On any given day, freight brokers work with shippers of all types to pinpoint capacity and rates, use load boards to find qualified carriers, and handle mounds of documentation and paperwork. One of the most important pieces of paperwork is the broker-carrier agreement.
Once you’ve found a driver to haul your shipper’s freight and both of you have agreed on the rate, it’s time for the broker-carrier agreement. This document ensures the carrier delivers the product within specified parameters, knows his/her responsibilities, and understands how payment will work.
How do you create a broker-carrier agreement? How should it be structured and what should it include? Here’s what goes into a solid broker-carrier agreement.
What is a broker-carrier agreement?
In its most basic form, the broker-carrier agreement is a contract between two or more parties that details legally enforceable mutual obligations.
Going a little deeper into Law 101, that enforceable contract must contain mutual assent, expressed by a valid offer and acceptance.
Here’s what happens from an industry perspective.
- You post a load and offer a rate (the “offer”).
- The carrier accepts the offer and its terms (the “acceptance”).
- The subsequent broker-carrier agreement then outlines the:
- Obligations (requirements)
- Consideration (rates and charges)
- Capacity (qualifications and abilities of both parties)
Key sections in a broker-carrier agreement
Broker-carrier agreements come in a variety of formats and layouts. But no matter which version you choose, any agreement should include the following:
Legal status of parties and services
- Who’s involved. Always include the names of the parties involved, such as the carrier’s name and company, your name, and the name of your firm. Also include the carrier’s motor carrier and/or license number.
- Date and term. Any agreement requires a start and endpoint. In this section, list when the contract terms begin and when they end. Here you might also include any rules for terminating this agreement.
Scope of services
- Geography and commodity. The agreement must include precise information about the product being transported and the origination point and destination. Anything outside of this scope could be considered a breach of the agreement.
- Specific services. Sometimes extra duties are involved beyond hauling items. The carrier might be responsible for loading or unloading, palleting or packing, cargo protection, or other steps. Make sure these are clearly outlined before anyone signs.
- Subcontractor prohibition. When the carrier signs for a particular load, they’re 100% responsible for transporting it. The carrier isn’t allowed to “sub” out that work without your approval.
Rates, charges, terms, and conditions
- Freight rates. Agreed-to freight rates are outlined, as are any additional charges. Such information might also be included in an attached load or rate confirmation sheet.
- Payment. Payment specifics include how the carrier will be paid, through what method, and when.
- Equipment and labor. In most cases, the driver will be responsible for providing equipment and labor to get the job done. But, this should be spelled out in the agreement, so the carrier understands that these provisions are his or her responsibility.
- Bills of lading. Here, the carrier agrees to either issue a bill of lading, or to sign one outlining the type, condition, and quantity of goods being delivered.
- Indemnification. An indemnification clause is a must in any freight broker-carrier agreement. It lets you off the hook if the carrier breaches the agreement. It also protects you if the shipper’s cargo is damaged or harmed while in the driver’s possession.
- Cargo liability. Liability ties into indemnification, as it states that the carrier is 100% responsible for the condition of the product while in their truck or care. Any damages are the carrier’s responsibility.
- Insurance. This section states that carriers must show proof of insurance before they load any cargo. Here you’ll outline any requirements such as motor truck cargo legal liability insurance, workers’ compensation insurance, or additional bonding requirements.
Finally, you need language around how disputes will be handled if either you or the carrier believes something has gone wrong. Dispute resolution provides legal remedies for complaints and can encompass everything from third-party mediation to relief through federal or state courts.
Broker-carrier agreement template
There are many agreement samples online that you and your attorneys can use to draw up your own freight broker carrier agreement. Here are some contract templates.
Before any hauling job starts, it’s crucial you have a carefully worded broker-carrier agreement in place. Not only does it protect all parties legally, it makes the entire operation run more smoothly and helps ensure carrier compliance. With a carrier agreement, both you and the carrier have a clear picture of responsibilities, rights, and obligations.
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