Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: March, 2018

My “Top-Ten” Terms and Clauses for Transportation Contracts

by gspencermynko

Drafting and advising clients on contracts is a substantial part of my practice. Unfortunately, too often, I work with clients whose rights are not adequately protected because the written documents which control or govern the dispute they are faced with, are either inadequate or simply don’t exist. I continue to be surprised at how often the players in the transportation industry operate with either oral agreements, poorly drafted documents or shoddy written contracts.

And interestingly enough, the problems often do not stem from some highly technical transportation specific matter, but simple standard contract clauses which should be utilized by anyone in business, let alone trucking and transportation.

Therefore, I created a list of 10 ingredients that should be at least considered, if not included, in any agreement involving transportation transactions.

And when I refer to “contract” I am talking about anything from shipper-broker agreements, broker-carrier agreements, independent contractor agreements, employment contracts, to bills of lading and simple invoices. These critical terms and clauses can make a world of difference in the event a dispute arises

1. Forum selection clauses

The potential advantages of a forum selection clause are numerous. For example, a forum selection clause can prevent having to litigate far from one’s home court, help keep litigation costs down, and minimize the inconvenience to employees who are witnesses in the litigation. Any party entering into a contract should pay close attention to what forum is chosen in the contract because it is now highly likely that any dispute will end up in the contractually chosen forum.

2. Arbitration clauses

Requiring arbitration has benefits: Cost: arbitration has often been seen as a cheaper way to resolve disputes than litigating in court. Speed:, arbitrations tend to follow more specific and defined timelines toward resolving a dispute, and arbitrators do not always face crowded work and caseloads, resulting in quicker final decisions. Fairness: Often arbitrators are selected by agreement of both parties. Finality: For the most part, it is very difficult to appeal arbitration rulings. This finality can be a positive factor in relation to ending a dispute.
Simplicity: Litigation can involve mounds of paperwork, multiple hearings, depositions, subpoenas, and similar processes. An arbitration may eliminate some or many of those time-consuming and expensive tools of litigation.
Confidential:Arbitration hearings do not take place in open court and transcripts are not part of the public record.

3. Attorneys fees and costs

Awarding Attorneys fees and costs to the prevailing party really puts teeth in any agreement. Lawsuits are expensive. Litigation is expensive. Too often, cases simply are not worth pursuing because they will cost more than you can recover. Ensure your right to attorneys fees and costs by having a proper clause included on any document that governs any transaction, from a complicated contract to a simple invoice or bill of lading.

4. Liquidated damages and consequential damages.

Sometimes it’s difficult to determine what your actual damages may be in a given dispute. Therefore, a liquidated damages clause can be very beneficial to the aggrieved party. As long as it is reasonable (i.e. not excessive) these clauses will usually be upheld by courts. Similarly, a breach of contract can result in all sorts of consequential harm. Therefore it’s a good idea that a contract specifies the right to be compensated for consequential damages arising from a breach.

5. “Entire agreement” or integration clause.

If you go to the trouble of entering into a written agreement, then the written agreement should represent the entire contract between the parties. Simply put, you do not want oral agreements and representations, or other external terms to affect or complicate your business dealings.

6. Opportunity to review by a lawyer.

Inserting a clause into the contract that states the parties had an opportunity to review the document with an attorney and they enter into the contract freely and fully informed emphasizes that the contract was entered into at “arm’s-length” by two parties on equal footing.

7. Governing Law.

These clauses go hand-in-hand with your venue selection clause and forum selection clauses. Generally speaking, you will want to select the laws of the state in which you reside to govern and control any dispute between you another party. However, there may be exceptions to this general rule and as long as there is a reasonable basis for choosing the laws of a particular state, these clauses will tend to be upheld by courts.

8. Confidentiality.

Trade secrets, intellectual property and customer lists are a few examples of property that you’ve worked hard to develop and which deserves protection. In order to be most effective, a confidentiality agreement must be specific and detailed.

9. Indemnification.

Indemnification or “hold harmless” clauses are a must, especially in transportation where Life and valuable property is always great risk. Contractual indemnification is defined as a provision in an agreement where one party (or both with a mutual indemnification provision) agrees to compensate the other for loss or liability arising out of the contract.The type of loss is usually described in broad terms in the indemnity provision, and can include all forms of litigation (claims, counterclaims, cross claims, grievances and appeals),all harm, bodily injury, property damage, liens, fees, judgments, attorney costs and any other fees and costs arising out of litigation related to the contract. Put another way, the indemnifying party (indemnitor) is managing the financial risk attendant to the contract for the indemnified party (the indemnitee).

10. Class-action waiver.

Class-action litigation can be devastating, and when appropriate, class-action waivers are a must to protect the company against such lawsuit. However, Be aware that these clauses are highly technical and should be drafted by an experienced attorney. This is especially true in California, where courts tend to view these terms with disfavor.

11. Bonus!

This is not a term or clause but simply a good idea: include an initial line at the bottom of each page of every contract. You’d be surprised as to how often lack of an initial line created all sorts of headaches.

