Risks in Shipping Contracts
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.
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.
~ 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.
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