Word for Word

Payment terms are one example of a term that may be left open as buyers and sellers form contracts for fresh produce. But the commercial standard for payment terms is quite clear, at least for interstate transactions. Per PACA regulations, unless otherwise agreed, payment is due “within 10 days after the day on which the produce is accepted.”

Accordingly, these terms will be imputed if the parties are silent on payment terms. Similarly, there is PACA precedent suggesting that delivery terms are presumed to be f.o.b. (free-on-board) if neither party can establish that a different delivery term was intended.

Price is another example of a term that may be imputed if not specified by the parties at the time the contract is formed. Price-after-sale transactions are one example where courts have recognized a binding contract even though the price term is left open. On the other hand, where parties fail to agree on the quantity of goods, courts may very well find that no contract was formed due to the indefiniteness of the terms and difficulty of enforcing performance or applying a remedy when the quantity of goods that were the subject of the bargaining, is unknown.

For an excellent discussion of when additional terms may be incorporated into a contract based on language included on a seller’s invoices, such as provisions for interest and attorneys’ fees, see Marion Quesenbery’s article, “The Fine Print,” in the July 2014 edition of Blueprints.

Who has the authority to enter into an agreement on behalf of my organization?
Regarding authority, PACA regulations essentially codify the common law for apparent authority, which provides that an agent-employee is able to act on behalf of the principal-employer within the scope of the agent’s apparent role within the company. Section 7 CFR 46.41 provides—
In construing and enforcing the provisions of the Act and the regulations in this part, the act, omission, or failure of any agent, officer, or other person acting for or employed by a licensee, within the scope of his employment or office, shall in every case be deemed the act, omission, or failure of the licensee.

Accordingly, buyers and sellers are empowered to enter into contracts binding their employers to purchase or supply produce without explicit authorization of owners or officers. As such, it may well be helpful for all buyers and sellers to have a basic understanding of contract formation.