Perhaps the most important part of any owner-operator's working relationship with a carrier or broker is their contract or load confirmation sheet. Signed at the onset of their working relationship, the agreement sets the ground rules by which the trucker and carrier/broker will conduct business over the next several months or years. It is the foundation of the trucking business.
But such an important document is taken lightly by some owner-operators. Viewed as a mere formality, agreements are scanned and signed in a matter of seconds. If there are provisions missing or ones that are counter to your best interest, they may be overlooked. The result can be financially disastrous.
Despite all the horror stories of truckers being cheated out of hundreds and thousands of dollars because they signed an erroneous or misleading agreement, some owner-operators still don't take necessary measures to protect themselves from fraud. They are of the opinion that if something is unclear, within the agreement, it is either unimportant, or the other party will explain it to them verbally.
That is a poor business practice, according to Gary Green of the Business Services department of the Owner-Operator Independent Drivers Association. Green deals with questionable agreements on a daily basis. His phone rings regularly with calls from distraught truckers, and he estimates seeing five to seven new "problem agreements" each week.
"It's amazing, some of the stuff that's in these agreements," Green says over a mound of case files that have piled up on his desk. "I don't care what they tell you. What's in the agreement is what you get."
Read Those Agreements Carefully
Whether it's a lease contract or a broker contract or load confirmation sheet, read the agreement very carefully. If you have any questions, you should ask a qualified professional or attorney before you sign. If you find sections with which you do not agree, mark out these sections.
Finally, Green says when signing the contract (or confirmation sheet), be sure to initial any mark-outs or additions you've made, and have the other party do the same. He also says it's a good idea to number and initial the pages to protect from additional pages being slipped in.
"We rarely see this, but it does happen," he says.
Where Problems Often Lie
Problems appear in many forms. For example, Green recalls a contract he once saw which, when read closely, billed the trucker for the company's phone bill, light bill, and secretary's desk.
Whether it is a carrier "indemnification" clause that relieves all of its agents, employees, first of kin, from any responsibility of anything – to nonspecific non-compete clauses, any section can contain provisions that are not in your best interest.
Non-compete clauses often contain ambiguous wording. Aimed at preventing the owner-operator from doing business, a non-compete clause carries the threat of a lawsuit for noncompliance. If your contract contains such a clause, Green says to be certain that it has specific information and dates. Otherwise, you may find yourself fighting a former carrier because you agreed (via a clause without any dates) not to compete against them for business for the rest of your life.
...Carrier shall look only to Broker for payment of Carrier's charges hereunder. Broker shall remit to Carrier freight charges billed by Carrier only after collection from the shipper, consignee or party billed...
– excerpt from agreement with TJS Brokerage & Co., Inc., Philadelphia, PA
As consideration for Forwarder's service of attaining merchandise to be shipped by Carrier, Carrier shall pay a fee of twenty five hundred dollars, which amount may be deducted from the first loads as set forth on the Rate Confirmation Sheet. After the fixed fee is paid by Carrier, Carrier shall then pay commission to Forwarder in the amount of forty percent of the gross billable revenue of the Carrier.
– excerpt from agreement with Lockheed Transport, Inc., a freight forwarder, Las Vegas, NV
...Carrier agrees that at no time during the contract of for one year after its termination shall Carrier attempt to solicit business from a customer for which it ever transports produce to or from on behalf of Forwarder or the Beneficial Owner of merchandise. The parties recognize the Forwarder's damages would be difficult if not impossible to determine in the event of a breach by Carrier of this Agreement, Carrier shall be liable to Forwarder for, and shall pay Forwarder the sum of twenty five hundred dollars which shall represents a liquidated damages from Carrier.
– excerpt from agreement with Lockhead Transport, Las Vegas, NV
...In event of a dispute, Carrier agrees not to report broker to any credit agency or any other third party, either orally or in writing, regarding financial arrangements for services rendered, or any other matter whatsoever, or in any manner disparage the good name and reputation of broker pending the negotiations relative to the dispute, and if such a report is made, carrier agrees to rescind and correct all such reports, in writing, and broker reserves the right to enforce all remedies set forth herein including but not limited to the remedies set forth...
– excerpt from agreement with TJS Brokerage & Co., Inc., Philadelphia, PA
When you sign a lease with a carrier – be proactive. Know the problem areas. For starters, Green notes that fuel taxes are often a source for dispute. The carrier will typically charge either a flat rate, or a percentage. And although the trucker is entitled to a refund of overpayment, there are times when the money is never seen again. He suggests that a trucker attempt to bypass the carrier, and take care of fuel taxes on his/her own.
Equally important to note is the section dealing with escrow funds. There is a very specific way an escrow fund must be handled, Green says. There are guidelines (mandated by leasing regulations) spelled out regarding the payment of interest and the amount of time allowed to issue a refund. Know your regulations, and make certain the contract complies, Green says.
Probably the most ambiguous (and thus most susceptible to fraud) portion of a contract is any and every section that deals with insurance. Workman's compensation, liability insurance, etc. can be difficult to interpret correctly. Green cites as an example a paragraph that says "lessor shall (provide) insurance," but never gets specific enough to mention who pays for it and what gets deducted.
Green notes that, sadly, some truckers "spend more time looking at a breakfast menu than they spend reading their lease agreements." He says that some truckers will go to an orientation or to a yard to pick up a load before actually signing a lease. If you follow this practice, and happen to find something in the contract with which you disagree, you are less likely to spend time negotiating the point. By showing up for a load on the same day you sign your contract, you send out a signal that says to the carrier, "I plan to complete the necessary paperwork without reading it or attempting to negotiate."
Finally, Green recommends knowing the leasing rules and regulations. If a carrier violates the agreement, you have legal recourse. But the important thing, he says, is to read, understand, and negotiate. And don't be afraid to refuse a poorly-drafted contract.
"You have to observe a contract as a two-way street," Green concludes. "You are hiring them to do the paperwork, get you loads, and complete office work. Think with a different attitude."
Green has a number of suggestions to better your chances at getting a fair contract.
The first step is to take your time.
Specifically, ask for a copy of the document before you ever intend to sign it. Obtain a copy at least several days before meeting with the carrier.
"Ask (the carrier) to fax you a copy, so you can go over it at home," he says. "If they won't fax or mail you one, that should send up a big red flag. They must have something to hide. Hang up the phone."
When you've read the contract and noted all the sections which seem misleading or in which you do not wish to participate (such as deductions for fuel taxes), pay a visit to the carrier. Don't be afraid to bargain for specifics. Leave your truck at home. If an agreement can't be reached, you won't have a pending load to deal with.
Another tip from Green – do your business in person. "It's best to go to the terminal to sign the lease agreement. Know as much as you can about the people you're dealing with." LL