In this installment of PARCEL Counsel, we will take a look at the basic legal relationship between a shipper and a carrier. Generally speaking, the relationship is defined by one of three categories of documents --- an airbill or trucker’s bill of lading, a pricing agreement, or an individually negotiated contract. Although bearing different labels, all three of these documents are legal contracts.
Black’s Law Dictionary defines a contract as: “A deliberate engagement between competent parties, upon a legal consideration, to do, or abstain from doing, some act.” Looking first to Bills of Lading, the contract is entered into by the shipper tendering the cargo to the carrier, which the carrier agrees to transport to destination pursuant to the carrier’s terms and conditions. This concept is expressed in the current FedEx US Airbill as follows: “By using this Airbill you agree to the service conditions on the back of this Airbill and in the current FedEx Service Guide, including terms that limit our liability.” In this agreement all of the terms — pricing and rates, limits of liability for damage claims, categorizing of various service offerings, etc., etc. — are 100% established by the carrier.
Although a carrier’s standard terms are not inherently evil, being created by the carrier, they are naturally written in favor of the carrier. Accordingly, shippers with larger volumes of traffic will try to negotiate terms that they believe to be more favorable to themselves than those established by the carrier. For most shippers, the primary objective is to obtain lower rates than the carrier’s standard published rates.
When the only issue is pricing, the parties consummate their negotiations in a document that is often titled or referred to as a Pricing Agreement. The essence of such an agreement — which often may only be a page or two in length — is to document the rate negotiations. However, the Pricing Agreements almost always contain a clause to the effect that other than the matters set forth in the Pricing Agreement, all of the carrier’s other standard terms will apply.
Shippers with larger volumes of traffic will often try to negotiate variations and terms other than just pricing. Such negotiations can become quite complicated. Examples of topics which might be on the table for such negotiation include, but are certainly not limited to, the following:
• Higher limits of liability for cargo claims
• Extended payment terms
• Reduced or no late payment penalties
• Insurance and indemnification
• Frequency and extent of general rate increases
• Advanced notification of changes to standard terms & conditions
For shippers, the drafting goal in reducing these negotiations into a written contract is to have all of the terms contained within the agreement itself, without incorporating by reference any of the carrier’s standard terms or by referring to other publications. Examples of such other publications would be the National Motor Freight Classification (NMFC) or mileage guides. When it is necessary to refer to other publications or sources, either out of necessity or convenience, it is important to then freeze the contents of such publication as written on the date of the transportation contract between the carrier and the shipper — and specifically preclude any future amendments or changes to the other publication.
To wrap up, I would like to say that if any readers of this column have any suggestions or requests for future columns, please don’t be bashful. I would really like to hear from you!
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.
Black’s Law Dictionary defines a contract as: “A deliberate engagement between competent parties, upon a legal consideration, to do, or abstain from doing, some act.” Looking first to Bills of Lading, the contract is entered into by the shipper tendering the cargo to the carrier, which the carrier agrees to transport to destination pursuant to the carrier’s terms and conditions. This concept is expressed in the current FedEx US Airbill as follows: “By using this Airbill you agree to the service conditions on the back of this Airbill and in the current FedEx Service Guide, including terms that limit our liability.” In this agreement all of the terms — pricing and rates, limits of liability for damage claims, categorizing of various service offerings, etc., etc. — are 100% established by the carrier.
Although a carrier’s standard terms are not inherently evil, being created by the carrier, they are naturally written in favor of the carrier. Accordingly, shippers with larger volumes of traffic will try to negotiate terms that they believe to be more favorable to themselves than those established by the carrier. For most shippers, the primary objective is to obtain lower rates than the carrier’s standard published rates.
When the only issue is pricing, the parties consummate their negotiations in a document that is often titled or referred to as a Pricing Agreement. The essence of such an agreement — which often may only be a page or two in length — is to document the rate negotiations. However, the Pricing Agreements almost always contain a clause to the effect that other than the matters set forth in the Pricing Agreement, all of the carrier’s other standard terms will apply.
Shippers with larger volumes of traffic will often try to negotiate variations and terms other than just pricing. Such negotiations can become quite complicated. Examples of topics which might be on the table for such negotiation include, but are certainly not limited to, the following:
• Higher limits of liability for cargo claims
• Extended payment terms
• Reduced or no late payment penalties
• Insurance and indemnification
• Frequency and extent of general rate increases
• Advanced notification of changes to standard terms & conditions
For shippers, the drafting goal in reducing these negotiations into a written contract is to have all of the terms contained within the agreement itself, without incorporating by reference any of the carrier’s standard terms or by referring to other publications. Examples of such other publications would be the National Motor Freight Classification (NMFC) or mileage guides. When it is necessary to refer to other publications or sources, either out of necessity or convenience, it is important to then freeze the contents of such publication as written on the date of the transportation contract between the carrier and the shipper — and specifically preclude any future amendments or changes to the other publication.
To wrap up, I would like to say that if any readers of this column have any suggestions or requests for future columns, please don’t be bashful. I would really like to hear from you!
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.
