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ARBITRATION DECISION BRIEF: Whether there was a material breach of the contract and did the Respondent suffer damages

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 Regulations (R&R) apply in the event of a dispute. DRC Dispute R&R 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 #20042 – Parties Domiciled – Mexico and Canada

 

Facts

 

  • On August 28, 2017, Claimant sold two lots of Mango Kent to Respondent: one lot contained 2340 boxes of 7’s at US$4.5 per box (US$9,945), and the other lot contained 1800 boxes of 8’s at US$4.5 per box (US$7,650) for a total of US$17,595. According to the invoice, the product was sold F.O.B. Laredo. 
  • On August 29, 2017, the Respondent picked up in Laredo and delivered to its clients in Montreal on August 30, 2021.
  • The Respondent informed the Claimant that the mangos received were Keith instead of Kent, which he had ordered. Therefore, his clients were returning the product.
  • The Respondent offered to pay US$3.75 instead of the initial price of US$4.25. However, the Claimant advised the Respondent that he would not accept less than US$4.00. 
  • Respondent made payment to the Claimant in the amount of US$15,515: US$3.75 per box for each of the 2340 boxes of 7’s and the 1800 boxes of 8’s. The Claimant accepted this payment but not as a final payment as he did not agree to a credit or price reduction.

 

Issue

 

Whether there was a material breach of the contract and did the Respondent suffer damages.

 

Arbitrator’s Analysis/Reasoning

 

Was there a breach of the agreement between the parties for the sale and purchase of Kent/Keith mangos?

 

Neither party proved their position or case, nor did either party answer the arbitrator’s questions. As such, it was not possible for the arbitrator to justify either position given conflicting evidence.  

 

Obviously, mangos were sold and delivered to buyers. While the Claimant did not admit they shipped the wrong variety, the different invoices and text exchanges indicate the wrong variety was shipped. The wrong variety is a material breach of contract. Under a material breach, a federal inspection would not be required. The Claimant did not answer the question posed by the arbitrator regarding the transaction.

 

Even though there appears to have been a material breach of contract, there is no proof of claim regarding the sale of the mangos at a loss. Had the Respondent attached an itemized account of sale for the mangos, they could have documented their loss and proven their damages.

 

In the text communications, the Claimant did offer to accept $4.00 USD per unit instead of $4.25 USD. 

 

Arbitrator’s Decision

 

The Respondent was required to reimburse the Claimant in the amount of $1,045, within 30 days from the date of this Decision and Award. However, Respondent was not required to reimburse the Claimant for the DRC arbitration fee in the amount of $600.00 USD.

 

DRC Comments

 

When filing a Statement of Claim or a Statement of Defence, make sure all statements are supported by evidence. If you are not sure how to properly document a claim, it is in your best interest to have a legal representative help you with your claim or defence.

If during the arbitration process, an arbitrator requests clarification or additional information, provide a reply including any supporting documents to the arbitrator.

For a shipper to have a successful claim, three elements must be proven: (1) that there was a breach of contract; (2) that notice of the breach of contract was provided; (3) proof of damages.

When there is no meeting of the minds regarding the terms of the contract and the documents of the transaction do not provide clarification, the parties have the burden to support their statements. In this case, emails exchanged between the parties proved to the arbitrator that the wrong variety of mangoes was shipped. However, the respondent failed twice to provide evidence to support their return to the claimant. Firstly, on their statement of defence and secondly when the arbitrator requested this information. An account of sales is the most used method to prove damages.

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