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.
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.
QUESTION: We are a wholesaler based in New York State. Recently we purchased a shipment of Mexican watermelon on an f.o.b. basis from a wholesale distributor (“the seller”) with a cooling facility in New Jersey. Because we never received this product, and the wholesaler-distributor has not provided us with proof of delivery, we do not believe we are obligated to pay for the watermelon. How can a produce seller expect to be paid $18,000 for product it can’t prove was delivered?
ANSWER: You are correct that the seller must “deliver” under the sales agreement. But because this was an f.o.b. sale, the seller’s obligation is to deliver to the truck you hired at shipping point—not to your destination. When product is purchased f.o.b., the risk of loss in transit rests with the buyer; therefore, provided the seller can establish by a preponderance of the evidence that the product was loaded on the truck, the seller would be entitled to payment of its sales invoice. If the product disappeared en route, this would be a proper basis for a claim between your firm and the carrier you hired.
In reviewing the documentation associated with this transaction, we see the seller has provided a signed bill of lading in support of its claim that the product was loaded on your truck. Unless there is some reason to believe this document is not genuine, this alone would be enough to show the seller lived up to its end of the bargain.
Additionally, however, we note the lack of correspondence from your firm to the seller inquiring about the status of this allegedly missing $18,000 order, even after the seller had invoiced you for the product. At a minimum, we would expect to see documentation from your firm after it was invoiced stating, “As we discussed, this product was never delivered. Call me!” In our view, the absence of such a paper trail further supports the seller’s claim for its full invoice price.
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Your questions? Yes, send them in. Legal answers? No, industry knowledgeable answers. If you have questions or would like further information, email tradingassist@bluebookservices.com.
