Commentary: Heading Off a Third-Party Risk

Q: We are a large importer of children’s wear into the United States. My question is in regard to a local drayage company we use to pick up containers from the pier and bring them to our warehouse.

Once goods are released from U.S. Customs and offloaded, we issue a delivery order and send it to this drayage company so it can pick up the container. It’s done a good job for us for about six years, but we’ve heard grumblings about it owing money to other companies, and I’m concerned about the company’s financial stability.

My question is: If this drayage company has another trucker pick up these containers on its behalf, do we have liability to this third-party trucker if the drayage company doesn’t pay? I’ve seen many of your articles refer to third-party issues, and I want to make sure we have no liability if this actually happens.

A: I’d love to give you a reassuring answer, and from a purely legal standpoint, I can come close, but it’s still a situation you don’t want to confront.

For the moment, I’m going to assume you’re taking precautions to make sure your pickup orders and (very important) the bills of lading specify the drayage company you’re choosing to do the work. That is, neither document should mention the trucker that’s actually picking up by name. (If you aren’t taking such precautions, start doing so immediately.)

This should suffice to establish that your sole contractual relationship is with the drayage company. Therefore, that’s whom you owe and nobody else. The relationship between the drayage carrier and anyone else to whom it subcontracted the haulage is a matter strictly between the two of them and imposes no liability on you.

Now all this postulates that you’ve duly paid your drayage operator before the actual hauler demands payment from you. If not, all bets are off. Should you receive such a demand before you’ve paid your drayage company, you should put a screeching halt to paying anybody until the two carriers have sorted things out between them. Otherwise, though, the law’s on your side.

Here, however, is why you don’t want to encounter the problem. The fact that a strict reading of the law supports you probably won’t stop the actual trucker in such a situation from demanding that you pay it, and may not deter it from suing if you don’t.

Such a lawsuit may be brought in small claims court, where strict readings of the law aren’t the rule and justice tends to be pretty rough and ready. Even if the money’s too great for that, it’ll still be in a lower local court, where the law is usually applied some better but decisions are still unreliable.

First, you’ll have the expense of defending such a lawsuit, because corporations must be represented by legal counsel even at the small claims level. Second, a judge whose sympathies may lie with the trucker, which is sure to be a lot smaller and lower on the marketplace totem pole than your company, could decide against you based on his or her view of the “equities.”

I’d suggest you handle this by eliminating the problem before it comes up. Have a frank talk with your drayage carrier, explaining your concerns. Tell it bluntly that you’ll no longer accept it subbing loads out to other carriers; say that if it can’t handle a move itself, it must instead advise you, and you’ll arrange with a substitute carrier on your own.

In fact, this is a more sensible way to do things operationally as well as economically. The “good job” you say your drayage company has done for you over the past six years can’t, of course, extend to loads it isn’t handling itself. And if it’s in the financial trouble you suggest, it may be reduced to digging at the bottom of the barrel for truckers willing to subcontract with it. I don’t think you want this level of carrier handling your loads.

You also might run financials on the drayage carrier to see whether, and to what extent, your fears are justified. There’s no need to rely on scuttlebutt when the facts can be unearthed so easily. You could learn that the company is on such shaky economic ground that you’ll decide to stop using it entirely; however, you could find that the grumblings are baseless.

This isn’t a problem you have to face, so take the steps needed to make sure you won’t.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.
 

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