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Copyright (c) 1990 Emory University School of Law
Emory Bankruptcy Developments Journal

COMMENT:

Bankruptcy and the Perishable Agricultural Commodities Act Trust

1990

7 Bank. Dev. J. 291

Author

Ali F. Morad

Excerpt

I. INTRODUCTION

Producers of perishable agriculture products often send their products to a buyer or broker thousands of miles away, resulting in transactions in interstate commerce. 1 Because of the highly competitive nature of the agricultural commodities industry, Congress recognized a need over fifty years ago to create a federal regulatory scheme that would protect sellers from irresponsible business conduct by the buyer or broker. 2 A common occurrence, for instance, might involve a purchaser who, upon receiving a shipment of perishable commodities during a declining market, would wrongfully reject the shipment. The purchaser, to justify her actions, could easily make a false claim that the commodities had arrived in a damaged condition or make some other claim permitting rejection. 3 Due to the perishable nature of the commodities, compounded by the fact that the seller of the commodities was often a great distance from the buyer, the seller would likely suffer a loss on the product. 4 The losses to the individual seller were usually small, but the underhanded practices threatened to place a large burden on the industry as a whole. 5 Furthermore, the courts did not provide a satisfactory remedy because litigation was often slow, expensive and ineffective. 6

Congress passed the Perishable Agricultural Commodities Act (PACA) 7 in 1930, hoping to eliminate such unfair practices in the marketing of perishable agricultural commodities. 8 The primary purpose of the statute is to protect sellers of perishable commodities by defining and prohibiting unfair ...
 
 
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