Q&A: Contracts vs. Bills: One or the Other

Q: I’ve been working in transportation for more years than I like to think about. It’s all been on the shipper side, and I hope I’ve learned a thing or two over the years.

We do a fairly small piece of our business with motor carriers, but it’s been expanding to the point that we’re considered an attractive customer by some of the carriers. My previous boss figured the best way to take advantage of this was to put our traffic “up for grabs” on a load-by-load basis. That is, we’d solicit quotes on each shipment from a small group of carriers with whom we’d established relationships, and take the best deal offered.

I know this sounds kind of labor-intensive, but it wasn’t. We had the process pretty well automated using e-mails, and it seemed to work pretty well most of the time. Occasionally, we couldn’t find anyone to give us a very good price, but mostly we were competitive and sometimes we got some really low quotes.

Well, that boss retired a few months ago and management brought in a younger guy from outside. The new man’s views are completely different, and he put our traffic up for bid on a lump-sum basis. He’s selected three carriers and has signed one-year “evergreen” contracts (meaning they’ll roll over year to year) with them.

OK, everybody has his or her own way, and that’s not my problem. But now he’s telling me to stop preparing bills of lading for our shipments. He wants them to go out with just the manifests we generate in our warehouse. That just doesn’t seem right to me, and I’m not sure it’s even legal. I don’t want to say that to him, because it’ll sound like I’m challenging him, but I’m feeling very uneasy. If he’s wrong about this, I need to speak up, so I’m calling on you for confirmation that I really do have this right.

 

A: Remain silent. I know youíd like to one-up your new boss, but you can’t do it on this issue. Bear in mind the old saying that it’s better to keep quiet and be thought a fool than to open your mouth and remove all doubt.

I won’t get into a discussion of the different philosophies of your old and new bosses. Arguments can be made for each approach — long-term contracts vs. spot quotes — with a lot of factors playing into how well each works out. There’s no way, based on the sketchy information you’ve given me, for me to judge whether one is right or wrong for your situation.

But given your new man’s decision to go the contract course, he’s spot-on about dispensing with bills of lading. In fact, continuing to use B/Ls could be counterproductive, and almost certainly would be confusing, at least.

The primary function of the standard bill of lading is to serve as the contract of carriage between shipper and carrier. Oh, it also has secondary purposes — it is, for example, the carrier’s receipt for the goods tendered to it, it’s the shipper’s vessel for providing shipping instructions, one copy often serves as proof of delivery, etc. But mainly it’s contractual.

Under your new regime, however, the need for shipment-by-shipment contracting is no more. You’ve got signed continuing agreements with these carriers now, covering every shipment they handle for you. That obviates the B/L’s main reason for being, and in fact could lead, as I say, to confusion and possible problems.

You see, the law contemplates the possibility that parties may have more than one document defining their relationship with overlapping effect. And the general legal rule — not an inviolable one, but carrying great weight — is that the “most recent writing” will prevail in such cases.

Now, a bill of lading prepared for today’s shipment by this measure will supersede a contract signed weeks or even months ago, won’t it? And if their terms differ and some kind of problem or dispute arises ... well, I think you get the point.

There are other ways to handle the secondary B/L functions. A countersigned manifest will do nicely as the carrier’s receipt; and shipping instructions may be provided otherwise. You can even use your normal B/L form for these things if you like, provided you add language disavowing any contractual intent or effect.

But what you don’t want is two separate written contracts with your carriers covering the same shipments. That’s what your new boss is telling you. I agree with him completely.   

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