In previous columns, we have taken a look at recent cases and industry developments. In this issue, we are going ‘back to basics’ to briefly review the basics of what are known as ‘rules tariffs,’ ‘service guides,’ ‘terms and conditions,’ etc. and their legal effect upon your company.
Regardless of the exact label given to such items, they are all essentially the same: a very detailed set of terms and conditions governing shipments tendered to them for delivery. They are written by the carrier and, naturally, are favorable to the carrier. Amongst other things, such terms or rules will not only limit the maximum dollar amount of a carrier’s liability for loss and damage but may also prescribe certain procedures to be followed as a prerequisite for recovery of a loss and damage claim. Similarly, the rules may also define certain circumstances wherein the carrier states that it will not have any liability at all for loss or damage.
It is very important to fully understand that all of a carrier’s terms and conditions are legally binding upon a shipper unless there is a specific, individually negotiated writing or contract between the shipper and the carrier superceding one or more of such rules or terms. The reason for this is that when there is no separate contract, the carrier’s bill of lading, airbill or similar document then becomes the ‘contract for carriage.’
In addition to any specific terms and conditions set forth on the front or back of a bill of lading or airbill, these ‘contracts for carriage’ also include ALL of the terms and conditions of the rules tariff in effect as of the time of shipment. They become part of the ‘contract for carriage’ due to a legal concept known as ‘incorporation by reference, which Black’s Law Dictionary defines as ‘the method of making one document of any kind become a part of another separate document by referring to the former in the latter and declaring that the former shall be taken and considered as a part of the latter the same as if it were fully set out therein.’ For example, on the front of a FedEx US Airbill it states, ‘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.’
It is also very important to understand that the shipper is deemed to be bound to these contract terms regardless of whether or not the shipper has actually read them. In the May/June issue, we discussed the case of Treiber v. UPS, 474 F.3d 379. There the lower Court stated that ‘failure of a plaintiff to read matter plainly placed before it cannot overcome the presumption that the plaintiff assented to the terms of the carrier.’
The Court of Appeals said, ‘This is basic contract law: one cannot accept a contract and then renege based on one’s own failure to read it.’ The Court of Appeals went on to say that the shipper ‘should have taken the time to examine the provisions of the tariff and/or the terms and conditions of service before he sent an item worth more than $100,000 via UPS.’ Thus, we cautioned that in today’s deregulated transportation environment, the shipper must take the time and trouble to familiarize himself or herself with all the ins and outs of a carrier’s tariff.
So what would Bill Augello say about this’ I believe that he would have no problem with the concept of incorporation by reference. There is no way that a shipping document such as a bill of lading or airbill could physically contain the number of words needed to spell out all of the potentially relevant provisions.
However, what really bothered Bill is that the carrier may unilaterally change the terms and conditions at any time it chooses without any legal requirement to alert its customers that there has been a change. For example, on July 7, 2007, UPS posted on its website a revised set of ‘terms and conditions.’ Although the UPS home page has a tab labeled ‘New Rates Effective January 1, 2007,’ there is no similar tab announcing the new rules.
When printed out, these rules are 39 pages in length. An industry consultant analyzed the new rules and compared them to the rules that were in effect as of January 1, 2007. After spending considerable time and effort, he determined that there were five new paragraphs added. These paragraphs do not indicate in any way, such as through an asterisk, footnote or underlining, that they are new. In other words, the only way a person could tell if there were new provisions would be to print out the previous service guide and the current service guide and go through them line by line.
To compound this problem, once this analysis is complete, a carrier could change the rules the following day again without actual notice that any particular provision had been changed. Nevertheless, the shipper would be bound by the new terms. Bill’s frustration was that this seems to be perfectly legal.
Our conclusion? It would be nice if the carriers could design their websites to allow a shipper to readily see additions, deletions and modifications in the rules or terms and conditions. Second, the ICC is long gone, the FAA is longer gone, so shipper beware! We will soon look at fuel surcharges, so let me know if you have any questions or points that you think should be addressed. All for now!
Brent Wm. Primus, J.D. can be reached at