Drafting Transportation Contracts: Negotiating Key Terms in Shipper, Carrier and Broker Agreements

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Drafting Transportation Contracts: Negotiating Key Terms in Shipper, Carrier and Broker Agreements Crafting Provisions to Minimize Loss and Liability Exposure in the Event of Loss, Damage or Non-Delivery of Goods THURSDAY, OCTOBER 29, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Henry E. Seaton, Partner, Seaton & Husk, Vienna, Va. Angela Alexander Savino, Perez & Morris, Columbus, Ohio Michelle L. Mejia, Sandler Travis & Rosenberg, Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Drafting Transportation Contracts Key Terms October 29, 2015 Angela Alexander Savino Perez & Morris LLC

6 Logistics Master Angela A. Savino

7 Shipper s Perspective Within a limited period of time and budgeted resources: Navigate foreign lands Travel international waters or air space Transition through various modes of transportation Understand applicable foreign laws, international treaties, federal and state laws Survive shipping document terms Angela A. Savino

8 Contracting Adds Stability Angela A. Savino Manage risks Budget costs Address distinct needs Develop relationships Increase efficiency Promote success 8

9 MANAGE RISKS Angela A. Savino Understand the laws that affect the services. Origin jurisdiction on movement to the ports International treaties on international waters/skies shipments Carriage of Goods By Sea Act Hague Convention The Shipping Act The Warsaw Convention 9

10 MANAGE RISKS Angela A. Savino U.S. federal law and regulations on imports and practices in foreign countries by US companies Foreign Corrupt Practices Act Patriot Act U.S. Customs and Border Protection U.S. Custom s Customs-Trade Partnership Against Terrorism certification (C-TPAT) 10

11 MANAGE RISKS Angela A. Savino U.S. federal law and regulations on interstate transports The Carmack Amendment (per 49 U.S.C. Section 14101(b), must expressly waive the rights and remedies of Carmack in order for contract to govern). U.S. Department of Transportation U.S. Surface Transportation Board Federal Motor Carrier Safety Administration 11

12 MANAGE RISKS Angela A. Savino Interlocking agreements Clearly identify services and roles Controlling authority and integration provisions Protective liability provisions Indemnification promises Insurance requirements 12

13 MANAGE RISKS Angela A. Savino Contract with parties from origin to delivery to manage and control risks. 13

14 MANAGE RISKS Define the role of the contracting parties Who is the Shipper? Does it include the parent, affiliate, subsidiary or other related entities? Angela A. Savino Does it include franchisees? Who is the Carrier? Is it an agent, freight forwarder, vessel/aircraft owner or broker? Does it include parent, affiliate, subsidiary or other related entities per common ownership or global venture arrangement. 14

15 MANAGE RISKS Angela A. Savino Controlling Authority: Other shipping documents (e.g. bills of ladings, tariffs, receipts, manifests, credit agreements, purchase orders, invoice terms, etc.) can impact the terms and conditions. READ THEM Address unacceptable provisions Identify which provisions control 15

16 MANAGE RISKS Angela A. Savino Sample Integration Clause: This Agreement and the terms and conditions of Carrier s BOL and tariffs in existence on the date of execution of this Agreement (to the extent applicable after giving effect to this Agreement and exhibits referenced herein) shall constitute the entire agreement for Services and incorporate all prior negotiations and understandings. In the event of a conflict between the terms and conditions of this Agreement, Carrier s BOL and the Carrier s applicable tariff(s), the Agreement shall govern. All agreements previously entered into between the parties for said services are hereby superseded and terminated. 16

17 MANAGING RISKS Angela A. Savino LEGAL AUTHORITY C.O.G.S.A. Visby Amendment Warsaw Carmack LIMITATIONS OF LIABILITY ($500US) per package or customary freight unit unless a higher value is declared. Customary freight unit is used in US only for goods not shipped in packages. Special Delivery Rights (SDR) of International Monetary Fund units per package or 2 units per kg = whatever is higher. limits damages to $20/kg or 9.07/lb unless the consignor has made a special declaration of value and paid a supplemental sum based on that value, or unless there is willful misconduct. Amended by Montreal Protocol to 17 SDR per kilogram. Hague Protocol establishes limit of 250 francs per kilogram. Actual loss or injury to the property, but can be limited by contract to value declared for property on shipping documents 17

18 MANAGING RISKS Angela A. Savino Is Indemnification for any claims or merely 3 rd party claims? Will the promises survive termination? Is it limited to not include incidental and consequential damages? 18

19 MANAGING RISKS Angela A. Savino Insurance should provide security. Additional insureds Waiver of subrogation Review and monitor certificates of insurance Cancelation and material changes in insurance 19

20 RATES Angela A. Savino All rates should be mutually agreed upon in advance of services. All rate increases, surcharges, accessorials, bunker and fuel factors and other costs and expenses should be clearly addressed. Ability to modify the agreement to adjust rates as needed. 20

