In today’s fast moving world of commerce the people who are the movers and shakers out there are often irritated or even offended when asked if they’re using a contract with their customer, whether the "customer" is a shipper, carrier, broker, freight forwarder, or some other 3rd party.

Frequently I’m told "We use faxed confirmations. We don’t have time for anything else." Then I ask, "What is being confirmed?" The typical answer is, " Names of the parties, load number, point of pick up, point of destination, and rate." I then get a surprised look when I say, "Your faxed confirmation by itself is not a contract....it is just what it says it is ...a confirmation." The "contract" was the entire verbal understanding negotiated between the parties and the confirmation represents some evidence of that understanding. Then there’s another "contract" that comes into play and controls the shipment if nothing else is put in writing...i.e. the bill of lading. If no problems arise and nothing goes wrong, which is usually the case, then it doesn’t make much difference what the "contract" was....It’s academic.

Fortunately most of commerce operates fairly smoothly. But law books are filled with cases, and court calendars, and court rooms are filled with parties fighting over transportation transactions that some how went wrong. When that happens what’s the first thing they do? (Even before they call their lawyer.)....They go look to see if they have a "contract" that addresses the issues......If all you ever got was a confirmation faxed to you...your contract whether you like it or not, is the bill of lading. In today’s deregulated times there are lots of bills of lading being used. Many shippers have adopted and insist on carriers using their own shippers bill of lading. Many carriers have similarly adopted their own form of bill of lading. The National Motor Freight Classification Conference has it’s "Uniform Straight Bill of Lading." Welcome to the battle of forms!!!! Now the question: How to decide which one to use?

The first answer is the simplest and the best.....DON’T USE THE BILL OF LADING AS THE TRANSPORTATION CONTRACT ! (But if you must, use your own.) Use it as a delivery receipt only! Use a written transportation contract which is tailored to fit your specific situation. At the very least your transportation contract should include provisions which clearly: (1) Identifies the correct names of the parties, including full street address (Not a PO box), phone and fax numbers; (2) Identifies, if it’s a carrier contract, the carriers MC number; (Get a copy of the registration or authority permit before any shipment is transported.); (3) Prohibits interlining or co-brokering without prior written consent; (4) Identifies the rate, timing, and conditions under which all payments are due.(NOTE: Don’t agree on a rate by referral to a tariff unless the tariff page containing the rate is attached; and don’t agree on a tariff that incorporates a general " rules tariff" unless you’ve read it and it’s attached because you may be agreeing to pay all collection costs, outrageous collection fees and charges, as well as attorney fees and other collection costs).These tariffs should be attached to your contract because a carrier is not required to inform you of tariff rate changes etc...It is only required to tell you if you ask. If your contract says that the only rates which apply will be those that are agreed to and attached, and that they can’t be changed without your written consent, then you will have some certainty as to your rates!; (5) Identifies exactly what services each of the parties is expected to perform and when they are expected to be performed. In cases where you’ve got construction workers waiting at the point of destination of some equipment/ machinery/ raw materials etc., you’d be wise to tell your carrier (in writing) what the consequences are of a late delivery will be. Failure to inform the carrier in advance of the consequences of late delivery will very likely prevent you from recovering those costs. It’s a fertile area for lawsuits; (6) Specifies what happens in the event of non-performance. Arbitration or mediation may be desirable; (7) Sets forth insurance requirements. (Be sure to get proof of insurance in your hands before the shipment moves, and make sure the name on the insurance certificate matches the name on your contract.); (8) Provides a representation that the person signing the contract has the authority to do so; (9) Provides an indemnification agreement to protect you from claims arising out of the other parties default. This is especially critical if the transportation involves hazardous materials.

I’ve recently come across some transactions which are moving so fast that no one bothered to prepare bills of lading much less a written transportation agreement. Now it’s a he said, she said situation. Good for attorneys, bad for clients!

In today’s fast paced and generally healthy economy some of the players in the transportation community have been (and are being) burned due to lack of sound credit procedures, or failure to enforce the credit procedures they already have in place. One of the best ways of avoiding legal expenses (why am I telling you this?), is to establish and follow sound credit procedures....It’s just as critical to do that in financially healthy times as it is when the economy so not so good. Most of us have experienced both. In the final analysis, after 34 years of law practice just remember my motto:

IT’S NOT A MATTER OF WHO’S RIGHT, IT’S WHO’S LEFT!

In upcoming issues I’ll discuss other developments of interest in the transportation community.

from TIA Update, Transportation Intermediaries Association, May 1999

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