The Price of No-Shows

Q: Now that ocean carriers are implementing so-called no-show fees when a container misses its booked sailing, we’re faced with a problem when a rail or motor carrier delivery arrives late at a port.

We always dispatch in plenty of time for the carriers to get to the port according to their established schedules. But occasionally — well, make that more than occasionally — one or more containers doesn’t get to the port in time.

Up to now this has been no more than an inconvenience; we simply push forward to the next vessel, and the ship lines usually will make room. Now, however, it’s going to cost us money if the container shows up late.

This isn’t our fault; it’s the inland (rail or motor) carrier’s fault. We think they should be the ones to pay. But can we legally make them do this, as with a claim for unreasonable delay? I’d like you to clarify our position here.

A: Unless you can persuade your rail/motor carriers to enter into contracts specifically addressing this contingency, your position is pretty lousy.

Surface land carriers are indeed obligated to deliver with “reasonable dispatch,” and reasonable dispatch to you and me may well be what the carriers tell you they can accomplish. In general, the courts agree, see esp. John Morrell & Co. v. Burlington Northern, 560 F.2d 277 (U.S.C.A.7, 1977), and N.Y., Philadelphia & Norfolk R.R. v. Peninsula Produce Exch. of Md., 89 A. 433, aff’d 240 U.S. 34 (1915).

So the late delivery at least arguably constitutes delay, for which carriers are liable. But the second prong of whether this may be subject to a claim is whether the claimant suffered economic injury — damages — as a direct result thereof, and there you hit a snag.

Sure, the ocean carrier is penalizing you for the no-show container(s), which clearly constitutes damages. Because of the secondary aspect of those damages, though, they fall into the category of “special” or “consequential” damages, for which carriers are ordinarily not liable without advance notice.

Special and consequential damages are defined in law as “those which are the actual, but not the necessary, result of the injury complained of, and which, in fact, follow it as a natural and proximate consequence in a particular case, that is, by reason of special circumstances or conditions;” Black’s Law Dictionary. And that’s what you have here.

That is, the goods themselves suffered no harm because of the late delivery. Rather, the injury you incurred was because of a late penalty imposed by someone inconvenienced by the lateness — no different, for example, than late fees assessed by some major retail outlets on their suppliers, or late charges incurred by a contractor who can’t bring in a new building on time because carriers didn’t deliver needed materials or tools on schedule.

This rule of law exists on the not-unreasonable basis that anyone entering into a contract is entitled to know up front the price of non-performance. Late delivery of a shipment won’t always result in late fees, so unless you tell the carrier before dispatching your shipment that in this case it will, you’re likely out of luck.

And if you do tell the carrier up front, chances are good that it’ll politely decline to haul your freight.

You have two shots. One is to file claim and then sue when it’s declined, arguing that the ocean carriers’ decision to start assessing no-show fees has been well publicized and therefore the motor or rail carrier should have known that late delivery might result in your having to pay such fees. There’s some precedent for such an argument, but in this case it only weakly applies, and I think you’d lose. In addition, the no-show fees are too small to warrant the cost of litigation.

Your second option, and the one I recommend you pursue, is to deal with the lateness issue contractually. Build into your carrier agreements a provision that if late deliveries cause you to incur penalties, then the carrier will be liable for such penalties.

Be warned, though, it’s almost surely going to cost you.

You may have noticed some carriers offer guaranteed service, promising delivery on a certain schedule and agreeing to pay penalties if they’re late. But they sell that service at a premium price, and you can expect the same when you demand the same. You’ll have to decide if it’s cheaper to pay the ship lines’ penalties or the land carriers’ premiums for the guarantee you’re after.

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.
 

For the full story: Log In, Register for Free or Subscribe