OTA reminds carriers of collection provision

TORONTO, (Feb. 18, 2004) — The Ontario Trucking Association is reminding carriers to be aware of their legal options in collecting freight charges — particularly in situations where a shipper is resisting or not responding to the carrier’s efforts to collect payment.

In many such cases, the OTA says, the shipper has gone out of business, filed for bankruptcy protection, or in other circumstances, the load broker defaults.

A provision in a little-known Ontario statute called the Mercantile Law Amendment Act — as well as a similar federal statute known as the Bills of Lading Act — may be helpful to carriers who find themselves in such situations. Basically, the provisions provide that every consignee or endorsee “named in a bill of lading, to whom the property in the goods passes upon or by reason of the consignment or endorsement,” is subject to the same liabilities as if the contract had been made with him.

The essence of these statutory provisions is that, by delivering to a consignee who takes ownership of the goods, the carrier is giving up its lien on the goods and therefore the consignee becomes liable for the freight charges, even in situations where there was a “prepaid” notation on the bill of lading, the OTA says. Therefore, the law draws the consignee into the contract of carriage-including allowing the consignee to make claims for loss and damage against the carrier, even though the consignee was not a party to the contract of carriage.

In a 1996 case known as 2318-1654 Quebec Inc. v. Swiss Bank Corp. (Canada), the courts spelled out how a carrier can use the provisions of the Bills of Lading Act to sue a consignee for freight charges when the shipper had gone bankrupt without paying. In order to initiate such a claim against a consignee, the carrier, upon determining that the shipper is unlikely to pay the freight charges, immediately re-issues an invoice for the charges to the consignee, advising the consignee that it is relying on the provisions of the law and requesting payment of the invoice.

For more information contact the OTA at 416/249-7401.

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