Shipping LTL? Get it in writing

By Staff -- Logistics Management, 3/1/1999

John Cutler, general counsel for the law firm McCarthy, Sweeney & Harkaway, has advice for less-than-truckload shippers: Ask the right questions and include the answers in contracts.

At a recent seminar presented by the North American Small Shipments Traffic Conference (NASSTRAC), Cutler told the story of a shipper who had selected a carrier because the carrier claimed to have insurance. When the carrier damaged one of the shipper's loads, the shipper was surprised to learn that the carrier's insurance did not cover the damage.

"Of course the carrier had insurance," Cutler said. "You cannot operate without it. But the shipper did not ask for the right information. What he needed to know was whether the carrier had loss-and-damage insurance." The shipper should have stipulated in his contract that the trucker carry loss-and-damage insurance, he added.

Cutler cited a number of other "contract essentials" that should be included in every agreement with an LTL carrier. First, the contract should identify rates clearly and accurately. These should be included in an appendix, so that they can be changed easily to reflect new business conditions.

Cutler said he "questioned the certainty of contract rates with carriers" that participate in rate bureaus. In a court of law, a judge may be inclined to favor rates from rate bureaus, he noted.

A contract also should include a protective provision in case the rate-classification system should change, he said. Cutler recommends a clause that states "in the event of a significant modification of the class rate system, both parties agree to use rates comparable to the rates in this contract."

Because carriers discount class rates by as much as 70 percent, Cutler said, contracts should not impose any loss-of-discount penalties for late payment. In addition, contracts should include all entities in a corporate family and spell out geographic coverage. He also recommended including an "evergreen" clause to prevent rates from changing if a contract expired.

Cutler further urged attendees to define the released value--the extent of liability faced by the carrier for loss and damage--in any contract with an LTL carrier. Cutler noted that the courts varied widely in their interpretations of the Carmack amendment, which requires carriers to compensate shippers for the full value of goods lost or damaged in interstate commerce. But current law allows carriers to limit their liability in tariffs on file in their offices. Carriers can change those limits without notifying their customers.

Cutler also recommends that shippers use bills of lading that include minimal information, so they do not contradict any contract provisions. All a bill of lading need specify is a consignor and consignee, origin and destination, the number of packages in the shipment, a description of the freight, and weight, volume, or other measurements for rating purposes.