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Opinion: 8 trends in Canadian carrier contracts

Posted: November 8, 2019 by Jaclyne Reive

A decision to agree to shipper-friendly terms will come down to factors such as whether the terms will fit a carrier’s business model, the customer’s importance, and the risk a carrier is willing to assume.

But a growing number of shippers are also looking to introduce more terms in their favor.

Consider these eight trends that we are seeing in shipper-carrier contracts:

  1. Increased liability for cargo loss or damage

Carriers are increasingly being asked to take on full liability for cargo loss or damage. In some cases, there may be an accepted monetary cap on liability, but this cap usually equates to the shipment’s value.

Such full liability for cargo damage is the standard in the U.S. and is increasingly being added into Canadian contracts.

Canadian carriers typically take advantage of their statutory rights to limit liability to the lesser of the value of the goods at the time and place of shipment, plus freight and other charges, or $4.41 per kilogram ($2 per pound) based on the shipment’s total weight.

Be sure to notify your insurers when taking on more liability than required by law, to ensure that coverage is not denied in the event of a claim.

  1. Waiving lien rights

To protect against unpaid freight charges, carrier-friendly contract terms will typically confirm the right to claim a possessory lien over the goods being transported. In some cases, carriers will go one step further to include the right to claim a lien for unpaid freight charges that relate to an earlier shipment.

However, we are also seeing shipper-friendly contracts that require carriers to waive their right to claim such liens.

  1. Recovery of freight charge rights

Shipper-friendly contracts often require carriers to waive their rights to collect freight charges from any party except the shipper, such as customers and consignees. In other words, carriers are increasingly being asked to forgo related rights under the Bills of Lading Act (Canada) and the Mercantile Law Amendment Act (Ontario).

  1. Incorporating a set-off

Carrier contracts increasingly include a provision that allows the shipper to set off any amounts that the carrier owes for things like cargo damage, and apply those figures to the amounts that the shipper owes the carrier for things like freight charges.

  1. Liability for subcontractor acts

Many contracts include provisions that prevent a carrier from sub-brokering, interlining, or contracting a shipment to a third-party carrier without the shipper’s consent. Carriers are increasingly being required to remain liable for the acts or omissions of a third-party carrier – regardless of whether they had the shipper’s approval to subcontract the load.

  1. Bills of lading – Deemed compliance with laws

Many contracts include a clause that says any related bill of lading — whether it’s issued by the shipper or the carrier — is deemed to meet the form and content of an originating jurisdiction’s applicable laws. This also extends to situations where there is no bill of lading. Such wording supports everyone involved because it clarifies the bill of lading and the carrier’s rights.

  1. The contract always governs

Another clause that is becoming increasingly common is that the contract’s terms and conditions will always govern. The agreement will indicate that any terms in a bill of lading, tariff, standard terms and conditions, or any other document will not change or modify the contract’s terms in any way. Similarly, the bill of lading will only function as a receipt.

  1. Taking on other regulatory obligations

We are slowly starting to see carriers asked to be bound by the new statutory requirements relating to cleanliness, sanitation, and equipment maintenance set out in the Safe Food for Canadians Act (Canada). These would otherwise not apply to carriers whose only connection to the food is its transportation.

Carriers should review the other contract terms to see how far the shipper has tried to extend the carrier’s liability. For example, look at whether there’s also a requirement to indemnify the shipper for any administrative monetary penalties for failing to comply with the equipment requirements under the statute.

Next steps

Be sure to carefully review any contracts that a shipper or broker presents to you, whether they are new contracts or amendments to existing agreements.

  • Jaclyne Reive is a lawyer in Miller Thomson’s Transportation & Logistics Group. She can be reached at jreive@millerthomson.com. This article is provided for information purposes only and does not constitute a solicitor-client relationship or legal advice.
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