Many years ago, I heard a story that has stuck with me ever since. It went like this: France surprised everyone in the world of sport judo when the French team won several gold medals in the Olympics, blowing away powerhouse countries such as the USA, Russia, and Japan. When the press asked the French coach what he was planning to do next, he said “Go home and work on basics.” Please consider: The French team had just beat the world, and now the coach wanted to go back to the basics.
In this installment of PARCEL Counsel, we will be going back to the basics of transportation contracting. When I first formulated rules for contracting, the first rule was, and still is, “Know with Whom You Are Dealing.” At that point in time, I had in mind the factors generally considered as part of a duly diligent inquiry regarding a potential business partner — credit worthiness, reputation in the industry, trade references, and other similar factors.
I previously wrote about the first rule of contracting for the May/June 2009 issue of PARCEL. There I discussed an additional factor critical in transportation contracting — whether the provider of the services is a carrier and, if so, which type of carrier? Or are they an intermediary and, if so, which type of intermediary?
The reason that this is so critical is that each category of provider has distinct legal characteristics giving rise to distinct rights and obligations with respect to its shipper customers. However, within the last few years, I have realized that there is an even more basic inquiry that needs to be made as a critical first step to the contracting process — determining the name, address, and identifying numbers of the provider.
The Critical First Step
Accordingly, the crucial first step in contracting is to, at a minimum, gather the following information from the provider:
· The exact corporate name including Inc., Corporation, LLC, etc.
o Non-lawyer, transportation professionals need to know and understand that ABC Transportation Co. is not the same as ABC Transportation Services, LLC. From a legal standpoint, they are separate and distinct corporate entities — and a contract with one is not at all a contract with the other.
· The provider’s primary business address and state of incorporation.
o This information should be included in the recitals in the contract and to facilitate Step Two.
· The licenses held and indentifying numbers for the provider.
o Does it hold a federal license as a motor carrier and, if so, what is its MC number and US DOT number?
o Or, is it a transportation broker and, if so, what is its MC number and US DOT number?
· What licenses will the provider be using to provide the performed services?
o Put another way, will they be acting as a motor carrier or transportation broker?
o Other possibilities include providing services as a surface freight forwarder or as an indirect air carrier.
o For entities that hold multiple licenses, this information is particularly important. If the provider will be providing more than one type of service, the contract terms and conditions certainly need to reflect this.
Once this information is gathered, the second step is at least as critical as the first step: Compare the information received from the provider with the information posted on the FMCSA website Licensing and Insurance page (here).
You will be amazed to see how often the information provided is simply wrong: That there is not a match between the company name provided and the MC number provided… or that someone who said they were a carrier only holds a license as a broker… or even getting the provider’s name wrong.
It should be noted that contract templates or forms typically provide spaces for this information to be inserted. However, it has been my observation that this is usually not done until all of the negotiations of the terms and language have been completed and the parties are preparing the final draft for signature…which is far too late in the process.
By the way, our office has developed a two page questionnaire for shippers to submit to a provider as a first step in the contracting process. If you would like a copy of this, just shoot me an email. 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 on the Parcel website at parcelindustry.com/by-author-1130-1.html. Your questions are welcome at email@example.com.