Presenting a live 90-minute webinar with interactive Q&A
Drafting Motor Carrier Agreements:
Anticipating and Addressing Cargo Claims,
Carrier Indemnity Obligations and More
Navigating MAP-21 Legislation, Carrier Safety Performance and Compliance
Requirements, and Other Key Concerns for Motor Carriers
THURSDAY, MAY 19, 2016
1pm Eastern
|
12pm Central | 11am Mountain
|
10am Pacific
Today’s faculty features:
Jason Orleans, Partner, Chilton Yambert Porter, Chicago
William D. Bierman, Principal, Price Meese Shulman & D’Arminio,
Woodcliff Lake, N.J.
Jason E. Engkjer, Lommen Abdo, Minneapolis
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STRAFFORD WEBINAR
Drafting Motor Carrier Agreements:
Anticipating and Addressing Cargo
Claims, Carrier Indemnity Obligations and
More.
May 19, 2016
KEY PROVISIONS
Presented By:
William D. Bierman, Esq.
Price, Meese, Shulman & D’Arminio, P.C.
50 Tice Boulevard
Woodcliff Lake, NJ 07677
Tel: 201-391-3737
[email protected]
6
I.
INTRODUCTION
Preparation – Preparation – Preparation
Before you put pen to paper or keystroke to computer
consider following which apply to all Contracts discussed
today:
1. Contract goals for either party
2. Value of Contract in terms of dollar and customer
relations
7
Preparation – Preparation – Preparation
…Continued…
3. Discuss issues with company groups who will carry
out Contract:
a) operations
b) financial
c) claims
d) sales:
Contract is not only legal document it is an operational
- financial – claims liability blueprint.
8
Preparation – Preparation – Preparation
…Continued…
4. Use detailed checklist previously throughout to avoid
missing important items;
5. Beware of copying another Contract as law and issues
change and may not apply to your Agreement;
9
6. Use detailed checklist previously throughout to avoid
missing important items;
10
Remember
A fairly negotiated Contract will address both Shipper and
Carrier concerns in advance providing for discussion and
compromise to foster an anticipated partnership for the
beneficial working relationship between the parties.
11
7. Identify unique issues underlying transaction such as:
a) unique commodity
b) geographic scope
c) specific equipment
to name a few.
12
8. Understand charges:
a) freight
b) accessorial
c) fuel surcharge
d) detention
e) payment terms
13
9. Transportation Documents:
a) bill of lading
b) tariffs
c) rules
d) exclusive contract terms
14
10. General Contract Language: Always try to be “the
Drafter” of the Contract:
a) simple straight forward
b) legalize only when necessary
c) avoid ambiguities
d) avoid internal inconsistencies
15
11. 800 Pound Gorilla Contracts. Throw all reason and rules
out the window!
12. Many of these important and preliminary suggestions
will apply to all transportation Contracts referred to
throughout this discussion.
16
II.
FIRST IMPORTANT KEY PROVISION:
Will Contract be the entire Agreement between the parties?
49 U.S.C. §14101 (b)
Will Contract Waive all rights, duties and obligations
under 49 U.S.C. §14101 (b)
17
PROS v. CONS OF WAIVER
PROS OF WAIVER:
Parties can make any Agreement and Waive all federal
legislation except:
NOT WAIVE
 Registration
 Insurance
 Safety Fitness
18
PROS v. CONS OF WAIVER
CONS OF WAIVER:
Be careful what you wish for.
IMPORTANT REASON NOT TO WAIVE…
19
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
1. No Carmack Liability § 14706
2. National Uniformity and Consistency of Statute
3. Predictability v. State Law
4. Special and Consequential Damage Interpretation
5. Removal to Federal Court 28 U.S.C. § 1337
6. Venue Flexibility 49 U.S.C. §14705(a)
20
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
7. Forum of Non-Conveniens – Right to transfer to
convenient forum 28 U.S.C. § 1391
8. Burden of Proof for negligence transfer to shipper
9. Presumption of good order and case law
10. Consignee duty to accept shipment unless practically
worthless and to mitigate damages
11. Preemption trumps state law causes of action
21
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
12. Written claims requirements:
a) regulations on claims – 370.3 (c)
b) minimum claims requirements – 370.3 (b)
c) response to claims – 370.5 and 370.7 ( c )
d) claims v. offset
22
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
13. Bill of lading and standard provisions waived
14. Loss of released rate, notice and inadvertence clause and
opportunity to declare higher rate;
15. Back side terms and conditions of bill of lading omitted
23
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
Reasonable Dispatch
Five Classic Defenses





