783, 786-87 (1962).
210

The Requirements specifically state that “the buyer assumes all risk of damage and delay in

transit not caused by the seller” in f.o.b. sales. 7 C.F.R. § 46.43(i).

Where the shipper failed to properly load the lettuce, it suffered freezing injury. Held that the

shipper was responsible for the condition of the lettuce upon arrival and was liable to the

receiver for damages. Cal-Veg Sales, Inc. v. Sears-Schuman Co., 40 Agric. Dec. 476, 478

(1981).

The responsibility is on the shipper for damage in transit due to faulty transit equipment if

shipper knew of defect in the equipment when he loaded the commodity. This is true even if the 

receiver secured the truck. Joe Phillips, Inc. v. Wisill, Inc., 34 Agric. Dec. 763, 765-66 (1975). 

See also Friedrich Enter., Inc. v. Benny’s Farm Fresh Distrib., 57 Agric. Dec. 1695, 1700

(1998); Firman Pinkerton Co. v. Casey, 55 Agric. Dec. 1287, 1294-95 (1996); Berwick

Vegetable Coop. v. A.G. Shore Co., 37 Agric. Dec. 1247, 1252 (1978).

However, where the shipper told respondent that the truck which the receiver sent was a flat

bed with tarps (likely to sweat onions) and was nevertheless told by respondent to ship, it was

held that respondent failed to prove transit conditions were normal, suitable shipping condition

rule did not apply, and there was no breach by shipper. Parsons Packing, Inc. v. Pac. Gamble

Robinson Co., 38 Agric. Dec. 760, 763 (1979). See also Firman Pinkerton Co. v. Casey, 55

Agric. Dec. 1287, 1294-95 (1996) for similar result.

RESPONSIBILITY FOR DECEPTION:

Where the seller was to ship on a “Martin” truck to be secured by the buyer, and the buyer’s

truck broker sent a “Seminole” truck which represented itself to the seller as a “Martin” truck

and subsequently converted the load to its own use, it was held that it would be an undue

extension of principle enunciated in Berwick Vegetable to hold a shipper liable for failure to

ferret out a deception perpetrated by a buyer’s agent. Green Valley Produce v. Pupillo Fruit

Co., 40 Agric. Dec. 1176, 1178 (1981).

77. TRUST, CONSTRUCTIVE

Where a shipper and receiver had no contact with each other except through the broker, and the 

broker sent conflicting memoranda resulting in no contract of sale being formed between the

parties, the receiver was found to be a constructive trustee of the goods which it received, and 

obligated to return them or, in the event of their sale, to pay the reasonable value of such goods 

to the owner. Cypress Gardens Citrus Products, Inc. v. Joseph Wedner & Son Co., 28 Agric.

Dec. 218, 221 (1969).

78. TRUST FUND

a. LIABILITY OF SALES AGENT
211

A sales agent may be liable to its principal for the failure of the buyer to pay if the principal can 

show that the agent’s failure to file a timely trust notice resulted in its inability to collect money 

it otherwise would have received. Payette Valley Fruit, Inc. v. Gem State Sales, Inc., 48 Agric. 

Dec. 723-724 (1989).

See also Griffin-Holder Co. v. Smith, 49 Agric. Dec. 607, 609 (1990), which discusses when

filing is timely and date accrual of seller’s cause of action from day after last date on which

trust notice should have been filed. See CAUSE OF ACTION – this index.

Where broker failed to file trust notices as to a party that subsequently filed for bankruptcy, it

breached its duty under the PACA, but was not liable for damages because either modifications

of some of the contracts had been agreed to by complainant, or the broker had already been

found liable to complainant for concluding modifications without complainant’s authority.

Newbern Groves, Inc. v. C.H. Robinson Co., 53 Agric. Dec. 1766, 1853 (1994).

b. PAYMENT OF REPARATION NOT BARRED

Respondent, under court order to place all receivables in an account to be held in trust for

certain PACA creditors, was not barred from paying complainant in reparation proceeding.

C.H. Robinson Co. v. ARC Fresh Food Sys., Inc., 50 Agric. Dec. 950, 952 (1991); C.H.

Robinson Co. v. Olympia Produce Co., 49 Agric. Dec. 1204, 1207 (1990).

79. UNIFORM COMMERCIAL CODE – SECTION INDEX

“Federal law governs where a Federal statute or interest is involved, and in ‘fashioning the

federal law that is applicable,’ courts are ‘guided’ by the Uniform Commercial Code.” In re

Am. Fruit Purveyors, Inc., 30 Agric. Dec. 1542, 1557 (1971).

