The Fruit and Vegetable Dispute Resolution Corporation (DRC) has developed a series of articles summarizing past arbitration decisions. These articles will help members understand how the DRC Dispute Rules and Standards (R&S) apply in a dispute.
The DRC Dispute R&S states that all DRC arbitrations are private and confidential. As such, the names of all parties, including arbitrators and companies, are not included. A reminder that the DRC’s sole role is to administer the arbitration process; the DRC does not participate in any hearings. Therefore, this summary is based solely on the arbitrator’s written decision and may not reflect important information shared with the arbitrator through written briefs or verbal testimony.
ABSTRACT
The arbitration decision addresses a dispute between parties from the United States and Canada regarding an alleged breach of contract by the Claimant. The issue arose when the Respondent made a partial payment of the total invoice amount, arguing that the Claimant breached the contract because he ordered “oriental cut/short cut” crown broccoli with stalks and heads that did not meet the specified length requirements.
The arbitrator concluded that there was insufficient evidence to support the allegation that the Claimant had breached their obligation to ship “oriental cut/short cut” broccoli. Additionally, there was no evidence determining any damages that could be awarded to the Respondent.
This summary provides an essential overview of the arbitration decision and its implications for international commercial disputes.
CASE: DRC File #18249 – Parties Domiciled – United States and Canada
SUMMARY OF FACTS:
The invoice #520610 shows that the Claimant sold 1,232 cartons of “Crowns X” label broccoli, FOB*, at a price of US$6.50 per carton, plus a handling charge of US$25.00. This brings the total invoice amount to US$8,033.00.
The Claimant received a payment of US$2,360.06 from the Respondent and claims that the Respondent still owes a balance of US$5,672.94.
While the Respondent acknowledges the payment of US$2,360.06, they argue that they did not receive the ordered “oriental cut” crown broccoli. To support their claim, the Respondent provided a CFIA inspection certificate (appeal inspection) that describes the length of the stalk and head of the product received. Additionally, they submitted post-delivery emails exchanged between both parties, along with two emails containing unofficial industry opinions regarding the appropriate stalk lengths for “Asian cut” broccoli.
SUMMARY OF ARBITRATOR’S ANALYSIS AND REASONING:
The parties agree that the purchase price was US$8,033.00, but give diametrically opposite accounts about the type of broccoli ordered. The Claimant says the Respondent ordered “short cut” broccoli without discussing the length of the stalk. The Respondent says it ordered “oriental cut crown broccoli” after the Claimant assured it that its “Crowns X” label had a head size of 3 to 6 inches wide and a stalk length of 1 inch.
Where parties put forth affirmative, but conflicting, allegations with respect to a term of the contract, the burden rests upon each to establish their allegation by a preponderance of the evidence. The arbitrator concluded that there was no way to determine which version was correct, since neither party met this burden regarding the type of broccoli ordered during a telephone call between two people with no significant history of dealings with each other.
The Respondent, though, accepted the broccoli by unloading it, and so bears the burden of demonstrating that the Claimant breached the contract, and any resulting damages. The Respondent cannot establish that the Claimant breached the contract by shipping “oriental cut” broccoli since it has not established that the contract was for “oriental cut” broccoli.
Respondent could still have prevailed had they been able to establish that the Claimant breached an obligation to ship “short cut broccoli” since the Claimant admits that they were obligated to ship such broccoli. The Appeal Inspection in the remarks section provides:
“The average and range shown on inspection results show crowns measuring 3 1/2 inches to 6 inches wide; however, the length showed 4 inches to 6 1/2 inches long with the majority between 4 and 5 inches long.”
There are no USDA or Agriculture Canada standards for “short cut” broccoli from which one could determine whether the length of the stalk mentioned in the Appeal Inspection fails to conform with such a standard. While the Respondent submitted two industry opinions, the opinions concern “Asian cut” broccoli, which is presumably the same as “oriental cut” broccoli, and so do not bear upon whether there was a breach of an obligation to ship “short cut” broccoli. And while Claimant apparently believed that the stalk length of the broccoli was longer than usual, as evidenced by the Claimant’s e-mail sent on May 1, 2006, this was insufficient to establish that the length was long enough to constitute a breach. Therefore, the arbitrator determined that the Respondent failed to demonstrate a breach of the Claimant’s obligation to ship “short cut” broccoli.
Even if the Respondent could had been able to prove a breach of contract, its Response in this Arbitration didn’t contain an accounting of its damages. Therefore, there was no way to determine the amount of damages that the Arbitrator should award to the Respondent.
ARBITRATOR’S SUMMARY DECISION
The arbitrator’s final decision required the Respondent to pay the Claimant US$5,672.94, plus US$600.00 for estimated arbitration fees within 30 days from the date of this decision.
DRC COMMENTS
Whether you are the claimant or the respondent, during the Arbitration Process, it is crucial for each party to properly support their claims.
In the produce industry, business deals are often conducted over the phone, where key details of the transaction—such as contract terms (FOB, Delivered, CIF**, Fixed Price, Consignment, PAS***, etc.) and product descriptions (e.g., quality grade, no grade – Good Delivery/Good Arrival, size, quantity, etc.)—are discussed. It has always been DRC’s strong suggestion that anything communicated verbally should be followed up with an email.
When there is a disagreement or there is no meeting of the minds as to what was discussed verbally, the documents related to the transaction will determine the contract between the parties. If these documents do not clearly specify one or more terms, each party must bear the burden of proof for their respective statements.
In this case, the parties had differing views on the appropriate length of the stalk for “Asian cut” versus “short cut” broccoli. No written communication between the parties outlined what “Asian cut” or “short cut” broccoli entailed. The transaction documents did not reference any specifications, and there were no official standards for “short cut” or “Asian cut” broccoli that the arbitrator could use to assess whether the stalk length referenced in the Appeal Inspection met any expected standard.
Moreover, as the arbitrator mentioned in its decision, even if the arbitrator was inclined to find the Claimant in breach of contract, it would have been challenging to determine the Respondent’s damages, as the Respondent did not provide an account of sales detailing its losses.
*FOB: Free on Board
**CIF: Cost, Insurance, Freight
***P.A.S.: Price after Sale
ADDITIONAL RESOURCES:
To access the full redacted arbitration decision, click here.
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