24
Act of God
Act of Public Enemy
Authority of Law
Inherent Vice
Act or Omission of Shipper
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
16. 9-month claim filing
17. 2-years to file suit – 49 U.S.C. 14706 (e)(1)
18. carrier liens for freight charges
19. conversion to warehouseman status upon wrongful
rejection
20. salvage and on hand provision
25
REASONS NOT TO WAIVE
NOT EXHAUSTIVE
21. no extraordinary value
22. hazmat protocol
23. payment of freight charges/ liability of consignor and
consignee
24. shipper load and count provisions and presumption on
shortage and damage claim waived
26
III. BALANCE OF CONTRACT PROVISIONS
Once Determine Waiver or Not Waiver
Balance of Contract still contains important terms.
Obviously with Waiver Drafter must consider all terms.
Outside Interstate Commerce Act to Complete Transaction.
A provision becomes KEY if not covered properly.
27
SPECIAL ITEMS
WAIVER OF SUBROGATION
ADDITIONAL INSURED
INDEMNITY
VALUATION
COMMERCIAL CONTRACT v.
TRANSPORTATION AGREEMENT
28
TERMS
TERMS TO ADDRESS
TERMINATION
SCOPE OF AGREEMENT
RATE CHARGES AND PAYMENT
FREIGHT DOCUMENTS
INSURANCE
REFUSED SHIPMENT AND WAREHOUSE LIABILITY
29
TERMS
TERMS TO ADDRESS
CARGO LIABILITY
SEALED SHIPMENTS
SALVAGE
INDEMNIFICATION
HAZMAT
FORCE MAJEURE
30
GENERAL BUT IMPORTANT PROVISIONS
 GOVERNING LAW
 VENUE
 ARBITRATION
 INCORPORATION BY REFERENCE
TARIFFS, CLASSIFICATIONS, RULES
31
Conclusion…
A well drafted Contract can anticipate and plan for problems
before they happen. On the other hand a poorly drafted
Contract can create problems that may not have existed
before.
To copy a real estate mantra – location – location – location.
In Contracts it is Preparation – Preparation – Preparation.
Don’t do things because they are easy.
Prepare to represent your clients by knowing, using and
negotiating the key provisions of your Contract.
32
…Conclusion
Preparation – Preparation – Preparation
Price, Meese, Shulman & D’Arminio, P.C.
By: William D. Bierman, Esq.
33
STRAFFORD CONTINUING
EDUCATION
MAY 19, 2016
THE BROKER/CARRIER CONTRACT
CHILTON YAMBERT PORTER LLP
CHICAGO, IL
Presented by:
Jason Orleans
[email protected]
INTRODUCTION:
BROKER – MOVING FREIGHT FOR SHIPPER –
MAY HAVE SHIPPER’S INTEREST AT HEART,
BUT CANNOT EXIST WITHOUT USE OF
EFFECTIVE MOTOR CARRIERS
CARRIER – WANTS THE FREIGHT – MAY
HAVE LESS BARGAINING POWER
SOUND CONTRACT HELPS AN EQUAL
PLAYING FIELD
35
OUTLINE OF KEY PROVISIONS:
KEY CONRACTUAL TERMS AND
OBSERVATIONS FROM BROKER SIDE/FROM
CARRIER SIDE
BROKER DEFINITION AND EXPLANATION OF
ROLE
 PAYMENT OF FREIGHT CHARGES
WAIVER OF CARRIER’S LIEN
WAIVER OF RIGHT OF CARRIER TO
RECOVER PAYMENT FROM SHIPPER
 NO DOUBLE BROKERING
 FREIGHT CLAIMS/LIMITATION OF LIABILITY
OFFSET PROVISION
LIMITATION OF LIABILITY
CARMACK WAIVERS
 INSURANCE
 INDEMNIFICATION
ANTI-INDEMNFICATION STATUTES AND
TRENDS
 NO BACK SOLICITATION
 FOOD SAFETY/TRAILER SEAL CONSIDERATION

