Terms and Conditions, Bills of Lading, and Agent Agreements for Freight Forwarders and Brokers

Start With the Licenses, Because the Documents Follow Them

The right terms depend on what the company is legally authorized to do, and most intermediaries do more than one thing. Each line of business has its own regulator, its own liability rules, and its own required paperwork.

• Property broker. A broker arranging interstate truck transportation registers with the Federal Motor Carrier Safety Administration under 49 U.S.C. § 13904 and maintains $75,000 in security under 49 U.S.C. § 13906. The broker regulations at 49 C.F.R. Part 371 require a record of each transaction and prohibit a broker from holding itself out as the carrier. A broker's documents have to preserve that distinction, because a broker that looks like a carrier on paper can be held liable as one.
• Domestic freight forwarder. A surface freight forwarder registers with FMCSA under 49 U.S.C. § 13903. Unlike a broker, it issues its own bill of lading and is liable to the shipper for cargo loss as a carrier under the Carmack Amendment. Terms written for a broker do not fit a forwarder, and the reverse is also true.
• Ocean freight forwarder and NVOCC. Ocean transportation intermediaries are licensed by the Federal Maritime Commission under 46 C.F.R. Part 515 and must maintain proof of financial responsibility. An NVOCC also publishes a tariff, and may use negotiated rate arrangements or service arrangements only if they are documented the way the regulations require.
• Air freight. A forwarder consolidating air cargo typically operates as an indirect air carrier under a Transportation Security Administration security program, may be an accredited cargo agent under airline industry rules, and issues a house air waybill whose conditions of contract operate under the Montreal Convention.
• Customs brokerage. Customs business requires a license under 19 C.F.R. Part 111, a valid power of attorney from the importer, and terms that allocate responsibility for classification, valuation, and the accuracy of the information the importer supplies.
• Warehousing and fulfillment. Storage and e-commerce fulfillment are governed by Article 7 of the Uniform Commercial Code and need their own receipt and lien terms. See warehouse and 3PL matters.

Corporate groups with several affiliated companies need particular care. Whether a branch office or a sister company may operate under an affiliate's license, or needs its own, is answered by the regulations and not by the organizational chart. Documents that name the wrong entity, or an entity without the authority the document assumes, hand the other side an argument in every dispute. A company that holds both motor carrier and broker authority has a related problem: it must make clear on each load which authority it is using.

Terms and Conditions of Service

The terms and conditions of service are the master document. Every quotation, booking, invoice, and bill of lading should point back to them. A complete set addresses:

• Capacity. When the company acts as the customer's agent in arranging transportation, when it acts as a principal or carrier, and which terms apply in each case.
• Limitation of liability. A stated limit per shipment or per unit of weight, paired with a real opportunity for the customer to declare a higher value and pay for it. A limitation with no such opportunity is the one most likely to fail.
• Claims. A short written notice period and a contractual deadline to sue, coordinated with the periods that the governing statute or convention permits.
• Insurance. A clear statement that the company does not insure the cargo unless the customer requests coverage in writing and pays for it.
• Charges and credit. The validity period of quotations, payment terms, interest, recovery of collection costs and attorney's fees, and a prohibition on deducting cargo claims from freight charges.
• Lien. A general lien on cargo and documents in the company's possession for all sums the customer owes, with a defined procedure for notice and sale.
• Customer warranties and indemnity. Responsibility for the accuracy of descriptions, weights, values, and classification, for hazardous goods, and for duties, demurrage, detention, storage, and government penalties.
• Compliance. Export controls, sanctions, security screening, and the company's right to refuse or hold cargo when a compliance question arises.
• Risk allocation. An exclusion of consequential damages, a force majeure clause, and the right to select carriers and routes.
• Governing law and forum. New York law and a New York venue, so that a modest claim is not litigated across the country or overseas.

