In the last installment of PARCEL Counsel we focused on three categories of “damages.” As explained there, the term “damages” is applied to losses sustained by one party as the result of another party’s conduct. The types of damages that we focused on in the last installment were actual damages, consequential damages, and irreparable damages. 

Jump in! The water is fine?

Another category of damages are liquidated damages. These are also referred to as stipulated damages. These terms are used to describe the situation where the parties have agreed in a contract that if one party breaches the contract, the amount owed to the other party will be a specified amount.

The amount of the liquidated damages can be, and usually are, either more or less than the actual damages. The benefit of having a liquidated damage clause in a contract is that it only leaves open the question as to whether a party has breached the contract and avoids the necessity of having to litigate the appropriate dollar amount to compensate for such a breach. 

Twofers: Consignee chargebacks

As used here, the term “consignee chargebacks” refers to a process whereby a purchaser of goods deducts a certain dollar amount when paying the seller’s invoice based upon the terms of the sales agreement between the seller (shipper) and buyer (receiver). Consignee chargebacks have been around in various forms for a long time. However, in recent years a new form has arrived which gives rise to a new set of problems for sellers of goods and their carriers.

The more recent form of consignee chargebacks arises out of a problem with the manner or way in which the goods are delivered --- as opposed to a problem with the goods themselves. An example of this category of chargebacks is when the seller’s carrier misses a delivery appointment. If the carrier arrives at destination outside of a specified window of time, the receiving buyer reduces the seller’s invoice by a certain amount, that is, a chargeback as liquidated damages for the late delivery

In addition to deductions for missing a delivery appointment, there can also be chargebacks for rescheduling a delivery appointment and other sundry items such as a missing packing list. It is my understanding that these chargebacks can range from $100 to as much as $500. For a certain delivery there could be multiple chargebacks.

An interesting aspect of consignee chargebacks is that they can simultaneously be both liquidated and consequential damages. They are liquidated damages in the context of the agreement between a seller and buyer of goods that is, when the parties have agreed that the buyer may deduct certain amounts from those otherwise due in the event of certain occurrences, e.g., a late delivery appointment or missing packing slip.

However, as a seller starts to feel the economic pinch of the chargebacks, the carriers may also become involved. This is because the seller will look to the carrier for compensation and file a claim with the carrier to recover its loss. However, the carriers will almost universally reject such claims on the grounds that they are in the nature of “consequential” or “incidental” damages, which, as discussed in the last installment, are generally not recoverable unless reasonably foreseeable. 

It should be noted that most carriers will state in their tariffs that consequential damages are not recoverable even if reasonably foreseeable. So far as I’m aware, the enforceability of such a provision has not been tested in court.

Warning! Stay Clear of These!!

The last category of damages that we will consider are those known as punitive damages, exemplary damages, or treble damages. These are damages which are imposed to punish the offending party and/or serve as an example to others not to engage in such conduct. The laws relating as to when a court may or may not impose such damages are set by the laws of each state, as well as by federal law. 

In some instances, treble damages are set by a specific statute. Alternatively, punitive damages can be awarded according to court decisions authorizing them when the harm is caused by someone “acting with a conscious disregard of the rights of others”. As a general principle, such state law remedies are not allowed in cargo claims asserted against a motor carrier or rail carrier operating in interstate commerce.

All for now!




Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com
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