See CONFLICT OF LAWS – this index.

See ELECTION OF REMEDIES – this index

See A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1060 (1991).

a. § 1-102(3)

Primary Export Int’l v. Eco-Farm Citrus, Inc., PACA Docket R-92-129, decided ---, (1993)

(unpublished decision). “The standards of reasonable proof and notice normally applied by us

in the implementation of f.o.b. terms may be varied by agreement of the parties as long as the

standards as altered are not manifestly unreasonable.”

b. § 1-201(20)

Nalbandian Farms, Inc. v. McDonnell & Blankfard, Inc., 46 Agric. Dec. 674, 680 (1987).

c. § 1-105

U.C.C. choice of law rule held to be equivalent of “significant contacts” test of second

Restatement of Conflict of Laws. A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec.

1044, 1060 (1991).
212

d. § 1-106

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 307 (1980).

e. § 1-201(15)

Delivery defined as voluntary transfer of possession. Crawford v. Ralf & Cono Comunale

Produce Corp., 51 Agric. Dec. 804, 809 (1992).

f. § 1-202(f)

Notice or knowledge within an organization. Nalbandian Farms, Inc. v. McDonnell &

Blankfard, Inc., 46 Agric. Dec. 674, 679 (1987).

g. § 1-207

A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1048 (1991).

h. § 2-103(1)(b)

Primary Exp. Int’l v. Eco-Farm Citrus, Inc., PACA Docket R-92-129, decided ---, (1993)

(unpublished decision). “An unreasonable claims policy would not be allowable under

U.C.C. §§ 1-102(3) and 2-103(b). For instance, one of the requirements of the subject claims

policy is that “[t]he survey must be performed within forty-eight (48) hours of vessel

discharge.” While the record shows only the expected arrival time for the MV Magleby and

does not show discharge time for the containers, it seems unlikely that the survey was

performed within the 48-hour time limit in this case. Respondent did not make this an issue but 

if it had, we would want to inquire whether, considering the time normally necessary for

customs clearance, the 48-hour requirement could be considered reasonable.” See also

Nalbandian Farms, Inc. v. McDonnell & Blankfard, Inc., 46 Agric. Dec. 674, 680 (1987).

i. § 2-103(4)

Crawford v. Ralf & Cono Comunale Produce Corp., 51 Agric. Dec. 804, 809 (1992).

j. § 2-105(6)

Definition of commercial unit discussed and decided. Salinas Lettuce Farmers Coop. v. Larry 

Ober Co., 39 Agric. Dec. 65, 68-69 (1980); A.W. Fabrizio & Son v. Ft. Lauderdale Produce, 39 

Agric. Dec. 60, 63 (1980).

k. § 2-207

Extensive discussion in Nw. Fruit Sales, Inc. v. Norinsberg Corp., 39 Agric. Dec. 1556, 1558-

59 (1980).

Where terms contrary to the original terms agreed to by the parties were expressed in

subsequent memoranda they were not effective under this section because they materially

altered the original accepted terms of the contract. Or. Onions, Inc. v. JAC Trading Co., PACA

Docket R-97-118, decided July 15, 1998 (unpublished decision).

l. § 2-305

Macchiaroli v. Gatz, 38 Agric. Dec. 1477, 1481 (1979).
213

m. § 2-314

Anthony Brokerage, Inc. v. Auster Co., 38 Agric. Dec. 1643, 1651-52 (1979).

n. § 2-316(2)

Primary Exp. Int.’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 980 (1997); River Valley Mktg.

Inc. v. Tom Lange Co., 53 Agric. Dec. 918, 924 (1994); L.E. Jensen & Sons, Inc. v. Huston

Produce, Inc., 51 Agric. Dec. 814, 826 (1992); Davis v. Goldman-Hayden Co., 50 Agric. Dec.

