Journal — From the Bar

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Withholding freight charges awaiting after-the-fact contracts

Q We are a large transactional broker that references our service terms and conditions on our load confirmation Henry Seaton Untitled 1sheet. We have handled a series of shipments for a large shipper that now refuses to pay us unless we first execute its shipper-broker contract, which is more than 40 pages long. Is it legal to hold our freight charges hostage awaiting our signature on a contract not presented to us before the shipments moved?


A I applaud you for setting forth your service terms and conditions on your Website and for incorporating them by reference on your load confirmation sheet. All too frequently, transactional moves are handled based upon load confirmation sheets without standard terms and conditions.

Your practice is similar to the practice of carriers and tracks the federal transportation statute that states that shipments are handled subject to written contracts, if any, that otherwise are subject to the carrier’s service terms and conditions, a copy of which is available upon request.

Clearly, when the shipper agreed to a rate in return for your service, it knew and could have reviewed your service terms and conditions, and in fact, you advise that the shipments were delivered intact and on time, so there is no real dispute over your service terms and conditions. If the shipper does not want to do future business with you unless it has a signed written agreement, it has the right to do so, and you can hammer out the details of its 40-page contract. Yet, it has no basis for not paying the freight charges on the delivered shipments in ordinary course. Any contract you executed with the shipper today would not apply retroactively in any event.

Moreover, as a broker, you have an obligation to bill and collect freight charges in a timely manner from the shipper and to transmit the payments upon receipt to the carriers you hired. Those carriers are not privy to your dealings with the shipper and deserve to be paid. There is no reason for their payments to be withheld for services provided, and there is no reason for you to finance the receivable for the shipper until a lengthy new contract is negotiated.

Clearly, you cannot get litigious with the customer and threaten to sue them over the issue if you want to curry their favor and future business. But fair is fair, and your accounts payable department should insist upon timely payment while your contract issues with respect to future business are being resolved.

Henry Seaton is a transportation lawyer who represents carriers.

 

Any contract a broker executes with a shipper today would not apply retroactively.

*Carrier service terms and conditions apply unless trumped by a signed written contract. (49 U.S.C. 14101(b))

*Unless otherwise agreed in writing, the regulations still require payment of freight charges within 15 days of receipt of invoice. (49 C.F.R. 377)

*A written load confirmation sheet is a simple agreement identifying the service and the compensation to be paid.

*A typical bill of lading is a contract as well as a receipt, incorporating any written signed agreement and the service terms and conditions published by the carrier.

*Shippers have constructive knowledge of brokers’ and/or carriers’ service conditions and actual knowledge when incorporated by Website reference.