James W. Kelly, II | Vorys, Sater, Seymour and Pease, LLP
Eric Arling | Integrity Express Logistics, LLC
Everybody knows the drill. You finally get a shot at a load by a prospect you have been calling for months. You agree on a rate, find a qualified carrier, and you are off! If only it were that simple. When time is of the essence and a customer relationship is on the line, too often the very actions that can show a customer your ability to provide them exceptional service are the ones being overlooked.
The fast-moving pace of our industry can create ambiguities in real-time expectations. As a 3PL, how you manage potential grey areas can make or break your customer relationships, and with them, your entire business.
Anyone can get a load tender, book a truck, hope for the best, and blame the carrier if something goes wrong. That is precisely the perception brokers have been trying to overcome for years: book first, disclaim responsibility later. Transportation intermediaries should be looking to provide service and expertise that goes beyond what a customer expects from a carrier directly. While carriers have their own specialized knowledge, a 3PL must use its services to create efficiencies a carrier is not capable of achieving on its own. That service starts with making sure that as freight makes its way from the shipper to the customer, every hand that it touches knows what the other ones expect.
Identifying the Key Documents
Always verify, never assume. There is no better opportunity to add value as a freight broker than connecting the dots between the key documents relating to a load: the broker-carrier agreement, the customer load tender, the carrier rate confirmation, and the bill of lading. If those documents are not double checked and do not align, the broker will often be the one stuck sorting through the wreckage – literally and figuratively. If you can spot potential misunderstandings before they happen, you will not only provide a higher level of service but also save you and your company time and money.
It is often said that 80 percent of your time on a load should be spent before a truck is booked. Each load has different elements and multiple people involved. Many times, those people are experts and are excellent at what they do. However, if the broker is not focused on ensuring that all the pieces are in place for a load to run smoothly, things can and will go wrong.
Even if you think the arrangements that have been made comply with the expectations of shipper and the carrier, the relevant documents may reflect something different. And if the customer is not happy with the product it gets, it is going to look at those documents to see what went wrong – and why. As the intermediary, it is the 3PL’s job to ensure that those documents do not contain different or conflicting instructions. If they do, you need to know what you have agreed to. If you do not confirm this before the load is picked up, you may have unwittingly breached your agreement with the shipper before the product has even shipped.
Generally, under the common law governing contracts for services, a written contract can only be formed if parties agree to the same terms. Referred to as the mirror rule, if an offer is made under particular terms, the acceptance must mirror the terms of the offer. If it does not, no acceptance has occurred. Rather, a counteroffer has been made that will only become a contract if accepted by the original offeror.
Just because a customer orders 1,800 cases of roma tomatoes, does not mean the shipper received the same order, or has the entire product available to ship on the date your customer instructed.
However, the law imposes certain rules regarding how acceptance can occur. These rules allow parties to be able to act quickly in response to fast-moving economic demands, while ensuring parties can predictably rely on the behavior of others. But it is only predictable if you know those rules. (Note: under contracts for goods, such as the shipper’s contract with the ultimate recipient of the goods, different sets of assumptions than those below may apply under the Uniform Commercial Code.)
For instance, acceptance does not always have to occur through a signature or a piece of paper. A load tender can be accepted through any conduct that an offeror in the particular circumstances would reasonably believe indicates acceptance. If such conduct is undertaken in response to the terms offered, that conduct often will be presumed to be an acceptance of all these terms. As a practical example, if a 3PL books a carrier and maintains a running carrier-broker agreement that lays out standards of conduct for the carrier to follow, the carrier’s unconditional acceptance (perhaps through a confirmation email, an acceptance in a TMS system, or simply by picking up and carrying the load) likely will be understood to accept the load tender along with all the terms of the broker-carrier agreement. The law will presume that the parties are acting according to the mutual understanding they maintain.
But what happens when one party seeks to change that understanding? If a party says they accept an offer, but that acceptance adds additional terms or conflicting terms, they have not accepted your offer; they have made a counteroffer. Thus, if a request is made to a carrier, and an enthusiastic acceptance attaches a rate confirmation sheet, the carrier has offered you a new contract. That new contract contains the new and additional terms from the carrier. It may also be implied to contain the original terms you offered that do not conflict with the carrier’s offer. Known as the last-shot rule, if you accept the carrier’s “acceptance” through your words or conduct, the latest-offered terms control and become the contract – or at least are added to the uncontested contractual terms you originally offered.
It is critical to closely review these new terms. They may contain assumptions of liability for the broker, limitations of liability for the carrier, or requirements that do not conform to or agree with the instructions given to you by the shipper. Likewise, if you are contracting out a shipment to another broker, the second broker could include carrier requirements that do not conform to what you agreed to with the shipper. If you ignore the terms of the new offer and continue to coordinate shipment – including simply letting the carrier or broker proceed with their obligations – those actions likely constitute acceptance of the terms in the counteroffer. In addition to making the customer unhappy, you may have just breached your contract with the shipper to ensure that a carrier kept a product at the specified temperature.
Vigilance is required throughout the performance of the contract. It is important to ensure that inconsistencies do not crop up again down the line. Even if prior contract terms have been set – either explicitly between you and the carrier or constructively by the rules of common law a subsequent document, such as a bill of lading, can act as an amendment to the agreed terms or the formation of a completely new contract. Again, permitting performance after receipt of the bill of lading can be conduct indicating acceptance of those new terms.
Confirm that the customer’s load tender to you is the same thing the shipper and receiver have in their systems. Just because a customer orders 1,800 cases of Roma tomatoes does not mean the shipper received the same order, or has all the product available to ship on the date your customer instructed. In addition to quantity and availability, temperature also needs to be closely monitored.
Over the years 3PLs have fallen victim to assuming everyone is on the same page. 3PLs can be encumbered with expensive claims due to a customer ordering fresh product, and the shipper having it down as frozen. The driver inevitably is going to set the temperature to the reefer incorrectly, and the 3PL is the one who will have to explain why the order was not fulfilled as promised (not to mention get a bill for several thousand dollars). All of that could have been avoided with a simple phone call.
The same process applies to the receiver. If they don’t expect an order or get the correct product, the truck is not going to deliver on time. Your driver is then in a precarious position and will likely need to be compensated on top of the customer service issue and risk of a cargo claim. Laying a driver over an entire weekend is very costly, and if you are dealing with perishable product, these delays slash the shelf life and value of the product.
What if your customer gives you orders verbally or via text message? Very simple, either utilize your TMS system to generate a customer confirmation with consistent terms, or outline the details of the load via email and have your customer confirm what you have down is accurate.
To protect your customer and protect yourself, the time you take at the start of the shipment will go a long way to ensuring success. That proves the important role of 3PLs in making sure a product safely reaches its final destination.
James W. Kelly, II is an attorney in the Cincinnati office of Vorys, Sater, Seymour and Pease, LLP. He can be reached at [email protected] and 513-723-4089.
Eric Arling is Director of Operations at Integrity Express Logistics, LLC. He can be reached at [email protected] and 937-684-8202.