A broker has no rights to this shipment

A broker has no rights to this shipment

Q: We are a freight broker and facilitated a load for a Canadian customer to go to the border in North Dakota more than 180 days ago.

The customer paid a deposit, and the carrier we booked picked up the load. While the shipment was in transit, the customer was nowhere to be reached and the balance for the load was not settled as agreed.

Because the shipper was unavailable to take delivery of the load, we instructed the carrier to put it in storage close to the delivery location.

The shipper has now responded to some of our communications, but has refused to settle the open balance until receiving delivery. Our research has shown that our Canadian customer also has an outstanding balance with the seller, so we are unwilling to extend credit.

The load was booked as prepaid. It has now been more than 180 days since the original load. At what point can we sell the shipper’s property to settle the balance, and what are the required steps?

A: Let me be quite blunt here. You can’t ever — never, never, never — “sell the shipper’s property” to recoup what it owes you; in fact, you have no rights whatever regarding this shipment and will have to look elsewhere in the hopes of recovering any money from your customer.

The key here lies in the first sentence of what you told me — i.e., that you’re a broker. A carrier, now, does have a lien on goods tendered to it for the amount of its freight charges and can indeed sell the goods in the exercise of that lien. But that’s not you, nor can you obtain such rights by any artifice, such as yourself not paying the carrier and trying to work around your problem that way.

Basically, the law doesn’t recognize your role in this transaction. It affords certain rights to the carrier vis-à-vis the shipper, as I’ve already mentioned, and extends other rights to the shipper in its relationship with the carrier. But you, as a middleman in that relationship, have no legally recognized standing and no legally protected rights as respects either party.

OK, I acknowledge that this sounds pretty harsh when I put it so plainly. But it’s the unvarnished reality of your chosen profession. Transactionally, the broker is a legal non-entity in dealings between shipper and carrier.

That’s not to say, mind you, that the true parties to the transaction, the shipper and carrier, have no rights against you. If, as is usual these days, you agreed up front to pay the carrier for its services, the carrier may have a claim against you if you fail to do so. (The law’s a bit unsettled on this point, but some cases support that point of view.) And the shipper certainly can claim against you for your failure to make good on your promise.

Which is why you aren’t in a position to withhold payment to the carrier in an effort to gain its (the carrier’s) cooperation in exercising a lien on the goods, which are in its custody, not yours. That will be seen by a court as a mere subterfuge, and not sustained. And any carrier that participated knowingly in such a scheme would find itself in serious legal trouble as the plot unraveled.

So, is there anything at all that you can do to get the balance of your money? Well, assuming that you have some evidence of the indebtedness, you do have a civil right to pursue it for what it owes you, for whatever that’s worth. But it’s a right that exists independent of the transportation transaction underlying this whole mess; it’s merely the same right you’d have if the indebtedness arose from any other cause unrelated to the movement of goods, and the law won’t countenance dragging those goods into the middle of what’s legally just a monetary dispute.

From what you tell me, your customer has at least hinted that it’ll consider paying you once it has its goods. Since you have no right to withhold them, I’d pass on delivery instructions to the carrier and hope the customer does come through. Legally, that’s what you’re obliged to do anyhow; if you don’t, you open yourself up to criminal charges, which seems like a pretty severe price to pay no matter how much this customer may owe you.

And in future, I’d be more cautious about extending credit to your customers, recognizing your lack of effective recourse if they prove uncreditworthy.

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; email, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.