Shipper’s on the Hook After Broker Goes Bust

Q: A broker accepted our load and gave it to another carrier, who is a carrier of ours anyway. The broker went bankrupt since accepting our payment in full, but has not paid its hired carrier. The carrier has come after us for payment. In your opinion, are we responsible for payment?

A: Without knowing all the details, I have to say you probably are. You certainly are morally and pragmatically, if not legally.

Take it as a lesson in using your head for something aside from growing hair. I mean, if the carrier is one of your regulars anyway, as you say, please tell me how you benefited by using it this time through a broker.

Did you get a better rate? That’s hard to fathom unless you’re at about the end of the list as a negotiator. If you are, get somebody to negotiate for you; as a beneficial shipper, you should be able to get as good a rate as a broker can.

Or did you use the broker simply out of indolence? If so, give up laziness as an avocation and do your own work instead of farming it out.

And I can’t think of any other reason you hired a broker for this shipment.

OK, OK, I know you didn’t send me this question just to get rudeness in reply, and I suppose I owe you an apology. I apologize for being rude — but not for the gist of my previous comments, which I think are wholly warranted and also worthy of your attention.

It’s silly to hire a broker to engage one of your regular carriers to haul a load for you, not to mention it compromises your position irretrievably in the circumstances.

If this carrier is a regular of yours, you have a history of paying it directly for its work. That history is something you can be very sure the carrier will bring up if it sues you for its unpaid freight charges, with considerable legal effect.

Oh, sure, you can counter-argue that in this case — as distinct from many previous others — the carrier had agreed to accept its compensation from the broker. You might even have some documentation to support your case. But I think it’s unlikely to stand up in court beside this:

-- You’ve dealt with Carrier A before.

-- You’ve paid it directly on those past occasions.

-- You haven’t paid it this time.

-- You owe it, notwithstanding that, for whatever reasons you may care to advance, you accessed it this time (unlike as in the past) via a broker, who did not pay it.

As a matter of morality, Carrier A also can present the (persuasive) argument that, although it acknowledges (maybe) that it was engaged directly on this occasion by the broker, it knew it was acting for you, a past shipper with a solid payment record, and therefore and for that reason alone chose to accept the broker-tendered shipment, which may even be true. Who knows?

And, looking at the question pragmatically, because you say you have dealt with this carrier before, you presumably place some value on your relationship with it. Care to assess the value the carrier will reciprocate if you stiff it on this shipment? You might as well simply write it off your books.

I might ordinarily wish for more information from you, such as the manner in which the bill of lading was made out — who was shown as shipper, who as carrier, etc. And these factors will, I acknowledge, have considerable relevance to your legal situation in ordinary circumstances.

But given this particular situation — one of your regular carriers being hired by a broker — I think your chances of selling that idea in court are small without regard to how the papers read. The carrier hasn’t been paid, you used it before and this time benefited from its services, and that’s about as far as most courts will go with it.

I commend your attention to the things I’ve mentioned — that is, negotiate effectively with your carriers and quit subbing out loads to brokers simply because you don’t want to take the time checking out what you’ve already set up with those carriers.

Brokers are very useful contributors to the industry when you don’t have convenient options. But when you do, why go through a middleman rather than dealing direct?

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, 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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