1014, 1017 (1991).

o. § 2-316(3)(b)

N. Am. Produce Buyers v. Source Produce Distrib. Co., 48 Agric. Dec. 1101 (1989). See

Primary Exp. Int’l v. Blue Anchor, Inc., 56 Agric. Dec. 969, 981 (1997), where the suitable

shipping condition warranty was found to be an express warranty. See also Rich-SeaPak Corp.

v. Pro-Ag, Inc., 56 Agric. Dec. 1958, 1968 at n. 4 (1997), where the sale was delivered, but the

breach was of an express warranty.

p. § 2-319

Macchiaroli v. Gatz, 38 Agric. Dec. 1477-78 (1979).

q. § 2-401

Bruce Church, Inc. v. Tested Best Foods Div., 28 Agric. Dec. 377, 382 (1969).

r. § 2-401(4)

Pope Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101,

104 (1979).

s. § 2-503(1)(a)

Where goods were not held kept available for a reasonable period of time for buyer to take

possession, there was no tender under this section. Crawford v. Ralf & Cono Comunale

Produce Corp., 51 Agric. Dec. 804, 809 (1992).

t. § 2-504

Warren Fruit Co. v. Cavazos Candy & Produce, 37 Agric. Dec. 1754, 1757-58 (1978).

u. § 2-601

Perfect tender. See White & Summers, § 8-3, p. 256. See Harvey Kaiser, Inc. v. Kay Packing

Co., 52 Agric. Dec. 762, 765 (1993), where perfect tender requirement was applied.

Hawkland states:

Quite apart from the broad construction adopted by the UCC in defining the

concept of conformity, the perfect tender rule is qualified by the general

obligation of good faith imposed by Section 1-203. Accordingly, the buyer’s

right to reject involves two questions: (1) Do the goods conform to the contract?

(2) If the answer to (1) is no, did the buyer reject in good faith?
214

2 Hawkland U.C.C. Series § 2-601:3 (footnotes omitted). In other words, rejection on a falling

market because of some inconsequential non-conformity should not be countenanced. See

REJECTION – GROUNDS – this index.

v. § 2-601(c)

Salinas Lettuce Farmers Coop. v. Larry Ober Co., 39 Agric. Dec. 65, 68 (1980); A.W.Fabrizio

& Son v. Ft. Lauderdale Produce, 39 Agric. Dec. 60, 62 (1980).

w. § 2-602

Where there is no delivery or tender, notice requirement of this section is not triggered.

Crawford v. Ralf & Cono Comunale Produce Corp., 51 Agric. Dec. 804, 808-10 (1992).

x. §§ 2-602, 2-603, and 2-703

Seller required to exercise ownership over a rejected commodity where he has received prompt 

notice of rejection. Crowley v. Calflo Produce, Inc., 55 Agric. Dec. 674, 677 (1996); Pope 

Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101, 104-05

(1979); Bruce Church, Inc. v. Tested Best Foods Div., 28 Agric. Dec. 377, 382 (1969).

y. § 2-603(1)

“The ultimate responsibility for not allowing . . . abandonment falls upon the receiver as the

party in closest proximity to such commodity.” Dew-Gro, Inc. v. First Nat’l Supermarkets,

Inc., 42 Agric. Dec. 2020, 2025-26 (1983); Yokoyama Bros. v. Cal-Veg. Sales, 41 Agric. Dec.

535, 537 (1982); Cal-Swiss Foods v. San Antonio Spice Co., 37 Agric. Dec. 1475, 1480 (1978).

Following rejection, respondent at complainant’s direction resold a portion of the rejected

goods and remitted the proceeds to complainant. This was found to conform with respondent’s

duties as to the rejected goods as set forth in U.C.C. § 2-603. Harvey Kaiser, Inc. v. Kay

Packing Co., 52 Agric. Dec. 762, 765 (1993).

z. § 2-607(2)

Fresh W. Mktg., Inc. v. McDonnell & Blankfard, Inc., 53 Agric. Dec. 1869, 1874 (1994).

aa. § 2-608

Revocation of Acceptance. Highland Grape Juice Co. v. T.W. Garner Food Co., 38 Agric. Dec.

1001, 1007 (1979).

bb. § 2-609

Where parties entered into a written installment contract, respondent canceled the contract after 

complainant made late payments as to several loads. It was found that although the late

payments were a violation of the contract, the Regulations [Requirements] and the PACA, they 

did not furnish grounds for cancellation of the contract. Respondent, under section 2-609 of the 

U.C.C. could have taken the late payments as reasonable grounds for insecurity, asked for 

adequate assurance of due performance, and suspended performance until receipt of such 

assurance, but cancellation prior to a failure to receive requested assurance was not an option. 

