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Monday, May 30, 2005

Cases: Breach of warranty for rotten meat

Un_flag The buyer in a contract dispute has the burden of proof that goods are nonconforming under the U.N. Convention on Contracts for the International Sale of Goods, even where the seller is the plaintiff, according to a new decision from the U.S. Court of Appeals for the Seventh Circuit.

In the case, two wholesalers, one in the U.S. and one in Canada, agreed to a sale of 1,350 boxes (about 20 tons) of pork back ribs, for a total price of $178,200.  Neither Buyer nor Seller ever took possession of the ribs.  Under the deal, Seller's Supplier would turn the goods over to Buyer's Carrier, which would deliver the goods to Buyer's Customer.  When Carrier, acting on behalf of Buyer,  picked up the meat, it signed a bill of lading that said the goods appeared in good or but it did not know what the condition of the goods inside the boxes were.  Later, after Carrier  had delivered the goods to Customer, it was discovered that large amounts of the ribs were "putrid, green [and] slimy."  Ultimately the U.S. Department of Agriculture condemned the whole lot, finding that none of it was salvageable.  Buyer refused to pay Seller, and Seller sued.

Since no one could tell exactly when the meat spoiled, the burden of proof became crucial.  Seller argued that Buyer had the burden of proof because nonconformity is an affirmative defense.  Buyer argued that since delivery of conforming goods was a requirement of Seller's claim, Seller should bear the burden.  The court found no precedents under the CISG on the issue, but given that the relevant provisions (seller's warranty under Art. 35 and risk of loss provisions under Art. 67) are analogous to those in Article 2 of the UCC, it made sense to apply the UCC rule, which puts the burden on the buyer.  Since Buyer could not prove that the goods were nonconforming when delivered, Seller was entitled to the contract price.

Chicago Prime Packers, Inc. v. Northam Food Trading Co., 2005 U.S. App. LEXIS 9355 (7th Cir., May 23, 2005).

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