Double-Brokered Payment Problem

Copyright 2006, Traffic World, Inc.


A broker is given a load by another broker, who bills the shipper prepaid freight charges. The shipper pays the first broker. The broker who actually moved the freight bills the first broker, but the first broker goes bankrupt and doesn''t pay.

Does the broker who moved the freight have any recourse with the shipper, or with the lawful owner of the goods, in order to be paid?


Why is it that I''m pretty sure you''re the second broker who "actually moved the freight?"

I know you did, and I couldn''t be more sympathetic to your plight. But as I''m sure you already suspect, you''re out of luck in law.

You have a contract of sorts with the first broker. I say "of sorts" because I''m quite sure nothing was in writing; double-brokered shipments are in the real world almost never properly documented as between the brokers. It was, however, the first broker that engaged your services, and thereby implicitly undertook to pay for those services.

But you have no contract of any sort with either the shipper or the owner. To be sure, those parties benefited from the services you provided and therefore - although this is something of a reach -might be deemed to have assumed some legal obligation for payment therefor. Trouble is, the shipper (who, even if different from the owner, may be deemed the responsible party) already paid its contractor, the first broker, discharging that obligation.

So I''m sorry, but all you can do is queue up with the bankrupt first broker''s other creditors for your share of whatever pittance might be disbursed on discharge of bankruptcy. Which is almost surely going to be nothing, but that''s the best hope I can offer.

Liability of Consignee for Freight Charges


Here''s an issue you''ve probably never encountered.

My company (Company "A") purchased product from a vendor (company "B") on an f.o.b. origin, freight prepaid basis inbound to my company.

Company "B" sold out to company "C." We still buy from company "C."

Company "C" states they will not pay the carrier''s freight bills because their agreement with company "B" states that company "C" would like honor any payment of freight bills.

The carrier hauled the freight to us on a prepaid basis and is asking us to pay because company "C" doesn''t want to. The carrier''s attorney states that we''re liable to pay the freight charges because section 7 of the bill of lading was signed that the carrier can "only collect from the consignee," i.e. us, company "A."

As a side note, I placed a hold on paying company "C" for product (to get their attention) until the carrier''s freight bills were paid. This fixed the problem, but I still would appreciate it if you would provide your thoughts.


I''m glad you got this ironed out, because I sure can''t help you.

I published your question pretty much as you sent it to me because you didn''t provide a phone number. There are a few things I can''t figure out at all, especially your comment about some agreement that "company ''C'' would like honor any payment of freight bills." Like wow, man. I know you meant something else, perhaps that "C" had not agreed to pay freight bills, but I can''t be sure enough to edit it.

What I can be sure of, though, is that you''ve provided me with an impossible scenario. On the one hand you say freight was designated as prepaid, on the other you say section 7 was executed. Section 7 directs the carrier not to deliver until its freight charges are paid and is used only for collect (or very occasionally third-party-pay) shipments, so something''s amiss - and you''re quite right that I''ve at least not often run into anything this fouled up.

My best guess is that your sales contracts (purchase orders) call for prepayment of freight, but the bills of lading didn''t reflect that and instead either specified freight collect or were silent on the question save for execution of section 7 (which is good enough).

If that''s so, I can only advise you to pay closer attention to your inbound B/Ls. Because the carrier''s lawyer was absolutely right; under the B/L terms you, and you alone, were liable for the freight charges. The B/L is the only contract to which the carrier was party; by accepting delivery you accepted that contract and became bound by its terms (Corpus Juris Secundum, 13 C.J.S. ? 478(a)); section 7 basically says you''re liable for freight charges; Q.E.D., you are.

To be sure, if the sales contract/p.o. says something else you might have a cause of action against "B," your vendor at that time, or "C" as its successor-in-interest.

Or you could simply have withheld the freight-charge amounts from your payment of its invoices. But that''s strictly between you and "B" (or "C"). The carrier isn''t in any way bound by whatever agreements you may have with your suppliers, and is fully entitled to look squarely to you for its money.

-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.

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