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ARBITRATION DECISION BRIEF: Disagreement between the parties on the terms of sale and price adjustment.

Continuing with our series of articles summarizing past DRC arbitration decisions. We believe this will help members to better understand how the DRC Dispute Rules and Standards (R&S) apply in the event of a dispute. DRC Dispute R&S state 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 DRC’s sole role is as administrator of the arbitration process; 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.

 

Case: DRC File #20395 – Both Parties Domiciled in Canada

Facts

  • The Claimant shipped a load of 18 pallets (1967 cases) of French kiwi to the Respondent on March 8, 2019. However, 9 cases were forgotten at the Claimant Warehouse and later delivered to Respondent on March 13, 2019.
  • According to the invoice, the product was sold at a fixed price of $ 15 per carton for a total invoice price of $ 29,505, which was emailed to Respondent on March 11, 2019.
  • On April 11, 2019, more than one month later, Respondent advised Claimant that they did still have 10 pallets left and asked Claimant to decrease the price to $5 per case. The Claimant agreed to reduce the price for those pallets.
  • On May 2, 2019, the Claimant received a payment of $9,845 for the 1967 cases, which means Respondent paid $5.00 per case.
  • Claimant requested a sales report to the Respondent. However, Respondent did not provide it.

Issue

  • Whether there was an agreement between the parties on the terms of sale.
  • Whether the Claimant agreed on a price adjustment. If so, the price adjustment applies to all the load or just to 10 pallets.

 

Arbitrator’s Analysis/Reasoning

Did the claimant and respondent agree to a fixed price for Invoice #18-3156?

Yes. The arbitrator believed the parties agreed to a firm price for the following reasons:

  1. a) An invoice was sent to the respondent on March 08, 2019. This invoice was not contested. Although the previous transactions have little bearing on invoice 18-3156, it is noteworthy that when the kiwis were sold open price, the invoice was sent after the product was sold. In this instance, the invoice was sent at the time of shipment suggesting the claimant treated this as a fixed price contract.
  2. b) The claimant continues to assert this is a fixed price contract during an e-mail exchange on April 11, 2019. Following an e-mail from the Respondent in which they asked for an adjustment by saying, “maybe I can sell at $5?” Claimant responds, “We never agreed on consignment…you bought fixed price at 15$….” This e-mail never appears to be rebutted. Additionally, the question mark used in Respondent’s e-mail suggests he was seeking approval for a price adjustment.

 

  1. c) Finally, and perhaps most importantly, if the respondent thought this was an open price, they did not act in accordance with an open price contract. Per DRC’s Trading Standards, in the absence of an agreement on price, if a buyer remits a report of their sales, and a price cannot be settled, the buyer has the burden of proving that his reported sales were true and accurate.

As a result of the above, if the respondent thought this was an open price transaction, they should have contested the invoice, rebutted the claims in the e-mail transaction, and conducted themselves as though this was open price. Given the complete lack of an account of sales, there is little proof the respondent believed this was open price.

 

Was there an agreement to adjust the price from $15 to $5?  If yes, for the entire 18 pallets, or was the price only reduced for the 10 pallets?

Firstly, yes, it appears the respondent offered $5 in the April 11 e-mail exchange and the claimant agreed to this reduction to $5.  The question remains, was the $5 adjustment for the entire load or merely for the 10 remaining unsold pallets?  In the e-mail exchange Respondent writes, “Slow people don’t want this fruit, Approx. 10 pallets in stock, Maybe I can sell at 5$? you decide, or I can send it to someone else?” This e-mail implies that the respondent is seeking a price adjustment on the 10 pallets remaining and not on the 8 pallets previously sold. Furthermore, if the claimant did opt to send the remaining 10 pallets to someone else, it would have been reasonable for the claimant to accept payment in full for the 8 pallets that were sold. For these reasons, the arbitrator agreed with the claimant that the adjustment pertained only to the remaining 10 pallets and not to the entire load.

As stated in the DRC by-laws and Operating Rules, under General Records Section 3, “Members shall keep records which are adapted to the particular business that the member is conducting and in each case such records shall fully disclose all transactions in the business in sufficient detail to be readily understood.”

Also, “The responsibility is placed on every member to maintain records which will disclose all essential facts regarding the transactions in his business”

Note: Although the product was received under protest, the arbitrator did not believe this, or that the quality report provided by Respondent had any direct impact on the outcome or decision regarding this dispute.

 

Arbitrator’s Decision

Award in favor of Claimant, in the amount of $8,670.00 plus $826.18 for arbitration filing fees. A total of $9,496.18 must be paid by Respondent to Claimant.

 

DRC Comments

We cannot stress enough the importance of documenting in writing every part of the transaction. From the negotiating process to the final payment or settlement, following up with an email or fax, of what was discussed over the phone, is paramount and helps avoiding misunderstandings. We understand the fast pace of our industry but taking the time to write an email or a fax can save you some headaches.

Currently, more and more text messages are used to try to demonstrate what was negotiated or agreed in a transaction. However, text messages tend to be short, are not properly linked to a transaction, and are not specific enough about the conditions of the sale or settlement. While text messages can be used as evidence in a DRC procedure, it is your responsibility to make sure that those communications can be linked to the transaction and clearly convey the intended information.

For more information regarding the sections of DRC Trading Standards applied to this dispute, refer to the following sections:

DRC Trading Standards: