Risks in Shipping Contracts

Transportation industry lawyer Gordon Hearn from Fernandes Hearn sharing why your business model matters in the trucking industry

The movement of goods presents risks to every business included along the distribution chain. Whether you are a shipper, load broker, carrier, or freight agent awareness on specific contract risks is important.

Why does my business model matter for my trucking company?

Along with his colleague, Carole McAfee Wallace, Gordon Hearn joined us to go in to much greater detail in our Webinar: The Hidden Pitfalls in Shipper Carrier Contracts. With changes to the language in carrier contracts, it has never been more important to be aware of what your business is signing.
Webinar for Trucking Professionals on Shipping Carrier Contracts

~ Transcript ~

My name is Gordon Hearn and I’m a transportation lawyer with Fernandes Hearn LLP in Toronto in the transportation area. One of the areas that we’re routinely advising our clients on is the need to be deliberate with the business model that you have.

What are potential risks of stepping outside the business model to serve a shipper?

Pretend that you are servicing a shipper and that shipper wants to move goods from A to B. In a conventional way you might be the carrier where you issue the bill of lading and you are hauling goods from A to B. That of course involves specific contract and considerations. That’s a different discussion. But what if you as the carrier can’t perform the move but you want to service the needs of your shipper by facilitating or arranging a third-party fleet to perform that move? You now are, arguably, a broker and where you need to be deliberate is from the standpoint of the shipper customer.

Big Rig Truck Peterbilt

What is your legal liability for cargo loss or damage being in the middle?

Are you a freight agent where you’re simply arranging the carrier to be liable directly to the shipper, with the bill of lading being the relevant contract of carriage or, are you contracting to be responsible for the safe delivery of that cargo to destination? You need to be deliberate about what your business model is. Are you a contracting carrier? Some of our clients who are brokers say that we can’t possibly be liable for that cargo loss or damage because we don’t own a truck. Our answer is “you don’t need to own a truck”. It would be a carrier law; it’s a question of what you have undertaken to the shipper.

So, it’s important to be deliberate with what your business model is and it’s important to use the words in a contract or what you say to the shipper delicately and deliberately to set up what that role is.

Have additional questions? Email Gordon Hearn here

Linda started her career in the insurance industry in 1979 and gravitated toward the niche market of transportation insurance in 1986. Linda has been active in the transportation community since her beginnings and is a Board Member with the Durham Region Transportation Association. Since 2006, Linda has been contributing relevant industry articles in Ontario Trucking monthly periodicals

Hidden Pitfalls in Carrier Contracts

Ontario Transportation Industry Lawyer holding sign that says "Read the Fine Print in Shipping Contracts"

Whether you are a carrier, broker, or performing carrier there are certain risks you take on when signing a contract.

The question is: Do you know the risks your company is agreeing to when signing a contract?

In a busy and competitive industry, it can be difficult to take the time necessary to thoroughly review contracts before signing. However, it is imperative that you take the time to review! There are certain risks your company may be assuming and certain types of authority you are giving up by signing  a contract without taking the time to understand what is written.

As your insurance partner, our aim is to empower you and your company with the resources necessary to operate profitability and safely. To do this it is important to be aware and informed before signing off on contract terms. 

To support this discussion, we invited Gordon Hearn (email) and Carole McAfee (email) from Fernandes Hearn LLP to join us for a webinar. In the webinar Gordon and Carole discuss various aspects of shipper-carrier, shipper-broker and broker-carrier contracts.

What are the potential pitfalls in these contracts?

Current trends and potential pitfalls we are noticing include:

  • A lack of equilibrium, especially the brokers who are often stuck in the middle;
  • Brokers and carriers signing whatever the shipper or upstream broker want you to sign without assessing the risk;
  • And when something happens being caught off-guard by surprise “special contract terms”. 

Click the play button to view the webinar


The webinar reviewed four key areas:

Aggressive Terms in Contracts

Contract wordings can be written in such a way to drastically shift the risk downstream. One of the areas where terms are becoming increasingly aggressive is in respect to cargo loss and damage. Gordon and Carole discuss concepts like “Conflicts of law”, cross-boarder shipping dynamics, the Carmack Amendment, and Canadian “uniform bill of lading” vs agreement by contract.

Are Your Terms of Service Even Applicable?

Do you even know whether your terms of service apply? The webinar discusses “by reference” vs. expressly being set forth, the “Loadlink” conundrum, and “Entire Agreement” clauses.

Liability Risk within Important Clauses

Are you brokering loads out? If so, are you ‘crossing the line’ in terms of ensuring that your performing carrier is an independent contractor? Do you know if you are even able to broker out loads based on contract terms?

We dive deep into important clauses for your operation to consider including:

  • Force Majeure
    • “if either party is prevented from the performance of any service or act required by this contract by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, government act or regulations, riots, terrorism, war or other reasons of a like nature not the fault of, or under the control of, the party delayed in performing services or doing acts required under the terms of this agreement then performance of that act is excused for the period of the delay…provided that prompt notice be provided.”
  • Indemnity Provisions 
  • Insurance Requirements
  • Consequential Damages
  • Deemed Loss Clauses
  • Governing Law and Venue
  • and the impact of the STF Rule (USA “Crush and Dump” issue)

Contracting Commercial Considerations

What risks are you assuming inside of these considerations?

We cover some of the most important areas to focus in on including:

  • “Money for contract of carriage held in trust”
  • The Bill of Lading Act
  • Cargo Claim Set Off
  • and No Back Solicitation

What should we do next?

Nearer to the end of the webinar, we share action items to take away for your operation. We advise watching the webinar throughout to learn why those recommendations are provided. 

We do know that it is important to have a strategy in place. Part of a wise strategy is to have a strong relationship with legal professionals that specialize in the transportation industry. Both Gordon Hearn and Carole McAfee are transportation legal specialists that can support you and your company in making smart contract decisions.

To discuss more and set time to talk with Carole and Gordon please send them an email:Transportation Lawyers Gordon Hearn and Carole McAfee from Fernandes Hearn sitting with Bryson Insurance Senior Account Executive Linda Colgan

About the Presenters:

Gordon Hearn

Gordon represents international and domestic interests involved in the transportation, supply chain and distribution of goods in litigation, regulatory and contractual matters.

He advises shippers, receivers, carriers, logistics providers (3PL’s, supply chain and “fulfillment” providers, freight forwarders, load brokers, customs brokers and warehousemen) and their insurers on their legal interest and exposure in the international, cross-border and domestic carriage of goods by all modes of carriage.

Gordon is a Past President of the Transportation Lawyers Association, an independent, international bar association whose members assist providers and commercial users of transportation and logistics services.

Gordon is a frequent speaker at conferences and seminars throughout North America on the above matters. Gordon has authored numerous related papers and articles.

Carole McAfee Wallace

Carole McAfee Wallace is a lawyer with Fernandes Hearn LLP, a Toronto based law firm that specializes in transportation.

Carole represents both domestic and international trucking and bus companies on a wide range of transportation matters including regulatory compliance, defence of provincial offences, contract drafting and commercial litigation.

Carole also practises employment law, advising both federally and provincially regulated employers in Canada, and employers internationally, on compliance with employment standards, the management of human rights issues, including the duty to accommodate, and on occupational health and safety compliance including responding to workplace harassment complaints.

She appears on her clients’ behalf before the Ontario Court of Justice, the Ontario Superior Court of Justice, the Ontario Court of Appeal, the Ontario Highway Transport Board, the Licence Appeal Tribunal, the Ontario Human Rights Tribunal and the Canadian Human Rights Tribunal.

Linda started her career in the insurance industry in 1979 and gravitated toward the niche market of transportation insurance in 1986. Linda has been active in the transportation community since her beginnings and is a Board Member with the Durham Region Transportation Association. Since 2006, Linda has been contributing relevant industry articles in Ontario Trucking monthly periodicals

Coverage, Contracts and the Currency Difference

Canadian insurance policies are written in Canadian dollars.

It is common knowledge that the U.S dollar holds more muscle compared the weakened Canadian currency. This means that business conducted over the border has a very dramatic impact on the payment and settlement of claims.
With the strength of the U.S. dollar repairs, towing, storage are settled at a higher amount while in the United States. Converting currency places additional strain on the limits provided by the insurance policy.

For the most part vehicle repairs will not be affected by coverage limits however the final loss settlement will have an impact on the overall loss ratio. Simply a claim in the U.S will cost the insurer/carrier more.

Many transportation companies carry minimum liability limits while travelling south of the border. Although insurance Brokers discourage this practice it now is more of an alarming concern as we watch the erosion of limits just by the dictation of the currency difference.

A Canadian carrier who maintains minimum liability of $2,000,000 does not have the parallel limits once the border is crossed. It is encouraged that elevation of limits be considered in order to maintain the original comfort of the policy limits to cover the exposures at hand.

Ever consider cargo contracts?

Many shipper contracts are generated in the U.S. The language of these contracts speak in U.S. currency. If a carrier is required to uphold a specific limit for liability and cargo, the onus of responsibility befalls upon the carrier to uphold sufficient limits and abide by the terms of the contract.  Claims in the USA cost more than in Canada. This is a person in a suit holding us a US dollar.

With the erosion of the Canadian dollar increased limits must be accommodated to advocate the binding agreements with shippers.

In Ontario, freight is governed by the Highway Traffic Act unless a carrier has bound themselves to a written contract that supersedes the boundaries of the HTA. Carmack applies to inbound freight and thus once again binds the carrier to the terms of the U.S. contractual agreement for the transportation of goods.

In summary respect the limits of the policy and any terms that could be breached by currency differences and adjust the coverage limits accordingly.

Linda started her career in the insurance industry in 1979 and gravitated toward the niche market of transportation insurance in 1986. Linda has been active in the transportation community since her beginnings and is a Board Member with the Durham Region Transportation Association. Since 2006, Linda has been contributing relevant industry articles in Ontario Trucking monthly periodicals