I am not making some earth-shattering revelation when I say that the 2006 spinach outbreak and subsequent investigations and litigation (“2006 Events”) have forever changed the way the agricultural industry does business. The changes in business practices that have resulted from the 2006 Events are apparent on the face of every new contract for the growing, harvesting, packaging, marketing, and/or shipping of agricultural commodities. One example of these changes can be found in the warranty requirements, which are now commonplace in agricultural contracts.
Most new contracts, especially marketing agreements, contain provisions requiring the a contracting party to warrant the quality of the product, i.e., to promise that the product to which the agreement applies is free from “adulteration” as that term is defined in the Federal Food, Drug, and Cosmetic Act (1938) (the “Act”).
The Act provides that food is “adulterated” if it meets any one of the following criteria: (1) it bears or contains any “poisonous or deleterious substance” which may render it injurious to health; (2) it bears or contains any added poisonous or added deleterious substance (other than a pesticide residue, food additive, color additive, or new animal drug, which are covered by separate provisions) that is unsafe; (3) its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; or (4) it bears or contains a pesticide chemical residue that is unsafe.
In order to satisfy such a warranty obligation, the contracting party would have to have every individual item subject to the agreement inspected and tested. If the crop is baby spinach for example, every leaf would have to inspected and tested and determined to be clear of any contaminants or “deleterious substances” in order to prevent a violation of the warranty provisions of the marketing agreement. Considering the nature of the product and the resulting speed at which the industry must operate, such activities would be impossible and even if possible, overburdensome and unreasonably costly.
It is well established in California that impossibility is an excuse for nonperformance of a contractual obligation. The California Supreme Court has explained that impossibility is the equivalent of impracticability and impracticability is achieved when the obligation can only be done at an excessive and unreasonable cost. Oosten v. Hay Haulers Dairy Emp.& Helpers Union (1955) 45 Cal.2d 784, 791.
It is not difficult to argue that a warranty against adulteration would be impossible to perform. The inspection and testing of every leaf of baby spinach would most certainly result in excessive and unreasonable costs, substantial delays, and a higher probability of adulteration. On these grounds, it will be difficult to enforce the standard warranty against adulteration found in most agricultural agreements.
This article first appeared in L+G’s Food Safety Newsletter in August 2012.