Rich-SeaPak Corp. v. Pro-Ag, Inc., 56 Agric. Dec. 1958, 1966-67 (1997).
215

cc. § 2-609(3)

Complainant’s right to demand assurance was not prejudiced by its delay in making the

demand, and complainant was justified in withholding performance under a supply contract

while it awaited a response to its demand for assurance, and following respondent’s failure to

respond to its demand. R & R Produce, Inc. v. Fresh Unlimited, Inc., 56 Agric. Dec. 997, 1008

(1997).

dd. § 2-610

V.V. Vogel & Sons Farms v. Cont’l Farms, 44 Agric. Dec. 886, 894 (1985). Notice of intent to 

cover not required; See DNE Sales, Inc. v. Richfood, Inc., 50 Agric. Dec. 1037, 1041-42 (1991).

ee. § 2-612

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 305 (1980).

ff. § 2-615

R & R Produce, Inc. v. Fresh Unlimited, Inc., 56 Agric. Dec. 997, 1005 (1997); G. & H. Sales

Corp. v. C.J. Vitner Co., 50 Agric. Dec. 1892, 1897-99 (1991); Bliss Produce Co. v. A.E. Albert

& Sons, 35 Agric. Dec. 742, 746 (1976).

gg. §§ 2-703, 2-706, and 2-710

Pope Packing & Sales, Inc. v. Santa Fe Vegetable Growers Coop. Ass’n, 38 Agric. Dec. 101,

105 (1979); Bruce Church, Inc. v. Tested Best Foods Div., 28 Agric. Dec. 377, 382 (1969).

hh. §§ 2-703(d), 2-706, 2-708, and 2-710

“In our opinion there is nothing in section 2-706 of the UCC that permits a resale of anything

other than the same goods which were the subject of a rejection.” Shipper had intermingled

wrongfully rejected apples with its normal inventory for purposes of resale. Gwin, White &

Prince v. Nat’l Food Corp., 42 Agric. Dec. 445, 448-49 (1983).

ii. §§ 2-706 and 2-708

See Valley Pride Sales, Inc. v. Dairy Rich Ice Cream Co., 53 Agric. Dec. 879, 884-86 (1994).

jj. §§ 2-711 and 2-713

“[L]earned of the breach” means “time for performance” in anticipatory repudiation case.

Extensive discussion. Also, extensive discussion of buyer’s damages for non-delivery where

buyer fails to cover. V.V. Vogel & Sons Farms v. Cont’l Farms, 44 Agric. Dec. 886, 894-95

(1985).

kk. § 2-712

Cover purchases of white onions in substitute for yellow onions allowed because of showing of 

similar prevailing prices at time of cover. Al Campisano Fruit Co. v. Shelton, 50 Agric. Dec.

1875, 1883 (1991); See also Bliss Produce Co. v. A.E. Albert & Sons, 35 Agric. Dec. 742, 747

(1976).
216

For cover under a supply contract and use of a substitute supply contract as cover. See R & R

Produce, Inc. v. Fresh Unlimited, Inc., 56 Agric. Dec. 997, 1009 at n. 9 (1997).

ll. § 2-714(1)

Where an f.o.b.a.f. contract called for the supply of gas green tomatoes and, at a distant

destination, the contract was discovered to have been breached by the supply of vine ripe

tomatoes which could not be expected to carry to a distant destination as well as gas green

tomatoes, it was held that it was reasonable under the peculiar circumstances of the case to

assess damages by the differential between market price and the value of delivered product at

destination even though the warranty of suitable shipping condition was not applicable and

even though acceptance took place at shipping point. DeSomma v. All World Farms, Inc., 61

Agric. Dec. 821, 834 (2002). See also Outten v. Prettyman, 24 Agric. Dec. 339, 342 (1965).

mm. § 2-715

Formerly, our test for awarding consequential damages (also termed special damages or loss of 

profits) required actual knowledge on the part of the seller of a specific contract of the buyer 

with a third party for the resale of the goods. Under a 1990 decision, a less restrictive test was 

adopted. See Pandol Bros., Inc. v. Prevor Mktg. Int’l, Inc., 49 Agric. Dec. 1193, 1203 (1990). 

Note: that to be awarded consequential or special damages, it is still necessary for a buyer to 

show a loss resulting from general or particular requirements and needs of which the seller at 

the time of contracting had reason to know. As was stated in Pandol “. . . such damages must be 

proven in the normal manner, and comment 4 to section 2-715 states that ‘[t]he burden of

proving the extent of loss incurred by way of consequential damage is on the buyer...’” In 

addition, the buyer must also show that the loss could not have “reasonably” been “prevented 

by cover or otherwise.”

Incidental expenses such as an attempted charge for commission (note exception where buyer

properly retains services of a commission merchant to resell goods or a portion thereof) or

handling fee which is not the result of the seller’s breach should not be allowed. See Pan Am.

