Damages – Acceptance and Cover

The following summary of precedent-setting reparation decisions issued under the Perishable Agricultural Commodities Act (PACA) is intended to help companies understand their rights and responsibilities under PACA. The key facts and core reasoning used to decide cases are presented.

Complaint: PACA Case #S-R-2009-428

Issued July 12, 2011

Corona Fruit & Veggies, Inc.
(Santa Maria, CA)

v.

Produce Alliance LLC
(Buffalo Grove, IL)

Order: $1,530.48 award issued

Corona Fruit & Veggies, Inc. (Corona) sought to recover $4,941.00 for two truckloads of strawberries and mixed squash sold to Produce Alliance LLC (Produce Alliance). In response, Produce Alliance alleged that Corona failed to ship the kind, quality, and size of strawberries called for in the contacts of sale.

Produce Alliance stated that shortly after the USDA inspection of the strawberries in question was completed, the inspection report was faxed to Corona’s salesperson and advised that Produce Alliance was rejecting the strawberries. Although PACA found that the product failed to make good arrival, it was noted that the inspection showed the strawberries had been unloaded when the inspection was performed in the receiver’s cooler, and explained that unloading or partial unloading of product from the conveyance is considered an act of acceptance.

Additionally, PACA noted that the load in question included strawberries and mixed squash, but Produce Alliance alleged that only the strawberries were rejected, meaning the squash was accepted. Because the truckload of strawberries and mixed squash compromised a single commercial unit, Produce Alliance was obligated to accept or reject the shipment in its entirety. It was therefore found that Produce Alliance accepted the strawberries.

Produce Alliance also claimed damages related to the receiver’s purchase of goods in substitution of those due from Corona. PACA cited the Uniform Commercial Code, Section 2-712, which states, “[c]over is not available under this section if the buyer accepts the goods and does not rightfully revoke the acceptance.” Despite precedent allowing cover purchases following acceptance of nonconforming goods, PACA disallowed the remedy of cover in this instance.

After calculating the difference between the value the strawberries would have had (if they had complied with the sales agreement) and the value of the distressed berries, plus inspection fees, PACA ruled that Produce Alliance owed Corona a portion of the amount sought, or $1,530.48 plus interest.

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