Shipper-3PL Liability: Paid in Full?

Q: My company ordered a truck — four, actually — from a third party.

The third party provided bills of lading showing themselves as the bill-to party. They ordered the trucks and made all arrangements.

Fast-forward three months, and the carrier is trying to get us to pay (even though we paid the third party). Can we be held liable?

One shipment originated at our owned location, but three originated off site. Does that help our case?

I didn’t give the third party a line of credit; the carrier did. If I had ordered directly they would have asked me to fill out a credit application or pay in advance. If someone orders something from my company and doesn’t pay, our company is out the money. It seems like a faulty system that the carrier gets a pass. Why would they invest any time or finances in checking out any broker?

I apologize for the rant, but it just makes no sense to me (although being in the situation may give me a biased opinion).

A: I got this secondhand when my correspondent, who’d originally been asked the question by an acquaintance, forwarded it to me. As presented here, the question actually concatenates two e-mails; the last two paragraphs were written after my correspondent told his friend that he (the friend) was very likely liable to the carrier.

Relax, friend. Your “rant” says a lot of true stuff, and I don’t altogether agree with my correspondent; I doubt you’ll have to pay.

I won’t delve deeply into past case law; the question has been decided both ways. Sometimes, when a 3PL reneges on paying the carrier, the beneficial shipper has been held liable to the carrier even though it’s already paid the 3PL, sometimes not. It depends almost entirely on the facts of the particular case.

Here I think the facts seem to favor you. First, even though your name is (presumably) on the bills of lading as “shipper” — I really don’t care from where they originated — with the 3PL listed only as bill-to party, were the B/Ls in fact the contracts of carriage?

That seems unlikely. You asked the 3PL for four trucks and the same carrier provided all four. Is this probable unless the 3PL and the carrier had some kind of independent contract between them? I mean, third parties tend to spread the wealth when they’re dealing arm’s-length with carriers, distributing traffic among multiple carriers; and carriers, in turn, usually won’t have several empty units contemporaneously available for non-contract customers.

If there was indeed such a contract, then it, not the bills of lading, governs. And you aren’t of course party to any contract between the 3PL and the carrier. Therefore, the carrier has no recourse against you.
Suppose, though, this wasn’t the case — that, against all odds, the 3PL and carrier weren’t contractual partners. Even so, I like your position.

True, you’re the contracting party on the bills of lading, thereby nominally having committed yourself to pay the carrier. True also, there’s no direct evidence of the carrier having agreed to seek its money only from the 3PL. Additionally true, the 3PL was arguably your agent in hiring the carrier, for whose defaults you’re legally responsible.

But other facts may be unearthed. The 3PL was the one giving the carrier its marching orders; had it accepted such assignments from the same 3PL before and been paid by the 3PL? The alternative argument is that the 3PL was the carrier’s agent for the purpose of accepting payments from shippers, and this would go a way toward supporting such a view.

And, as you point out, if the carrier and 3PL were indeed strangers to each other, how come neither it nor you had to fill out a credit application before it supplied four (count ’em) trucks without seeing a dime up front? Or, wait, did the 3PL indeed complete such an application, thus satisfying its terms?

In your shoes, I’d tell the carrier (politely, please), “Sorry, we’ve already paid the 3PL.” If it sues, proper exercise of a legal procedure known as “discovery” should reveal the answers to many of the foregoing questions. I think at least some of these answers should favor your refusal to pay.

I mean, four empties, whap, whap, whap, whap? This 3PL and carrier knew each other for a while, and the 3PL’s been paying the carrier up to now. Prove that, and you’ll likely win your case.

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