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Aug.21, 2017

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Q&A 60 THE JOURNAL OF COMMERCE AUGUST 21.2017 By Colin Barrett LEANING ON LIENS Q: YOU'VE WRITTEN BEFORE that a carrier doesn't have a lien on a ship- ment for freight charges the shipper may owe the carrier on previous ship- ments. That is, it's not legal for the carrier to hold off delivering the cur- rent shipment until the shipper makes good on the unpaid bills he may owe the carrier. I know some carriers will try to use this as leverage on the non- paying shipper. But does this hold true if the ship- per executed a credit agreement with the carrier that includes a cross-over lien authorization? A: I'VE ACTUALLY NEVER HEARD OF a "cross-over lien authoriza- tion," and didn't even knew such a thing existed. Still, I'll take your word that there is such a critter and that it's incorporated into some credit agreements. The name tells me more or less what it is — i.e., that it specifically affords the carrier a lien on goods currently in its custody against money that the shipper may owe it (the carrier) for matters unre- lated to those goods. And yes, such an agreement would override the provisions of the Uniform Commer- cial Code that I've previously cited in support of the proposition you out- line, that a carrier can't hold today's shipment hostage until the shipper pays its past bills. Needless to say, this particu- lar provision of the law is intended principally for the protection of the shipper. It serves no other purpose. Unlike other parts of the law, it isn't meant to serve any underlying social principle or provide a broad level of protection for society or any signifi- cant segment thereof. Therefore, it is of much more limited scope, appli- cable only to specified individuals in specific circumstances. Provisions of this nature have an optional characteristic. That is to say, their application can be waived by the particular person(s) to whom they would otherwise have rele- vance. Naturally, this must be done voluntarily and without duress, and on a fully informed basis; but if it is done in exchange for some kind of consideration, the waiver is binding once the waiving party receives the consideration. In the case you postulate, the consideration would obviously be the carrier's extension of credit to the shipper, which was apparently granted on the condition that the shipper permitted the "cross-over lien." I would presume the carrier demanded the shipper's consent to such a lien for its own protec- tion against possible non-payment of freight bills, perhaps (since this isn't a usual condition) because of some history with that particular shipper. Whatever the basis, though, I see no reason for a court to refuse to honor the shipper's agreement to allow the carrier such a lien. The waiver has no implications or effect on anyone else. In this sense, it's similar to the "released rate" waiver executed by shippers relieving car- riers of full-value loss-and-damage liability on freight in exchange for reduced transportation rates, which is, of course, fairly commonplace in the industry. Now, I have to acknowledge that this is a fairly uncommon approach to the legal infrastructure. Most laws aren't subject to this kind of waiver, even those of limited appli- cation. For example, laws requiring people to wear seatbelts in moving cars or to wear motorcycle or bicycle helmets are pretty clearly intended only to protect those people, but they may not legally be waived by the affected individuals. Similarly, consumer protection statutes aren't waivable by individual protected consumers. I could go on in this vein for some time. But whether you agree with this standard or not, the provi- sion of commercial law prohibiting what you're calling "cross-over liens" isn't judicially treated the same. An agreement of the type you describe will be treated as one between equals, both possess- ing equal information and equally positioned to comprehend and apply that information to their own interests. Accordingly, I believe the courts would honor it. I gather that this is a situation you have encountered and has application to your circumstances. Depending on which side of the ag reement you fall, I g uess my opinion is either good news or bad news to you. No matter on which side of that ledger you sit, though, I don't think judicial uncertainty is enough to accommodate a differ- ent view. There are plenty of cases where the outcome is dependent on such extraneous matters as the qualit y of legal representation, etc., but I really don't think this is one of them. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, SC 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. Provisions of this nature have an optional characteristic.

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