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Mar.7, 2016

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Q&A 112 THE JOURNAL OF COMMERCE MARCH 7.2016 By Colin Barrett A CONTRACT DATING GAME Q: WE'RE INVOLVED WITH a major shipper who produces its transportation contracts and sends them to carriers for review and signing. In one particular contract, in the top left-hand corner, an effective date of Jan. 1 of the year is shown. I think the customer is wrong when he makes a statement to us that the con- tract rates and discounts don't become effective until some later date — Jan. 25, for example, which I assume would be the date the shipper received the signed copy from the carrier. Please advise your thoughts. A: THIS IS A QUESTION OF agree- ment between the parties. Strictly speaking as a matter of law, you're correct that the effective date would be as shown within the four corners of the written contract — Jan. 1 in this case. That would hold true even if the carrier signed the contract on some later date, because there's nothing in general or transportation law to preclude contracting parties from reaching agreements to be applied retroactively. But there's also nothing in the law to preclude the parties from agreeing to alter (delay application of ) that effective date. Technically, such agreement would be a modifi- cation of, or an amendment to, the contract itself. But so long as there was no conflict between the parties, such a modification or amendment could even be an oral one, as appears to be the case here. Obviously, it would be a lot more orderly for the shipper or the carrier to physically change the effective date on the paper itself, thereby eliminating any possibility for misunderstand - ing, but the ex parte agreement that the parties have evidently reached will stand up in most circumstances. You don't say how you're involved with this shipper, but from your signature block, I gather you're post-auditing its bills. Naturally, you'd like to claim for overcharges in the period between the stated effective date and the date the shipper advises you to apply the con- tract, because that would probably increase your compensation (post- auditors are ordinarily compensated as a percentage of the billing errors they discover). If your shipper supported you in strictly applying the effective date, there'd be no problem. But it doesn't, and that leaves you out in the cold. You can't go to court to try to enforce contract terms the shipper doesn't want enforced. In such a matter, only the parties to the contract have stand- ing to do that, and you're not one of them. So you really have no choice but to accept the shipper's directive about when you should begin apply- ing the contract rates and discounts, notwithstanding its apparent conflict with the document itself. If I'm correct about your status as auditor, though, I strongly suggest you get the shipper's instruction in writing and attach it to the con- tract in your file. There could come a time when you might need proof to support your failure to apply the contract strictly from its stated effective date, and it'll also provide clarification for the future. I'd also suggest you recommend to your shipper that it avoid this kind of inconsistency in its other contract dealings. Just don't expect the ship- per to thank you for the advice or follow it. For reasons best known to themselves, many people spend good money for legal advice that they then proceed to utterly ignore. It's one of the frustrations that besets those of us who are hired to give such advice. But I know from personal experience that an awful lot of indi- viduals feel that following all the ins and outs of legal process is way too formal and impersonal for their pref- erences in commercial dealing. They're generally wrong. The legal nuts and bolts to which law- yers are (to many people, tiresomely) dedicated are there for the purpose of protecting the interests of the client against things that can go wrong. For example, let's say this shipper had the misfortune of going bankrupt at some future time, or was involved in a merger or was acquired by another company. The successors of the indi- viduals involved in the making of this contract would not be privy to any informal oral agreement modifying its effective date, and would prob- ably not be disposed to honor that agreement. You can see how such a situation could disrupt relations between that putative new organiza- tion and its supplier, the carrier. That's why your advice to your client would be beneficial to it, and why you should give such advice, even though your client may not care for or heed your words. 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, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. If your shipper supported you in strictly applying the effective date, there'd be no problem.

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