Q & A

Q & A

Copyright 2003, Traffic World, Inc.

Q:

We have been in rate negotiations with a major railroad. Not long ago I suggested a rate to the carrier's senior account manager who calls on us. He took the offer to the company headquarters, but the headquarters did not respond immediately.

Meantime, we had loaded an empty car that we had to move to avoid demurrage charges. Just to test the waters, I faxed a request to the railroad to prepare a bill of lading on our behalf. We identified the consignor, consignee, commodity, route, etc., and specified the freight rate I had suggested to the railroad. We entered three asterisks beside the freight rate, and at the bottom of the fax we added this note:

"***Deregulated Rate Offer. Please advise the undersigned of any question, concern or conflict in this bill of lading request prior to moving the car."

A few days later the railroad said they could not accept our rate offer. Meantime, however, they had pulled the car and moved it with no other documentation. Now we have received a freight bill in an amount much higher than our rate offer. It seems to me that once the railroad moved the car, they accepted the rate offer. In your opinion, did we have a contract rate that binds the railroad?

A:

This is a highly unusual situation, but in the circumstances you describe I believe you're legally entitled to your proposed lower rate for this particular car. Of course, whether you're in a position to enforce that entitlement against the recalcitrant railroad without litigation - which, given that only one carload is involved, is economically impractical - is another question.

Start with the requirement of the Carmack Amendment, 49 U.S.C. ? 11706(a), that the carrier "issue" a bill of lading. You don't say whether the service is still subject to regulation or has been administratively deregulated by the Surface Transportation Board or the Interstate Commerce Commission before it, but neither do I care; the statutory provision authorizing such administrative deregulation, currently 49 U.S.C. ? 10502, specifies that the deregulated service is still subject to Carmack.

Since you say the shipment moved "with no other documentation" - and I double-checked with you to be sure there was no other B/L - only two possibilities exist: (a) the railroad followed your directive to issue a bill of lading as specified, or (b) it did not. And I don't care about this, either, because both ways the carrier must legally honor your rate.

If the carrier did issue the bill of lading, it's bound to that rate by express contract. In the absence of any other contractual agreement between shipper and carrier, such as does not exist here, the B/L serves as the contract of carriage for each shipment. By naming your rate on the B/L in accordance with your faxed instructions, the carrier has contractually accepted that rate for this shipment.

On the other hand, suppose the carrier did not issue a bill of lading. If that's the case then it's in breach of the express commandment of ? 11706(a) that it do so. Such a breach is to be construed against the carrier, meaning that it cannot therefore enlist the authority of its established tariffs (and the rate set forth therein) because there's no contractual document between it and you designating the tariffs as applicable. Moreover, your fax to it is clear evidence that you did not assent to the tariff rate.

So all that's left is your fax and the rate you specified. This certainly doesn't constitute a contract in and of itself, since there's no evidence of the railroad's acceptance. But it's all the documentation that exists concerning this shipment, and the railroad's action in following your instructions in the selfsame fax to pull the car and dispatch it to the named consignee would certainly suggest its willingness to abide by all the terms of the fax - including the rate.

But to you, as well as to any other readers who may think they've found the mother lode in their dealings with railroads, let me add a strong caution. What you've related to me is, as I said before, a highly - make that extraordinarily - unusual set of circumstances. I offer this conclusion only because the railroad failed to issue a bill of lading with other terms. Had the railroad done so, the "notification" caveat of your fax wouldn't have been of any consequence; by its preparation of another B/L referencing its tariff the railroad would have effectively "advise[d] [you] of [a] question, concern or conflict" with your fax directive, rendering your rate specification therein invalid.

Here, for whatever reason, the railroad messed up. Either it prepared the B/L as you specified or it didn't prepare one at all (or, at least according what you told me, failed to favor you with a copy). And it's only on that limited basis that I agree with your position that the railroad is bound by the rate you stated.

If you're the party paying the freight bill, your best answer is to withhold any amount greater than your named rate. If the railroad exerts economic pressure, you may have to cave in. But as a matter of law, for the reasons given I believe you have the right of things.

-- 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.