When you first receive a transportation contract, you may feel overwhelmed by such a lengthy and detailed document. However, it’s vital to understand what’s in your transportation contract and what you’re signing up for by agreeing to its terms.
RPM is here to help guide you through the different components of a transportation contract so that you can better understand what to look for.
Why Is a Transportation Contract Necessary?
A transportation contract is necessary to protect both parties involved in transportation — the transportation company and the client. These contracts are legally binding and legally enforceable in the event of a breach of contract.
Who Uses Transportation Contracts?
A wide range of transportation services use transportation contracts, including but not limited to domestic freight forwarding services, domestic rail freight transportation services, and motor carrier services. However, transportation contracts are not usually used for domestic or international air carrier services, international water carrier services, or other services using a bill of lading.
Why You Should Always Read Transportation Contracts
You should always read all of your contracts — transportation or otherwise. After all, contracts are put in place to protect you, so you need to ensure that you’re actually being protected by the terms laid out in your transportation contract.
For example, a transportation contract might contain misinformation or terms that were not agreed upon. If you were to sign such an agreement without reading it, you would have no idea that what you’re signing isn’t what you previously agreed to.
No matter how boring and tedious it may be, you should always read the fine print of your transportation contracts before you sign them.
What Your Transportation Contract Should Tell You
A transportation contract is a detailed and lengthy document that should tell you everything about the service you’re agreeing to and that the transportation company is offering. Here are some different components you should look for in a transportation contract:
A Transportation Contract Should Contain the Scope of Services Contracted
For starters, a transportation contract should contain the scope of services contracted — for example, shipping 10 pallets of freight 1,000 miles from Washington, DC, to Tampa, FL. However, the contract should be even more specific.
Is door-to-door shipping service offered? Does it come with an extra fee? Does the transportation company handle loading and unloading? Does that require an extra fee?
The contract should also contain the relevant names, addresses, dates, and times for the shipment. For example, if there’s a specific pick-up or drop-off time or if there’s a guaranteed delivery date, all of this information needs to be clearly presented in the contract.
A Transportation Contract Should Contain the Cost of Services Contracted
A transportation contract should also contain the cost of services contracted — some of which are more straightforward than others. For example, if you’re charged a base rate per mile, that should be included in the contract. If you’re being charged extra for an overweight shipment, that should also be included in the contract.
Overall, it should be very clear what you’re required to pay and why you’re paying it. Any extra services or options need to be accounted for in this section of the contract so you can be completely prepared to pay for your transportation services with no surprises.
A Transportation Contract Should Contain Billing and Payment Details
Next, a transportation contract should contain billing and payment details. It’s not enough to simply say what you owe on a contract. The contract also needs to tell you how and when you should pay the amount owed.
For example, do you have to pay a certain amount as a down payment and the rest upon delivery, or do you have to pay everything upfront? What payment methods are accepted by the transportation company, including credit cards, checks, cash, and money orders?
What is the payment due date? Is there a grace period? Is there a late fee? Will interest be charged on late payments? All of this information should be laid out in the contract.
Your Transportation Contract Should Have a Liability Limitation Clause
Your transportation contract should also contain a liability limitation clause. A liability limitation clause effectively limits what the transportation company is liable for in the event that a claim is made or a lawsuit is filed. This clause is designed to manage the risk taken on by the transportation company.
At the same time, you need to make sure that you’re able to seek damages and recoup costs in the event of a breach of contract. As a result, you should read the liability limitation clause very carefully and ensure it covers the costs of your shipped goods.
All Transportation Contracts Should Contain Safety Details
All transportation contracts should contain safety details designed to keep everyone safe, from the shipper to the driver to the actual transportation company. Accordingly, each party has different safety requirements and expectations.
For example, the shipper may be responsible for ensuring that shipments are properly packed and secured before being loaded. The driver may be responsible for safe driving practices to avoid accidents or damage to the shipment. The transportation company may be responsible for hiring drivers with proven safety records and adequate training.
No matter what specific information is included in the safety section, each party needs to be aware of and agree to their own responsibilities.
Your Carrier’s Contract Should Place Them Under a Standard of Care
Your carrier’s contract should also place them under a standard of care that’s clearly defined within the contract. While no carrier is able to achieve a perfect standard of care, it should be relatively high. Ultimately, it’s up to you to determine the standard of care you’re willing to accept for your transportation needs.
Your Carrier’s Contract Should Contain a Termination Clause
Finally, your carrier’s contract should contain a termination clause in the event that either party needs to terminate the contract. The contract should also contain the timeframe of the contract with a specific expiration date and information about renewals, if applicable.
Do All Transportation Companies Use Contracts?
All legitimate transportation companies use contracts to protect both parties — the transportation company itself and the client. As a result, you should only work with established transportation companies that always use contracts.
What Should You Do If You Don’t Get a Contract From a Carrier
If you don’t get a contract from a carrier, you should immediately inquire about one. Perhaps it was an oversight, and they simply forgot to give you one. In that case, it should be an easy fix, and you should receive a contract shortly.
On the other hand, if it wasn’t a mistake and the transportation company doesn’t use contracts at all, you should consider going with a different company — one that does use contracts — to protect yourself and your shipment.
What To Do If a Transportation Company Breaks Their Contract
The first thing you should do if a transportation company breaks a contract is to consult the contract. Many contracts contain a section on dispute resolutions that may be able to offer you some guidance on what to do next. Some contracts may also contain information on what you’re entitled to in the event of a breach of contract.
After consulting the contract, you should send the transportation company a demand letter that outlines the breach of contract and proposes a suitable resolution for the breach. This demand letter should be simple, short, and straightforward.
If the transportation company does not agree to your proposed resolution, you can use a mediator to come to an agreement that works for both sides. A mediator is an objective third party who facilitates productive discussions between both parties and finds common ground.
Filing a lawsuit should be a last resort if a transportation company breaks their contract. Not only is a lawsuit time-consuming and expensive for the transportation company, but it will be for you too, as you have to retain your own legal counsel and spend time in court. However, you can avoid all of this with a solid contract.
Conclusion
Before you even receive a transportation contract from a transportation company, you need to make sure that the company is worth working with in terms of experience, safety, and reputation. RPM has years of experience in the transportation industry, a proven safety record, and a reputation that speaks for itself.
For example, RPM is currently working with more than 2,000 customers to deliver thousands of shipments a day. Thanks to RPM’s services and dedication to its customers, RPM has received more than 25 awards, including Inc. 5000, for eight consecutive years.
Reach out to RPM’s transportation experts to see what we’re all about and what we can offer you.
Sources:
5 Tips for Reading a Business Contract | The Balance Small Business
What Is a Limitation of Liability Clause? | Rocket Lawyer
What to Do if a Company Breaks a Contract | Small Business Chron
