The Problem: Truck broker fails to pay underlying carrier and “double payment” sought from distributor.
The Key Point: There is usually no contractual relationship between the shipper and the carrier when the carrier deals exclusively with the broker.
The Solution: It is incumbent upon carriers to research the financial wherewithal and reputation of the truck brokers they extend credit to.
QUESTION: We’re a distributor based in Pennsylvania and source most of our transportation through truck brokers. Recently, we received a call from a collection agency representing a carrier that apparently never got paid by the truck broker for one of our shipments. The collector tells us, “It’s the law of the land, if the carrier doesn’t get paid by the broker, then you pay.” The fact that we paid the broker for this shipment is of no consequence according to this gentleman. Please advise.
ANSWER: We receive a fair number of calls from produce vendors asking if they are liable to carriers for “double payment” in situations where the vendor contracted with and paid a truck broker, only to later learn the underlying carrier was never paid by the broker. It is our understanding that, generally speaking, courts will not order a shipper (the vendor that hires the transportation service) to pay twice.
Our research suggests at least four lines of reasoning which have been relied upon by the courts: (1) shippers have no control over a broker’s operations, and are therefore not agents of their shippers, but independent contractors—in other words, the broker’s failure to pay is not the shipper’s failure to pay; (2) the doctrine of ‘equitable estoppel’ bars a carrier’s claim for double payment because, as one court put it, “the parties understood that the carrier would bill, and expect payment from, the [truck broker]”; (3) there is usually no contractual relationship between the shipper and the carrier when the carrier deals exclusively with the broker; and (4) one court simply explained “it is unjust to force [the shipper] to pay the freight charges for these shipments twice.”
Of course, we are happy to recommend a transportation attorney if you want a legal opinion on this issue. But generally, we think it’s fair to say that it is incumbent upon carriers to research the financial wherewithal and reputation of the truck brokers they extend credit to.
The Problem: No proof of delivery showing product purchased on an f.o.b. basis was received by consignee.
The Key Point: Because this was an f.o.b. sale, the seller is obligated to deliver the product to the truck you hired at shipping point, not to its terminal market destination.
The Solution: If the product disappeared en route, this would be a proper basis for a claim between your firm and the carrier you hired.
