By David G. Ballard, Attorney[1]
Law Office of David G. Ballard, Meridian, Idaho
One of my areas of practice is transportation law and, in particular, freight claims involving motor carriers. While attending a recent PACA workshop about claims, I noted a difference between the nature of a claim against a carrier for damaged cargo and one against a seller. What follows are my initial observations and comments about these two theories of recovery.
Some of the dissimilarities involve terms that sound alike, but which differ in application. One example is the term, load rejected, which as to the carrier may mean the refusal of the entire load but as to the seller, depending on the circumstances, may refer to all or part of the load that may not conform to the contract of sale.
Aside from the involvement of a third party, there are two primary parties against whom claims may be asserted for the recovery of the loss when fresh produce arrives damaged at destination. As against the carrier, the claim relates to the agreement with the carrier for transportation, as against the seller, the agreement for the sale of the goods.
In addition to the two different contractual relationships, there may be a difference in the point of injury. Damage may occur either during transit (carrier based) or at the time of loading (shipper based) due to the cargo not being in suitable condition at that time or arriving at destination in excess of normal deterioration in transit.
For damage during transit, a claim may be asserted against the carrier, but unless the cargo is totally worthless, the receiver has a duty to accept it. See generally Scotlynn USA Div., Inc. v. Titan Trans Corp., 555 F.Supp.3d 1246, 1250 (M.D. Fla. 2021) – where goods are shipped by common carrier and become damaged in transit, the consignee nevertheless has the duty to accept the shipment unless they are considered to be “totally worthless.”
This is similar to an “f.o.b.” contract where the right of rejection is lost only with respect to goods which have been damaged or changed during transit. See Schuman v Nelson, 219 F.2d 627 (3rd Cir. 1955). The rejected goods may be salvaged under Section 2-604 of the Uniform Commercial Code [Idaho Code Section 28-2-604] or a claim may be asserted for the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, Section 2-714(2) of the Uniform Commercial Code [Idaho Code Section 28-2-714(2)].
For goods, such as perishable agricultural commodities, if they fail in any respect to conform to the terms of the contract, a buyer may reject them under Section 2-601 of the Uniform Commercial Code [Idaho Code Section 28-2-601].
The different claims are also similar to the extent that the condition of the goods at origin is compared to or contrasted with the condition of goods at destination.
For a claim against the carrier, under either a state law breach of contract or negligence theory given that liability for damage to fresh produce (an exempt commodity) while in transit, may not lie under the Carmack Amendment, 49 USC Section 14706, an outline of the elements is: the goods were in good condition when accepted by the carrier and that the goods were damaged upon arrival at the destination and in the exercise of ordinary care, could have been transported without damage.
As for condition at origin for all part open to inspections and visible, there is a presumption of good condition when the bill of lading states that the shipment is in apparent good order without exception.
For perishable agricultural commodities, a market-inspection certificate issued by authorized agents of the Department of Agriculture shall be received as prima facie evidence of the condition of the commodity at either origin or destination, 7 U.S.C. § 499n, but such information is subject to being rebutted depending on the conditions under which the commodity was held. In the case of S. Strock & Company v. Southern Pacific Company, 326 F. Supp. 695 (D. Mass. 1971), notwithstanding that the inspection of cantaloupes may have shown them to have been in good condition prior to loading, the damaged condition upon delivery was due to the failure to have cooled them sufficiently before shipment to inhibit the natural tendency to decay – they had not been placed in a suitable shipping condition as defined in 7 CFR § 46.43(j).
Viewing a potential claim through these different lenses may aid in analyzing against whom liability may lie.
[1] Law Office of David G. Ballard, PO Box 935, Meridian, Idaho 83680. This Article is for general information purposes only and is not and should not be construed to be formal legal advice, a legal opinion of any nature whatsoever, the formation of an attorney-client relationship, or the solicitation of professional employment.
