Carrier Brokers Load, Factors Bill

Carrier Brokers Load, Factors Bill

Copyright 2004, Traffic World, Inc.

Q:

A carrier with which we have a contract took two of our loads and proceeded to broker them out to other carriers. This carrier used the services of a factoring company. We have paid the factoring company for this bill but owe them for other nonrelated loads hauled by other carriers.

Our contract states that in the event a carrier brokers our load without express permission, they forfeit all right to compensation. We would like to offset against the factoring company and make remittance directly to the underlying carrier(s). Would we be justified and within the law to do so?

A:

Sorry, you''re too late. You crossed your Rubicon when you paid the bill. Had you declined to pay it in the first place, as your contract permits, you could have remitted to the underlying carrier(s) with impunity. As I''ve often written, a carrier can pass on to a factoring company only such rights to compensation as it itself possesses. In this case it had no right to payment under terms of your contract, so neither did the factor.

But once you paid up, you effectively waived your right to assert the contract provision against the factor. You still have a valid claim against the carrier that generated the factored bill, but you can''t properly satisfy it by withholding payments due on bills factored by other carriers.



Time to Sue for Unpaid Bills

Q:

We have a few motor carrier invoices that we contested because the shipper marked the bills of lading as "collect" when our contract calls for prepaid shipments.

What is the time limit, if any, for the carrier to file suit in court for this type of claim? I know what it is for undercharges and overcharges and was wondering what it is for this scenario. I have declined to pay numerous times.

A:

"A [motor] carrier ... must begin a civil action to recover charges for transportation or service provided by the carrier within 18 months after" the date of delivery; 49 U.S.C. ?14705(a). That applies to both undercharges and unpaid bills.

And you''re wise to ask, because if I''m the carrier this is the path I''ll choose to collect my money. You''re getting on my last nerve trying to drag me into the middle of a dispute that''s strictly between you and your shipper. What''s more, I will collect - not only my freight charges but every applicable penalty I can find to tack on.

If you''re really adamant about not paying carriers'' freight bills, your only legal recourse is to refuse delivery of shipments billed as freight-collect. Admittedly, that''s probably unrealistic; you likely have operational need for the goods coming in. But there''s a good second choice: accept the shipment, pay the carrier''s bill and then offset the amount against your supplier''s invoice - plus, if you''re sufficiently bloody-minded and have the economic muscle to carry it off, an administrative penalty for the inconvenience.

But simply refusing to pay the freight bill isn''t an option. The bill of lading is a legally binding contract, and you become party to it, and bound by its terms, by accepting delivery of the shipment; Corpus Juris Secundum, 13 C.J.S. Carriers ?478. You accepted delivery and therefore the contract, one of the terms of which is that freight is to be paid by you. So you''re legally obliged to pay.

Bear in mind that none of this is the carrier''s fault. True, it''s legally responsible for preparing the B/L; 49 U.S.C. ?14706(a). But that act does not include arbitrarily deciding freight payment terms; on this point it must take the instructions given it by the shipper. It is of course not privy to the terms of your agreement with the shipper, nor does it have any obligation to enforce those terms. Therefore it has no reason, and no standing, to insist that the shipment be prepaid. Nor, for that matter, should you be taking out your frustration on it.

All of which is exactly what a court would find if the carrier takes you there. You''ve got what sounds like a rock-solid case against your shipper, who agreed to ship prepaid and then reneged (whether accidentally or by intent, it makes no difference). But the carrier''s case against you is equally rock-solid by dint of your acceptance of the B/L contract.

So your chosen course of action makes no sense unless you enjoy paying not only your own legal costs but also any penalties for your refusal to pony up for the bill - and some carriers withdraw all discounts if you don''t pay timely as well as adding in their own legal costs if they have to sue, neither of which you''ll be able to recoup from your shipper (though you''ll still have a claim against it for the base freight charges).

At this point I know you''ve already paid your shipper in full for the shipments in question, but you can deduct the freight charges against future invoices from it. So pay the carrier.

You''re in for a world of hurt if you don''t.



-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.