While this list is by no means comprehensive, it should provide food for thought about the quality of your agreements and documents. The bottom line is that trucking companies need to have all of their contracts and any document governing any transcation reviewed by a Transportation Attorney for meaningful legal advice. This simple, cost-effective step can literally save your company a fortune – the cost of prevention is far cheaper than the cost of the cure

Limiting Your Company’s Liability in Cargo Claims and Contracting “Around” The Carmack Amendment.

by G. Spencer Mynko, Esq.

Cargo loss and damage claims are a reality for anyone involved in transportation. A constant theme in the legal world of the Carmack Amendment is limiting liability of lost or damaged cargo. This is an important part of trucking law because of the nature of the business.Trucking companies transport millions of dollars of cargo everyday, and when cargo is lost or damaged the trucking company is responsible for replacing it or paying for it.

The Carmack Amendment essentially requires a carrier to insure the loss or damage of a shipper’s cargo in most instances. Carmack makes the Motor Carrier a defacto insurer of cargo. Therefore, it is critical for a carrier to know how to limit its liability under the Carmack Amendment, 49 USC 14706.To make a case against a carrier a shipper must simply show three things:
1. that the shipper delivers the goods to be transported free of damages;
               2. that the goods were damaged in some way prior to delivery; and,
               3. the amount of damages that the goods suffered

If a shipper establishes the above, the burden of proof shifts to the carrier to establish their innocence. A carrier is liable for the lost cargo except where the loss or damage is caused by (1) the act of God, (2) the public enemy, (3) the public authority, (4) the act or default of the shipper or (5) the inherent vice or nature of the property. In addition, the carrier must establish that it was free from negligence.

Because the threshold for proving a case under the Carmack Amendment is so low, trucking companies seek to limit their liability on the goods they deliver. This can be accomplished through the use of contracts to modify the Carmack Amendment.

Federal Judge Rules on Limiting Liability

The US Court of Appeals for the 3rd Circuit clarified the rules on limiting liability under the Carmack Amendment. “The carrier’s liability may be limited…. if it satisfies the following four requirements”

1. maintain a tariff within the prescribed guidelines of the Interstate Commerce                      Commission;

2. obtain an agreement from the shipper on a choice of the carrier’s liability;

3.  give the shipper a choice between two or more levels of liability;

4. issue a receipt or a bill of lading to the shipper to memorialize the agreement                       modifying liability prior to moving the shipment.

The case at issue here involved a carrier who on its face fulfilled all of these requirements and limited their liability. But the shipper still challenged whether the carrier should be liable for the goods that were lost.

Facts of the Case

This case, Yohan Choi v. ABF Freight Sys., 665 Fed. Appx. 182 (2016) involved a shipper who contracted with a national trucking company to have their household goods transported from Texas to New Jersey. En route to New Jersey the truck carrying the goods was in an accident that caused a fire that destroyed all of the goods on the trailer, including the shipper’s goods. The shipper made claims under the Carmack Amendment of more than $60,000 because all of their goods were lost.

Prior to shipping the goods the shipper and carrier entered into an agreement that limited the carrier’s liability to $7,500. The agreement also allowed the shipper to choose between other levels of liability, but chose the maximum of $7,500. The argument the shipper made in this case was that the carrier only offered one level of liability for catastrophic loss, even though there were a number of liability options for other types of loss.

The district judge did not agree with this argument. The court ruled that more than one option was enough, and the carrier did not need to offer different levels of liability for different types of loss. This is another very important lesson for trucking companies as they seek to limit liability under the Carmack Amendment.

Waiving Carmack Amendment Rights and Remedies

Another interesting case involved a shipper and carrier waiving their rights under Carmack. Federated Mut. Ins. Co. v. Con-Way Freight, Inc., 2015 U.S. Dist. LEXIS 61028: in this case the shipper agreed to ship its cargo via a well known shipping company. The case centered around the validity of an arbitration agreement and whether that contract could affect the the rights and remedies applicable in interstate-shipping cases. The judge ruled that Carmack rights and remedies can be waived, but they must expressly mention Carmack:

“If the shipper and carrier, in writing, expressly waive any or all rights and remedies under this part for the transportation covered by the contract, the transportation provided under the contract shall not be subject to the waived rights and remedies and may not be subsequently challenged on the ground that it violates the waived rights and remedies. 49 U.S.C. § 14101(b)(1)”

So while a company can waive the applicability of the Carmack Amendment, the waiver must be in writing and it must be expressly waived.

“The statute states that the express, written waiver must be between the shipper and carrier…As explicitly stated in the statute, a Carmack Amendment waiver must be in writing between the shipper and carrier”

A general waiver will not suffice: The court explained that such a general waiver was not enough to erase the applicability of the Carmack Amendment. Any agreement must expressly mention that it is waiving Carmack Amendment claims to properly waive the applicability of the Carmack Amendment.

Review your Bills of Lading and Shipping Contracts!

The above cases make it clear that precise language in your contracts and bills of lading can mean the difference between avoiding liability or getting hit with a huge judgment. The bottom line is that trucking companies need to have their shipping contracts and Bills of Lading reviewed by a Transportation Attorney for meaningful legal advice.