Unsigned on the Dotted Line

Q: We’re a third party, arranging transportation for shippers with carriers we have under contract. We specify contract rates in our rate confirmation sheets.

One carrier we’ve used several times had an accident that caused major damage to a shipment. The carrier claims its maximum liability is $100,000 (the amount of cargo insurance it carries), and in support sent me a copy of our standard form contract on which it had handwritten language specifying that limit “unless otherwise agreed in writing.”

The contract they sent, however, didn’t have my signature. I sign all contracts, and I won’t sign on for this kind of liability restriction. Even so, our corporate people tell me the limit is valid, and are preparing to pay the shipper the amount of claim over $100,000.

Are they correct?

A: You phoned me with this question, and we went back and forth for a little while as you kind of parceled out the foregoing information to me piecemeal. But in the end I had to agree with your corporate folks with one caveat.

There are two ways in which any person may agree to a contract, by word or by deed. “By word” in this context translates to your signature on the contractual document, which, as you emphasize, isn’t there on this one. Initially, I told you that absence invalidates the document the carrier sent you as a contract, because it bears no evidence of your agreement to its terms.

You told me the carrier had issued a bill of lading for this shipment, and that the B/L says nothing about limited liability. Absent any contractual agreement, the B/L is the controlling document, is subject to the Carmack Amendment (49 U.S.C. Section 11707 as to motor carriage) and, as such, is subject to full carrier liability.

But then there was this nagging issue of your having used the carrier on multiple previous occasions, and referencing the purported contract between you in your rate confirmations. Although you never signed the contract (the carrier’s copy, at least), did this sequence of actions constitute your acceptance of the agreement by deed?

Subject to a couple of unlikely possibilities, I told you it did. Although you never signed, your behavior says you accepted the existence of the contract and thereby tacitly agreed to its terms — all of its terms, including that handwritten liability limit. So did the carrier, which also signed the piece of paper. That’s enough to constitute a binding agreement between you.

Now, for those two possibilities. I told you to double-check your files and make sure you have a copy of the document there. I figured you would, because you told me you wouldn’t do business with a carrier that didn’t sign up, but it remains possible that you don’t have a copy of the document.

If that’s the case, you violated your own tenet that you give loads only to contracting carriers, and you need to tighten your procedures. But it doesn’t really help you much. Your rate confirmation sheets confirm the existence of a contract, its mere absence from your files doesn’t refute that, and you’re pretty much stuck with the carrier’s version of the contract because you have nothing to contradict it.

That leads me to possibility No. 2, that you do unearth a signed (by the carrier at least) copy of the contract in your files, but the handwritten language limiting liability isn’t on it. This would be a whole ’nother kettle of fish.

A written contract is meant to memorialize all terms of the agreement between the contracting parties. That’s why law students are taught to have their clients initial each page of a contract as well as signing the last page, so nobody can change any terms after the fact and argue that their version, not the other side’s, is the correct one.

If your copy doesn’t have the handwritten limitation that’s on the carrier’s version, the writing is at least arguably an ex post facto emendation made unilaterally by the carrier. Because it also favors the carrier, any court is going to regard it with deep skepticism, and might even go so far as to charge the carrier with attempted fraud. Almost surely the handwriting wouldn’t be upheld, because it was pretty patently added without your knowledge or acquiescence.

But get your paperwork ducks lined up for the future. Review all contracts after the carrier signs, sign yourself and send them a copy. Sloppy documentation is bad business.

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.

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