Terms protect the company only if they are part of the contract. That means a signed credit application or customer agreement where possible, a clear reference on quotations, booking confirmations, and email correspondence, a posted copy the customer can actually reach, and an archive showing what the posted terms said on the date of the shipment. Terms that the customer first sees after a loss are the most common failure point.

Many forwarders begin with a trade association model form. That is a sensible starting point, and customers recognize it. But a model form is written for a generic member. It does not know whether you issue your own house bills, broker domestic trucking, store goods, clear customs entries, or operate through affiliated companies, and it does not coordinate itself with your bill of lading, your tariff, or your carrier and agent agreements. Our page on business contract drafting covers the general principles.

Invoice Terms

Terms that appear for the first time on an invoice arrive after the shipment was booked, and a customer will argue that they were never part of the agreement. Invoice terms work when they repeat and refer back to terms the customer accepted at the credit application or booking stage, and when a consistent course of dealing stands behind them.

A well drafted invoice states the due date, the interest rate on late payment, the customer's liability for collection costs, and a deadline for disputing the charges. Under New York law, an invoice that is received and retained without timely objection can support an account stated claim, which shortens a collection case considerably. The invoice should also restate that cargo claims may not be offset against charges, refer to the lien, and address currency and exchange rate adjustments for international accounts.

Two regulatory points belong here. First, federal law prescribes the content of demurrage and detention invoices in ocean commerce, and an invoice that omits the required information can relieve the billed party of the obligation to pay. An NVOCC that passes these charges through to its customer needs an invoice form that complies on its own terms. Second, the broker regulations give each party to a brokered transaction the right to review the broker's record of that transaction. How a broker's customer agreement handles that right should be checked against the current rule, which FMCSA has had under review, and not carried forward from an old form. See collecting freight charges and commercial debt collection.

Bill of Lading Terms

The bill of lading is both a receipt and a contract of carriage, and the terms it needs depend on the mode and on the role the company plays.

• Domestic truck shipments. A broker should not appear as the carrier on the bill of lading. When a shipper's own form lists the broker in the carrier box, the broker has a problem that good terms and conditions may not cure. A domestic freight forwarder, by contrast, issues its own bill and is liable as a carrier, and any limitation of that liability requires the shipper's agreement and a reasonable opportunity to choose a higher level of coverage. See cargo claims under the Carmack Amendment.
• Ocean house bills of lading. An NVOCC's house bill should contain a clause paramount adopting the Carriage of Goods by Sea Act and extending it to the periods before loading and after discharge, the $500 per package limitation with a space to declare a higher value, a careful definition of the package for containerized cargo, a Himalaya clause protecting subcontractors, the one-year suit deadline, a broad definition of the merchant liable for freight and charges, lien and freight earned provisions, rules for delivery and release, and a forum clause. On a through bill covering inland legs, these terms can govern a loss that occurs on a truck or a train far from the port. The house bill and the NVOCC's published tariff rules must also agree with each other.
• House air waybills. The conditions of contract should track the Montreal Convention's weight-based limitation, its written notice periods for damage and delay, and its two-year limitation period, and should deal with declared value and security screening.

Our page for freight forwarders, NVOCCs, and customs brokers explains how courts decide which of several competing documents controls a shipment.

Carrier Agreements for Domestic and International Services

The governing principle is that what you promise your customer should not exceed what you can recover from the carrier that actually moves the freight. When the two sets of terms do not match, the intermediary pays the difference.

• Motor carriers. The broker-carrier agreement sets cargo liability, insurance requirements, indemnity, the prohibition on re-brokering, payment and factoring terms, and protection of the customer relationship. Our page on freight broker legal issues discusses these provisions in detail.
• Drayage carriers. Port trucking adds its own issues: responsibility for per diem and chassis charges, equipment interchange obligations, terminal delays and missed appointments, and who bears demurrage when a container is not picked up in time.
• Ocean carriers and co-loaders. Service contracts with vessel operators carry volume commitments and shortfall exposure. Co-loading arrangements between NVOCCs need to establish who is the carrier to whom, and how liability passes through the chain.
• Airlines and air consolidators. Capacity agreements and consolidation arrangements should align liability limits and claim deadlines with the house air waybill.

