Contracts: A simple clause can prevent major issues with customers
January 1, 2008
MONTREAL, Que. - Lawyers are generally not the most popular people in the world. Still, some of them really know their trucking. And Simon Rainville, from Lamarre Casgrain Wells in Montreal, is certai...
IT’S IN THE CONTRACT:When entering into a contract with a shipper, there are some key considerations that could prevent problems down the road.
MONTREAL, Que. –Lawyers are generally not the most popular people in the world. Still, some of them really know their trucking. And Simon Rainville, from Lamarre Casgrain Wells in Montreal, is certainly one of them. During an educational seminar organized in Montreal by Markel Insurance company, he gave fleet managers valuable advice on how to avoid getting in trouble with simple, easy to use and to understand legal tools.
Prevention is always better than a cure, and that’s particularly true when it comes to the legal world. If the contracts you sign with your shipper customers are complete and well-written, there are fewer chances that you will end up in court, paying high legal fees. That’s why lawyer Rainville claims that it would be in transportation companies’ best interest to consult their legal advisor when they have a doubt.
It’s quicker and much cheaper to avoid problems before they emerge than to fix them afterwards, he says.
A contract between a shipper and a carrier should be as complete as possible, in order to manage unexpected situations that can arise during the contract period. Carriers should be cautious even before they sign a contract with a new customer.
For instance, make sure to know the juridical identity of the company you are considering business with.
If you check the register of companies, you might find that the guy who wants to hire you started his company just a couple of days ago. Not necessarily a reason not to accept the contract, but certainly a red flag indicating that further investigation should be performed -credit history for example.
A contract between a shipper and a carrier should always include a cancellation clause to protect your investment if you need to acquire specialized equipment to serve a given customer.
That clause should also state the duration of the contract and the compensation you would be entitled to if the shipper were to terminate the contract before the agreed upon date.
The number of loads should also be outlined clearly. If you fixed a price for a volume of 100 loads, it’s likely to be a little cheaper, because of that volume. But what happens if the shipper ends up sending you only 15 loads? The contract should address that.
Moreover, include in writing who should be held responsible for cargo loss or damage and what method will be used to determine the value of the loss if such a situation occurs. Make a point of writing down in the contract that you shall not be held responsible for cargo damage due to fortuitous events (also called acts of God), an accident for which your
CONTRACT CAUTION: According to lawyer Simon Rainville, if the contracts you sign with shipper customers are well-written and complete, there are fewer chances that you will end up in court.
Photo by Eric Berard
driver was not responsible, for example.
And always put things in perspective before deciding not to sue a shipper because he is “such a big customer.” Letting a $10,000 claim slide because a customer brings you $200,000 worth of business is not necessarily a good idea. If your profit margin is around 2%, that “big customer”represents only $4,000 on your bottom line.
More legal tips
Besides the contract with the shipper, there are other areas of your company management that need to be taken care of from a legal perspective. For starters, incorporating your company is important in order to protect the personal assets of the owner by separating them from those of the company.
If you have business partners, make sure to write down a shareholders’ convention that clearly states the value of the company, who owns what and who gets the first refusal right if one of the partners decides to sell his shares.
Protect yourself also in the day-today management of your company. Include in writing who is entitled to make equipment purchases and when that authorized person does make an acquisition, there should always be a precise delivery date on the contract with the seller.
This way, you won’t end up lacking one truck to serve your customers with six months after the date of purchase, even if the salesman had verbally “promised” you would have your new vehicle within three months. Remember: prevention is always better than a cure.
Last but not least, did you know that some lawyers specialize in traffic tickets contestation? According to Rainville, the very good ones have a winning average ranging somewhere between 33% and 50%. That means big bucks savings, but also a very good protection of your safety rating.