21 DISTINCT SERVICES Angela A. Savino Independent Contractors Nothing herein shall be deemed to create the relationship of employee and employer, principal and agent, partnership, or of joint venture. Carrier shall provide Services as an independent contractor and as such, will have sole and exclusive control over the manner in which it or its employees or agents perform Services under this Agreement. Carrier assumes full responsibility for Carrier s employees and agents performance of Services hereunder. Neither party shall be liable for any debts or obligations incurred by the other, except as is expressly provided in this Agreement. 21

22 DISTINCT SERVICES Angela A. Savino Independent Contractors Generally, one who employs an independent contractor is not liable for the harm caused to another by independent contractor s negligence. Harris v. FedEx Nat. LTL, Inc., 760 F.3d 780 (U.S. Ct. of Appeals, 8 th Circuit recognizing Nebraska state law). Jones v. C.H. Robinson Worldwide, Inc., 558 F.Supp. 2d 630 (USDC, WD Virginia, recognizing Virginia state law). 22

23 Cargo Claims Henry E. Seaton, Esq. Seaton & Husk, L.P. October 29, 2015

24 Contracts and/or bills of lading and service terms are written bilateral contracts. The customer (usually consignor and/or consignee) promises to pay in return for carrier s agreement to deliver a shipment intact and with reasonable dispatch. 24

25 Absent waiver under 14101(b), cargo claims are governed by federal statute. The Carmack Amendment, 49 U.S.C establishes carrier liability for loss or damage in transit subject to the following principles: Carrier negligent need not be shown. Receipt at point of origin and delivery in damaged condition establishes prima facie evidence of a claim. Carrier liable for full actual value unless: Contractual limit agreed to. Release rate established. 25

26 Consignee has duty to accept and mitigate damages unless practically worthless. Value of claim reduced by shipper s duty to mitigate. Carrier has right to salvage for best advantage if shipper and consignee refuse to mitigate. Claims rules establish procedure for orderly claims adjustment. 26

27 Advantages of Carmack Uniformity / Carrier claims not subject to vagary of state law. Broad venue and jurisdiction to resolve claim at situs convenient for witnesses. No special or consequential damages. Strict liability subject to common law defenses, reduces justiciable issues. Act of God Inherent Vice Act of Shipper Act of Public Enemy or government authorities are limited exceptions. 27

28 Issues presented by waiver and shipper/broker contracted terms Scope of cargo claims expanded by indemnity. Special or consequential damages included. Reasonable dispatch converted into required time delivery. Flexible jurisdiction and venue restricted by forum selection. Duty to mitigate eliminated. Shipper/broker has sole discretion to salvage. Unilateral offset of uncontested freight charges against contested claim. 28

29 Reject it, crush it, and dump it philosophy, particularly with foodstuffs The carrier s predicament: Available cargo insurance unavailable to protect carriers against liability in excess of Carmack. 29

30 DRAFTING TRANSPORTATION CONTRACTS A BROKER S PERSPECTIVE Michelle L. Mejia

31 THE ROLE OF THE BROKER Shipper Broker Carrier 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. 31

32 DUTIES OF BROKERS FMCSA Licensing Check the safety status ( of all carriers that are engaged. Require a satisfactory safety rating in broker contracts. Verify motor carrier insurance. Obtain the proper liability insurance coverage Sandler, Travis & Rosenberg, P.A. All rights reserved. 32

33 OTHER CONSIDERATIONS Do not identify as the carrier on the bill of lading and don t allow the carrier to affix broker s name as the carrier on the bill of lading. Don t refer to carriers as partners in marketing materials or on website. Avoid making claims about control over all aspects of the operation. Don t assign the carrier driver routes or otherwise route loads. Refrain from scheduling pickup and delivery times whenever possible Sandler, Travis & Rosenberg, P.A. All rights reserved. 33

34 CARGO CLAIMS Claim Requirements Time Limits In the absence of a contractual provision, the tariff will apply Best practice: draft a time limit chart for each carrier in your routing guide Right to Setoff A broker may stand in the shoes of the shipper (49 U.S.C ) Salvage Rules 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. 34

35 INDEMNIFICATION Each party will indemnify and hold harmless the other from all loss, liability or claims to the extent same is caused by a negligent or willful act or omission of their respective employees agents or subcontractors in the performance of this contract. - If you use arising out of language, you may be contracting to indemnify more than that which is covered by your insurance! 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. 35

36 ANTI-INDEMNIFICATION PROHIBITS INDEMNIFICATION PROVISIONS REQUIRING THE CARRIER TO INDEMNIFY THE SHIPPER FOR DAMAGES THAT ARE CAUSED BY THE NEGLIGENT OR WRONGFUL ACTS OF THE SHIPPER. - MORE THAN 30 STATES HAVE ADOPTED ANTI- INDEMNIFICATION LAWS 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. 36

37 THANK YOU! Michelle L. Mejia SANDLER, TRAVIS & ROSENBERG, P.A. 225 W. Washington St., Ste Chicago, Illinois (312) Sandler, Travis & Rosenberg, P.A. All rights reserved. 37