Acceptance and Breach

Acceptance occurs when a buyer fails to reject the product in a timely manner or takes control of the load by diverting or unloading it.

If there is acceptance, and there is a problem with the produce, the buyer cannot reject. But the buyer can prove a breach of contract with a timely federal inspection and obtain damages. (The parties can agree to change the terms of the contract to a consignment or PAS after acceptance.)

To obtain damages after acceptance and breach, a buyer must have a timely inspection, and then promptly and properly dispose of the product, and keep an accurate account of sales.

The buyer’s damages equal what the buyer obtained for the load subtracted from what the buyer should have received for the product if there had not been a breach of contract.

For example, if there is a breach on a load of tomatoes that costs $5,000, it is first determined what the buyer would have gotten for the tomatoes if there had not been a breach. This is done using Market News Reports. In this example, the Market News Reports show the buyer would have received $8,000 for the tomatoes if there had not been a breach. Instead, because of the breach, the buyer only obtained $4,000. Thus, the buyer’s damages are $4,000, calculated as follows: $8,000 [should have received] minus $4,000 [received]). The buyer subtracts its damages of $4,000 from the price of $5,000 and owes the seller $1,000. The buyer is also entitled to expenses incidental to the breach, like the cost of an inspection.

A buyer who accepts a load can revoke the acceptance if the breach could not be discovered at the time of arrival. For example, if the buyer needs 72 hours to test for pesticide residues. So long as the buyer promptly tests and notifies the seller after discovering the defect, the buyer can revoke its acceptance. At that point, the goods become the seller’s again, just as if there was a rejection.