Issue link: https://jocdigital.uberflip.com/i/340697
Q&A 68 THE JOURNAL OF COMMERCE www.joc.com JULY 7.2014 By Colin Barrett PASSING THE BUCK Q: WE'RE A MOTOR carrier who's having a collection problem with a shipper. There are several bills of lading involved. All were marked "prepaid" with a direction to submit our freight bills to a third party. Section 7 was checked on all of the bills of lading. In some cases, the billing direction had the notation of "no recourse against (shipper's name)." None of the bills were paid, and the third party has gone out of business. We have tried to re-bill the shipper directly, but have been told it paid the bills properly to the third party. Our primary contact on the ship- ments was through the third party, but it isn't identified anywhere on the bills of lading except as "bill-to." Do we have a legal case for collect- ing on these bills? The total amount due is more than $300,000. A: SEVERAL YEARS AGO, I consulted as an expert witness on behalf of a carrier in a strikingly similar case. In what I continue to feel was a misapplication of the law, my client lost that case. I'm not sure why. Perhaps his lawyers failed to follow my recommendations on how to argue it, or perhaps there were other factors involved of which I wasn't aware. But I still believe the shipper properly owed the money in that case, just as I believe your shipper owes you, and for the same reasons. The point in both cases is that the documentation establishes a clear relationship between the car- rier and the shipper, imposing clear obligations on both parties to the other, and the shipper has failed to discharge its obligation. First, forget about Section 7, which is utterly meaningless on a prepaid bill of lading. Section 7 directs the carrier not to make delivery without first collecting its freight charges, and absolves the shipper of responsibility for those charges if the carrier fails to fol - low the instruction. That's useful on freight-collect shipments, where the consignee has responsibility for payment, but is clearly meaningless when the terms are freight-prepaid. Prepayment already places the duty to pay on the shipper, and the shipper can scarcely absolve itself of that responsibility by demand- ing that the carrier first collect (from the shipper itself ) before delivering. As to the so-called no-recourse notation in the billing instruction, I don't see much relevance. This is a unilateral statement by the shipper relating solely to where the bills are to be sent, and isn't specific about who is supposed to pay those bills. The notation further conflicts with the "prepaid" designation of the bills of lading, and I don't think it's bind- ing on the carrier. Nor am I overwhelmed by the fact that your dealings with this shipper have generally been through the third party. It may well be that the third party was acting to some degree as a broker relative to these shipments, but that is poorly docu- mented. Certainly, there appears to be no documentation what- ever establishing any relationship between you and the broker (if that's what it was) independent of or superseding the relationship set forth in the bills of lading between you and the shipper. All this paperwork says to me is that the shipper designated the third party to receive your freight bills as its agent. It doesn't even speak to the issue of who is to pay those bills. To be sure, if you received payment in the past from the third party, there is a "custom and use" argument that the third party was likewise to pay future bills, but even then only as agent for the shipper (because the bills of lading place the obligation to pay only on the shipper, and not the third party). And the shipper can scarcely excuse its own failure to pay you by arguing that it paid its own agent. As principal, it's responsible for the acts and failings of its agent in directing the payments to you. You have enough money involved here to warrant the cost of suing the shipper. I recommend you do so. Properly argued, I believe your case should prevail in court. Not- withstanding the failure of my consulting client to succeed in its own litigation, I think sound law is on your side. I see nothing in the paperwork to identify the third party as your agent for the purpose of receiving payments from the shipper. Therefore, the shipper's payment to the third party doesn't discharge its bill-of-lading obliga- tion to you. JOC 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. As to the so-called no-recourse notation in the billing instruction, I don't see much relevance.