Common Sales Terms
Every sale involves a sale term. It is crucial to know exactly what the sale term is because the sale term determines the rights and obligations of the produce seller and buyer. Below is a list of the most common sale terms with a summary of the specific rights and duties associated with the term.
Delivered – seller assumes risk of damage during transport — produce must meet specific grade at destination if so stated, e.g. “U.S. No. 1 grapes delivered New York City” must be U.S. No. 1 on arrival in New York City.
F.O.B. (Free on Board) at shipping point (e.g. “FOB Delano, California”) – buyer has risk of damage during transit — buyer has right of rejection — suitable shipping condition warranty applies.
F.O.B. at Shipping Point at Delivered Price – seller assumes costs of transportation, but the sale is F.O.B., meaning buyer: has risk of damage during transit; can reject; and suitable shipping condition warranty applies.
F.O.B.A. (Free on Board Acceptance) at shipping point – buyer has risk of damages during transit – buyer accepts at shipping point — no right of rejection — suitable shipping condition warranty applies.
F.O.B.A.F. (Free on Board Acceptance Final) at shipping point – buyer has risk of damages during transit – buyer accepts at shipping point — no right of rejection — suitable shipping condition warranty does not apply – must be clear proof this term was agreed to by the buyer.
Inspection Final – e.g. California inspection final – seller obtains inspection to show compliance with contract and buyer has no remedy against the seller – must be clear proof this term was agreed to by the buyer.
Purchase After Inspection – buyer has opportunity to inspect – no right of rejection – suitable shipping condition does not apply – must be clear proof this term was agreed by the buyer.
Suitable Shipping Condition Warranty – seller liable for product arriving with abnormal deterioration if transportation normal (only applies to F.O.B. and F.O.B.A. sales) – PACA has good delivery tolerances to determine if there is abnormal deterioration.
Open Price – price to be agreed upon sometime after shipment; if no agreement, buyer must prove reasonable price based on market reports and an accounting.
Price Arrival – price to be agreed upon after arrival; if no agreement, buyer must prove reasonable price based on market reports and an accounting.
Price After Sale (PAS) – price to be agreed upon after arrival and sale; if no agreement, buyer must prove reasonable price based on market reports and an accounting.
Most Common PACA Payment Terms –
- Sale – 10 days after acceptance
- Consignment – 20 days after acceptance
- To Growers by Grower’s Agents – 30 days after acceptance
- Terms can be changed by written agreement before the transaction. But see Payment Terms under The PACA Trust for what happens if terms are increased beyond 30 days from delivery.
Rejection Time –
- Truck – fresh: 8 hours after notice of arrival and availability for inspection; frozen: 24 hours after notice of arrival and availability for inspection
- Rail – fresh: 24 hours after notice of arrival and availability for inspection; frozen: 48 hours after notice of arrival and availability for inspection