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Nov.16, 2015

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Q&A 52 THE JOURNAL OF COMMERCE NOVEMBER 16.2015 By Colin Barrett CONTRACT TRANSPARENCY Q: WE'RE A BROKER. We also have another company that's a motor car- rier. Shippers often will ask us to sign a shipper-carrier contract. These are large companies. You'd think they'd have a better understanding of the law. We either have to sign or forget about handling their traffic. I have two questions. First, is the shipper's liability somehow mitigated because of this? Second, what if we added this language or something like it at the end of the agreement: "The par- ties agree that the description of Broker in this agreement as a Carrier is for the Shipper's convenience only and does not change the fact that (our company) is a Broker that arranges transportation by motor carriers and in fact is not a motor carrier." I'm sure you could clean this lan- guage up. Thank you for your help. A: I SEE NO REASON WHY you shouldn't sign the contract your shipper wants, with one impor - tant provison: It's critical that you ensure the shipper recognizes and acknowledges your role as a bro- ker, and not a carrier. It's likewise important that you document this understanding so that no legal ques- tion can arise later. The language you propose to add to your contracts should prove quite sufficient for this purpose, provided your shippers are willing to accept it, but there are alternative approaches that will work as well if — as I sus- pect may be the case — they aren't willing to do so. I'm sure that I, or any attorney you might engage for this purpose, could readily come up with alterna- tive wording for what you're saying about your status. I see, however, no need to "clean up" what you've writ- ten, which seems to me to be crystal clear. It spells out unambiguously that you're a broker and not a car- rier, which is the whole point. The key here is to avoid any hint of misrepresentation. As the law is written today, it's illegal for a broker to present itself to shippers as a car- rier, as though it were providing the transportation service itself rather than subbing out that service to car- riers it engages for that purpose. Congress decided that a broker should be required to make its role perfectly clear in advance of entering into any transaction with a shipper — a decision that to me makes a great deal of real-world sense in light of the market confusion of which far too many unscrupulous brokers have in the past taken advantage. Reg rettably, in many cases, corporate practices haven't quite caught up with the law or the com- mercial malpractices that gave rise to that law. Many shippers' legal departments take a one-size- fits-all approach to transportation providers, which is what you're encountering here with the demand that you sign a carrier contract. Those same legal departments also are generally loathe to accept substantive modifications or addi- tions to their contract language, which is why I suggest that some of your shippers may be unwilling to go for your proposed addendum. As I say, though, there's more than one way to skin this cat. The fact that you'll be signing a motor carrier contract, coupled with the fact that you also have a carrier division in your company, does give rise to the possibility of a perceived confusion, and that's what you need to guard carefully against. But it doesn't have to be done within the four corners of the contract itself. Although normally a contract is legally construed based on what it and it alone contains, this situation is somewhat different in that what's under consideration here isn't the meaning of the contract but rather the status of one of the parties to it. In that regard, a court would con- sider evidence beyond that of the contract's contents. As an example, you could keep a record of your solicitation of the shipper prior to execution of the contract. You'd want proof that your shipper had received the solicita- tion, and the solicitation itself would have to be pretty specific as to your representation of yourself as a bro- ker, rather than a carrier. You'd also want to be very care- ful that the contract was signed on your behalf by the entity in your cor porate st r uc t u re t hat wa s licensed, and acted, as a broker, as distinct from the carrier side of your operation. So long as it's clear that the ship- per recognized you as a broker at the time the contract was signed, though, I see no problem with your executing such a contract. 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; email, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. It's critical that you ensure the shipper recognizes and acknowledges your role as a broker, and not a carrier.

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