We have reviewed a few cases lately where a receiver fails to notify the shipper of problems on arrival in a timely manner. Unfortunately, in these instances, the shipper has not found out about this issue until payment was due. When the shipper contacts the receiver inquiring about payment, they learn that a government inspection (performed in a timely manner) proves the product failed to meet DRC Good Arrival Guidelines. Should the receiver be worried about not notifying the shipper of quality problems in a timely manner?
Yes. There are a couple of circumstances where a receiver should be very worried about failing to communicate problems, including not sharing the results of a government inspection, in a timely manner.
In keeping with Perishable Agricultural Commodities Act (PACA) precedent and DRC’s Trading Standards, to have a fully successful claim, three elements must be proven: (1) that there was a breach of contract by the shipper; (2) that notice of the breach of contract was given to the shipper; (3) proof of damages.
Number two is the one that concerns us in this article. DRC and PACA define reasonable time as to not to exceed 24 hours on rail and boat shipments, and 8 hours by truck. In addition, both require that a copy of the government inspection is shared within 24 hours after the inspection report is made accessible to the applicant.
It is quite common for a shipper to have 30 day payment terms yet his supplier (another shipper or a grower) may have ten (10) day payment terms. In this case, if the shipper proceeds to pay the supplier within terms because he was not notified of problems on arrival, the receiver may be responsible for full payment even if they have a timely government inspection proving damages. Finally, we would add, notifying the supplier that the product arrived in deteriorated condition is a common courtesy that fosters long term business relationships.
