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ARBITRATION DECISION BRIEF: Whether or not the return provided by Respondent was reasonable

Commencing this year, we will publish a summary series of arbitration decisions which will help members better understand how DRC Rules and Regulations apply in the event of a dispute. DRC Dispute Resolution Rules state that all DRC arbitrations are private and confidential. We have omitted the names of people, including arbitrators, as well as companies. DRC only acted as the administrator of the arbitration process, and did not participate during any hearings (if applicable), 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 #20205 –Parties Domiciled- United States and Canada

Facts:

  • Claimant sold to Respondent 1,152 cartons of cantaloupes size 9 rather than Jumbo size as agreed upon. The product origin was Guatemala and was sold at $10.00 F.O.B. Respondent informed the Claimant immediately upon arrival that he received 1,152 regular 9’s, not Jumbo 9’s as Respondent ordered and asked Claimant to pick it up.
  • A few days later, Claimant could not find a new customer for the cantaloupes. Claimant contacted the Respondent, authorizing them to sell the cantaloupes on Price After Sale (P.A.S.) without any discussion regarding a target price.
  • After Respondent sold the product, they submitted an account of sales and payment in the amount of $8,075.75. This payment was based on $7.00/case instead of $10/case as originally invoiced for the size 9 cantaloupes.

Issue:

Whether or not the return provided by Respondent was reasonable.

Arbitrator’s Analysis/Reasoning:

There was no disagreement the parties changed the original contract to a Price After Sale (PAS) transaction. PAS is a sale where no price has been agreed upon and is also sometimes referred to as open price sale or open sale. In the case of PAS, the buyer, after the product has been sold offers a return to the seller to settle a price

Claimant’s Sales Representative acknowledged there were shipping errors and destination market issues prior to agreeing to PAS.

Respondent’s account of sales show sale prices varied from $18-$23 over a10-day period from the date the product was received. These prices were lower than market reports. However, the sales are consistent with a lower quality and distressed market as acknowledged by Claimant’s Sales Representative.  

Claimant’s Sales Representative submitted a statement in which he acknowledged the return was reasonable. The statement included comments about poor market conditions. Therefore, it appears a settlement was agreed before Claimant initiated their claim through DRC.

Arbitrator’s Decision:

The claimant failed to prove their claim; therefore, their claim was dismissed.

DRC Comments:

While the arbitrator addressed all the matters presented in the arbitration process, the arbitrator based the arbitration decision on two main issues:

  • An agreement to change the original contract to a PAS transaction.
  • Claimant’s Sales Representative acknowledging sending the wrong cantaloupe size, lower quality, distressed market conditions, and a statement accepting the return offered by the Respondent.

Since the shipper acknowledge shipping the wrong cantaloupe size, no inspection was necessary to prove a breach of contract had occurred.

One important element that members need to know is that a salesperson from a company is considered a representative of the company that can make buy and sell decisions on behalf of the company. For more information regarding what sections of DRC Trading Standards applied to this dispute, you can review the following sections:

DRC Trading Standards: