Interstate Commerce, Acceptance, Rejection

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

Seller, Inc.
(Lake Worth, Florida)

v.

Buyer, Inc.
(Fort Meyers, Florida)
58 A.D. 1095,
decided October 13, 1999

Seller, Inc. (the Seller) agreed to sell to Buyer, Inc. (the Buyer) one truckload of 85 percent U.S. No. 1 or better “Cat’s Meow” brand gassed green tomatoes, to ship 3.5 to 4 color, on an f.o.b. basis. The Seller shipped the tomatoes from Homestead, FL to Buyer’s customer in Dayton, OH.

Upon arrival at destination it was discovered that the load consisted of 1,099 cartons of “Cat’s Meow” brand tomatoes, labeled “vine ripe,” and 400 cartons of “Sun Coast” brand tomatoes. After a USDA inspection was performed, the Buyer’s customer in Dayton notified the Buyer that the tomatoes were being rejected. The Seller challenged the effectiveness of the rejection and sought to recover the purchase price of the load of tomatoes.

The Buyer raised several defenses: as an initial matter, the Buyer alleged PACA did not have jurisdiction over this matter because both the Buyer and Seller were located in Florida so, therefore, there was no ‘interstate’ commerce. However, PACA explained that these tomatoes were purchased with the intention of shipping them from Florida to Ohio, and this was sufficient to qualify for interstate commerce.

Additionally, the Buyer alleged the tomatoes shipped were the wrong color, and that some were labeled “vine ripe” although the contract called for gassed green tomatoes. At least part of this allegation was admitted by the Seller, and PACA held that this constituted a breach of contract. In so holding, PACA referred to the Uniform Commercial Code, section 2–601, providing that “…if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) reject the whole…”

This is known as the perfect tender doctrine, and PACA explained that the Buyer’s putative rejection would have been permissible, had it otherwise been effective. But because the tomatoes were unloaded prior to inspection—the Buyer’s rejection was ineffective.