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.
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.
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.
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