Chicago Prime Packers, Inc. v. Northam Food Trading Co.
320 F. Supp. 2d 702 (2004) (United States District Court, Northern District of Illinois)
Background and Facts
Chicago Prime Packers, Inc., was a Colorado corporation with its principal place of business in Avon, Colorado. Northam Food Trading Company was a Canadian corporation with its principal place of business in Montreal, Quebec, Canada. Chicago Prime and Northam were wholesalers of meat products. In March 2001, Chicago Prime contracted with Northam to sell 1,350 boxes of government inspected fresh, blast frozen pork back ribs, which Chicago Prime purchased from Brookfield Farms, a meat processor. The agreed on price for the ribs was $178,200.00, and payment was required within seven days from the date of shipment. The ribs were stored at three different locations en route to Northam’s customer Beacon Premium Meats but at all times were stored at or below acceptable temperatures. However, the ribs ultimately proved to be spoiled and were condemned by the U.S. Department of Agriculture. Nevertheless, Chicago Prime continued to demand payment from Northam. Chicago Prime sued Northam for breach of contract because it refused to pay for the ribs.
Memorandum Opinion and Order
In this case, it is undisputed that the parties entered into a valid and enforceable contract for the sale and purchase of pork loin ribs, Chicago Prime transferred a shipment of pork loin ribs to a trucking company hired by Northam, Northam has not paid Chicago Prime for the ribs pursuant to the contract, and Chicago Prime has suffered damages in the amount of the contract price. Therefore, Chicago Prime has established the essential elements for a breach of contract claim. Northam asserts, however, that the ribs were spoiled at the time of transfer and, as a result, it is relieved of its duty to pay under the contract. The burden is on Northam to establish non-conformity. The evidence is evaluated in light of that burden.
Chicago Prime produced evidence . . . that the ribs delivered by Brookfield were processed and stored in acceptable conditions and temperatures from the time they were processed until they were transferred to Northam on April 24, 2001 . . . The ribs were appropriately processed and maintained in acceptable temperatures while at Brookfield; and no other meat products that were processed and stored at the same time and under the same conditions as the ribs were found to be spoiled or objectionable. . . .
Northam argues that Chicago Prime has “utterly failed to establish that the ribs were damaged while at Beacon.” That argument ignores the fact that Northam carries the burden of proving that the ribs were nonconforming at the time of receipt.
Northam is correct that “there were no contractual [terms] requiring inspection upon delivery.” . . . When an issue is not addressed by the contract, the provisions of the CISG govern. Because the contract at issue did not contain an inspection provision, the requirement under the CISG that the buyer examine the goods, or cause them to be examined, “within as short a period as is practicable in the circumstances” is controlling. CISG, Art. 38(1). Decisions under the CISG indicate that the buyer bears the burden of proving that the goods were inspected within a reasonable time. See, e.g., Fallini Stefano & Co. s.n.c. v. Foodic BV, [citation omitted] . . . The determination of what period of time is “practicable” is a factual one and depends on the circumstances of the case. . . .
Section 3 of Article 38 of the CISG provides that “if the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.” CISG, Art. 38(3). In this case, Chicago Prime knew, or ought to have known, that the ribs would be redirected or redispatched after receipt because Chicago Prime knew that Northam was only a “trading company,” which is defined as a company that buys and sells meat, but does not own any facilities, brick and mortar, or trucks. Thus, under the CISG, examination of the ribs could have been deferred until after they arrived at Beacon.
It is notable, however, that Northam did not present any testimony or evidence as to why the ribs or a portion of the ribs were not and could not have been examined by Northam, Beacon, or someone acting on their behalf when the shipment was delivered to Beacon or within a few days thereafter . . . Northam points out that the ribs were wrapped and shipped in sealed non-transparent cartons or packages that are either white or brown. However . . . nothing would have precluded a Beacon representative from opening and inspecting the boxes of ribs . . . Northam simply did not present any evidence indicating why the boxes or at least enough of the boxes to constitute a reasonable inspection could not have been opened and examined when they arrived at Beacon or shortly after arrival . . . Accordingly, Northam has failed to demonstrate that it examined the ribs, or caused them to be examined within as short a period as is practicable under the circumstances.
Article 39 of the CISG states that “[a] buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.” CISG, Art. 39. A buyer bears the burden of showing that notice of nonconformity has been given within a reasonable time. The evidence shows that, shortly after Beacon discovered the ribs were “off condition” and did not “look good,” both Northam and Chicago Prime were notified of a potential problem. Chicago Prime therefore received notice within a reasonable time after Northam discovered the problem; however, the question here is whether Chicago Prime was notified within a reasonable time after Northam should have discovered the problem.
A court in Italy found that the reasonableness of the time for a notice of nonconformity provided in Article 39 is strictly related to the duty to examine the goods within as short a period as is practicable in the circumstances set forth in Article 38. See Sport D’Hiver di Genevieve Culet v. Ets Louys et Fils, [citation omitted]. The court further noted that when defects are easy to discover by a prompt examination of the goods, the time of notice must be reduced. The putrid condition of the meat was apparent even in its frozen state. . . .
Because this court has found that Northam failed to examine the shipment of ribs in as short a period of time as is practicable, it follows that Northam also failed to give notice within a reasonable time after it should have discovered the alleged non-conformity.
In summary, the object of the CISG in requiring inspection in as short a period of time as is practicable, and notice promptly thereafter, is to avoid controversies such as this—where, because of the passage of time, the condition of the goods at the time of transfer cannot be reliably established. When that happens, the burden falls on the buyer, who had the opportunity to inspect the goods, but failed to do so.
DECISION. The district court concluded that the buyer failed to satisfy its obligations with respect to the inspection of the goods and notification of the seller of nonconformities within a reasonable time. As a result, the court entered judgment in favor of the seller in the amount of $178,200.00 plus $27,242.63 in interest for a total payment of $205,442.63.
COMMENT. This case is interesting not only with respect to ascertaining the buyer’s duties of inspection and notification but also for its discussion of sources for interpretation of the CISG. The court cited Dutch and Italian case law in reaching its conclusion and additionally noted that the CISG must be interpreted in a manner consistent with its international character and the need to promote uniformity and good faith in international trade.