Fruit Co. v. Bova, 17 Agric. Dec. 774, 779-80 (1958). On the other hand, a charge for sorting

out bad merchandise or a fee for dumping produce (where there is evidence to support such

dumping) should be allowed.

Late delivery of potatoes caused a shutdown of the buyer’s processing plant, and the overtime

operation was caused when three loads arrived later, all at one time. The buyer was allowed to 

prove plant overhead costs resulting from the shutdown, and overtime costs resulting from the 

delivery of three loads at one time. Both costs were awarded as consequential damages under § 

2-715. Process Supply Co. v. Perfect Potato Chips, Inc., 40 Agric. Dec. 800, 805 (1981).

nn. § 2-722

See this index under F.O.B. – CONVERSION

oo. § 2-723

Shriver v. Mkt. Pre-Pak, Inc., 39 Agric. Dec. 290, 306 (1980).
217

pp. § 2-723(2)

Macchiaroli v. Gatz, 38 Agric. Dec. 1477, 1483-84 (1979).

qq. § 3-311

Debtor tendered payment in one check for six produce transactions. Four of the transactions

were undisputed, and the check covered these transactions in their full amount. The remaining 

two transactions were disputed, and as to these, the check tendered only partial payment. The 

creditor negotiated the check and then sought to recover the balance alleged due on the 

disputed transactions. The debtor pled accord and satisfaction. It was held that the good faith 

tender requirement of U.C.C. § 3-311 would not be met by such a check especially in view of 

the “full payment promptly” requirement of the PACA and Regulations [Requirements]. The 

situation was distinguished from that in which the parties maintain a running account. 

Lindemann Produce, Inc. v. ABC Fresh Mktg., Inc., 57 Agric. Dec. 739, 743-44 (1998).

Under U.C.C. § 3-311 the return within 90 days of an amount paid in full satisfaction of a claim

disputed in good faith precludes the discharge of the claim unless the person against whom the 

claim is asserted proves that within a reasonable time before collection of the instrument was 

initiated, the claimant or an agent of the claimant having direct responsibility with respect to 

the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

Pac. Tomato Growers v. Am. Banana Co., 60 Agric. Dec. 352, 370 (2001).

rr. § 3-408

A. Sam & Sons Produce Co. v. Sol Salins, Inc., 50 Agric. Dec. 1044, 1053 n. 13 (1991).

80. VERIFICATION

An unsigned verification of a pleading is acceptable when the pleading has been signed and the 

verification is attached to it. Perez Ranches, Inc. v. Pawel Distrib. Co., 48 Agric. Dec. 725-26

(1989).

Unverified pleadings cannot be given evidentiary value. C.H. Robinson Co. v. ARC Fresh Food

Sys., Inc., 50 Agric. Dec. 950, 952 (1991); Prillwitz v. Sheehan Produce, 19 Agric. Dec. 1213,

1215 (1960).

While an unverified pleading is not in evidence, it does serve to form the issues between the

parties. Oshita Mktg., Inc. v. Tampa Bay Produce, Inc., 50 Agric. Dec. 968, 972 (1991);

Chapman Fruit Co. v. Tri-State Sales Agency, 44 Agric. Dec. 1366, 1367 (1985). See also

Perell, Inc. v. Anthony Abbate Fruit Distrib., 32 Agric. Dec. 1900, 1902 (1972); H. & M.

Fujishige v. Mike Phillips Enter., Inc., 30 Agric. Dec. 1095, 1097 (1971).

A verified statement by a party’s representative or legal counsel is assumed to be hearsay

unless there is clear indication that such person had personal knowledge of the subject matter of 

the statement. Such statements are mere argument and will not be given evidentiary value. 

Merit Packing Co. v. Pamco Airfresh, Inc., 47 Agric. Dec. 1345, 1337 (1988).
218

Since October 18, 1976, 28 USC § 1746 has permitted, “. . . the use of unsworn declarations

under penalty of perjury as evidence in Federal proceedings.” This does not apply to a

deposition, oath of office, or an oath required to be taken before an official other than a notary

public. The form to be used is specified by statute:

(1) If executed without the United States: “I declare (or certify, verify, or state) under penalty 

of perjury under the laws of the United States of Americathat the foregoing is true and correct.

Executed on (date).

(Signature)

(2) If executed within the United States, its territories, possessions or commonwealths: “I

declare (or certify, verify, or state) under penalty ofperjury that the foregoing is true and

correct.

Executed on (date).