Agent and Partner Agreements

International forwarding depends on agents and partner forwarders at origin and destination. Many of these relationships run for years on an exchange of emails. A written agency agreement should cover:

• Scope and territory. Which services, which lanes, and whether the relationship is exclusive in either direction.
• Whose bill of lading is issued. And therefore which company stands as the carrier to the customer, under which license.
• Cargo release. The conditions on which the destination agent may release cargo. Release without surrender of the original bill, or without the required payment, is among the largest exposures in the business, and the agreement should place that loss on the party that caused it.
• Compensation. Profit share on routed and free-hand cargo, handling fees, and destination charges.
• Settlement of accounts. Credit terms, reconciliation, currency, and the right of offset between the parties.
• Liability and insurance. Indemnity for each party's errors, required liability coverage, and cooperation on cargo claims.
• Compliance. Sanctions, export controls, anti-bribery law, and data protection.
• Non-circumvention. Protection of each party's customers during the relationship and for a reasonable period after it.
• Termination. Notice, handling of cargo in transit, and final settlement.
• Governing law and dispute resolution. A New York court judgment can be difficult to enforce against a foreign agent. An arbitration clause often works better, because arbitral awards are enforceable in most trading nations under the New York Convention. See arbitration.

Domestic agent arrangements raise a regulatory question as well. A sales agent or agent office that books freight under a broker's or forwarder's authority should have a written agreement establishing that it acts in the principal's name and under the principal's control, because an agent that operates independently may need its own registration. See independent contractor agreements.

A Document Set That Works Together

The most common defect we see is not a missing clause. It is a set of documents that contradict each other: terms and conditions that limit liability one way and a house bill that limits it another, a carrier agreement with a shorter claim deadline than the one offered to customers, an agent agreement that assumes a license the company does not hold, or invoice terms that charge interest the master terms never mention. An adversary's lawyer reads all of them and relies on whichever is worst for you.

We draft these documents as a coordinated set, with a stated order of precedence, consistent definitions, and liability terms that line up from the customer through to the carrier and the agent. We also advise on how to put the new terms into effect with existing customers, which is a practical project of its own.

Outside General Counsel for Logistics Companies

Most forwarders and brokers do not need a full-time lawyer, but they generate a steady flow of legal questions. As outside counsel we handle the matters that come up during the year:

• Review and negotiation of customer contracts, including the shipper agreements and requests for proposal that seek to override your standard terms. See contract negotiation.
• Cargo claims, from the first notice through denial, settlement, or litigation.
• Collection of unpaid freight charges and advances, and enforcement of credit applications and guaranties.
• Claims against your surety bond, and licensing and registration questions as the business adds services, offices, or affiliates.
• Disputes with carriers, agents, and partner forwarders, including double brokering and misdelivery losses.
• Employment and contractor matters, including driver classification, restrictive covenants for sales staff, and departing employees who take accounts.
• Leases for office and warehouse space, corporate housekeeping, and the purchase or sale of a book of business.

Ongoing counsel work is handled hourly or under a monthly arrangement sized to the company's volume. The advantage over calling a lawyer only when a lawsuit arrives is that counsel who drafted your documents already knows what they say.

How a Document Project Proceeds

We begin with what you have: your licenses and registrations, your current terms, invoice form, and bills of lading, any carrier and agent agreements in use, and a description of your services, lanes, and corporate structure. From that we identify what is missing, what conflicts, and what does not match your licenses, and we quote a flat fee for the document set so that the cost is known before the work begins. If the review turns up a licensing or structural issue, we address it as a separate item.

Call the Law Offices of Albert Goodwin at 212-233-1233 for a consultation.

You can contact us by phone at 212-233-1233 or by email at [email protected].