Exporting - South Korean Oysters

A U.S. company that buys seafood worldwide for sale in various countries purchased $700,000 of frozen oyster from South Korea for resale in the U.S. and Europe. Four months later, FDA discovered South Korea was releasing raw sewage into waters where Korean oysters are raised. FDA told U.S. companies to recall all Korean oysters due to risk of norovirus contamination which causes gastrointestinal distress. Other countries followed FDA's lead, resulting in a worldwide recall. This caused the U.S. company to recall $500,000 of oyster meat it had to destroy. When it requested reimbursement from the South Korean company, the latter's attorneys (a large U.S. firm) responded that their client bore no liability based on a number of legal technicalities. After the U.S. company's attorneys told their client no reimbursement was feasible, The Food Lawyers were asked to examine the matter.

We determined that all of the Korean company's legal arguments were bogus. For example, here are two paragraphs from the demand letter we sent to the Korean company's attorneys:

You assert that any claims of nonconforming goods should have been made within twenty days after delivery because the "... invoice ... states on its face, in clear, conspicuous text, that '[a]ll claims on frozen seafood should be made within 20 days of delivery.' " The text on the invoice is irrelevant because it is not a contractual term between the parties. The invoice was issued after contract formation and, as such, cannot retroactively add terms to the parties' agreement.

Assuming arguendo that "... [a]ll claims on frozen seafood should be made within 20 days of delivery ..." was a delivery term between the parties, it does not operate as a disclaimer of your client's warranty of merchantability that was breached when the goods were discovered to be unsalable four months after delivery. The warranty of merchantability may not be disclaimed in general language, except in "as is" sales. A sufficient disclaimer "must mention merchantability." (California Commercial Code 2316(2) and Official Comment 3.) Yours failed to do this.

Our letter contained 7 pages of this type of legal analysis. We demanded reimbursement in full and ultimately settled for ninety cents on the dollar. We achieved this in a few weeks without expensive litigation that would have delayed reimbursement for over a year. The U.S. company was happy with the result and became a permanent client of The Food Lawyers.


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