36

BROKER MUST ONLY REPRESENT THAT IT
ARRANGES FOR TRANSPORTATION OF
PROPERTY BY MOTOR CARRIER FOR
COMPENSATION
(49 USC § 13102(2))
BROKER DOES NOT WANT TO CONTROL OR HAVE
RIGHT TO CONTROL MOTOR CARRIER – CONCERN
FOR VICARIOUS LIABILITY/JOINT VENTURE
FAST ACT OF 2015 – REMOVED CRASH INDICATOR
FROM PUBLIC VIEW ON FMCSA – SMS – WEBSITE.
SUPPORTS BROKER’S LIMITED INTEREST IN ONLY
ASCERTAINING THE MOTOR CARRIER IS LICENSED,
INSURED AND HAS SATISFACTORY SAFETY RATING.
37
SHIPPER EXPECTS BROKER TO SEE THE PROPERTY IS
MOVED FROM A TO B. REALITY IS THAT SHIPPER
EXPECTS SOME LEVEL OF CONTROL
MOTOR CARRIER MAY VIEW BROKER AS
REPRESENTATIVE AGENT OF THE SHIPPER
BROKER MAY ISSUE BILLS OF LADING AS SHIPPER’S
AGENT (BUT CONTRACT MAY SAY THAT THIS IS FOR
INFORMATIONAL PURPOSES ONLY)
BROKER MAY SOMETIMES BE LISTED AS CARRIER ON
BILL OF LADING (BUT CONTRACT MAY STATE THAT
THIS IS FOR “CONVENIENCE ONLY”)
BROKER MAY OBTAIN ASSIGNMENT FROM THE
SHIPPER TO ASSERT CARGO CLAIM
BROKER MAY BE ALIGNED WITH SHIPPER (SHIPPER IS
ITS SOURCE OF BUSINESS)
BROKER SHOULD BE CAREFUL TO CONVEY LOAD
INFORMATION/INSTRUCTIONS, ISSUANCE OF BILL OF
LADING AS A “CONVENIENCE” ONLY OR AS
“FACILITATOR” OF INFORMATION
38
FREIGHT CHARGES:

BROKER/CARRIER AGREEMENTS
TYPICALLY PROVIDE THAT THE BROKER
SHALL PAY THE CARRIER THE RATE SET
FORTH IN THE RATE CONFIRMATION

TYPICALLY MOTOR CARRIER AGREES NOT
TO SEEK PAYMENT FROM THE SHIPPER
AND WILL WAIVE BROKER’S LIEN ON THE
PROPERTY SHIPPED

MOTOR CARRIER - WILL NOT WANT TO
WAIVE RECOURSE AGAINST THE SHIPPER

BROKER - WILL NOT WANT MOTOR
CARRIER FROM HAVING ANY
COMMUNICATION WITH THE SHIPPER
39
NO DOUBLE BROKERING:
MOTOR CARRIER
SUBCONTRACTING
FREIGHT TO ANOTHER
MOTOR CARRIER
PROHIBITED UNDER MAP – 21
. FINE OF $10,000 PER
OCCURRENCE
MOTOR CARRIER - MAY WANT
FREEDOM TO “INTERLINE” –
ESPECIALLY WITH LTL MOVEMENTS
 BROKER - HAS LIABILITY CONCERN
AS MAY BE HELD RESPONSIBLE FOR
UNKNOWN MOTOR CARRIER.

40
FREIGHT CLAIMS/LIMITATION OF
LIABILITY:

41
CLAIMS GOVERNED BY CARMACK AMENDMENT (49
USC § 14706)
-
ALLOWS FOR MOTOR CARRIER TO LIMIT
LIABILITY AND PRESCRIBES MANNER IN
WHICH CLAIMS MUST BE PRESENTED,
PROVED, MITIGATED, AND RESOLVED
-
LIMITS DAMAGES GENERALLY TO FAIR
MARKET VALUE OF PROPERTY/GOODS - NO
LOST PROFITS, CONSEQUENTIAL DAMAGES,
OR ATTORNEY’S FEES

BROKER/CARRIER AGREEMENT MAY WAIVE
CARMACK UNDER 49 USC § 14101(b), BUT WAIVER
MUST BE EXPRESS. WAIVER COULD OPEN UP
CLAIMS FOR LOST PROFITS, CONSEQUENTIAL
DAMAGES, ATTORNEYS’ FEES

BE CAREFUL OF CONTRACT WITH WAIVER
PROVISION THAT LEAVES IN CARMACK TERMS FOR
HANDLING FREIGHT CLAIMS UNDER 49 CFR § 370,
et. seq.
MOTOR CARRIER - WILL NOT WANT
CARMACK WAIVER (BUT WANTS
BUSINESS FROM THE BROKER)

BROKER – WILL WANT CARMACK WAIVER – SO
IF BROKER PAYS SHIPPER FOR DAMAGES, IT
CAN RECOVER FULLY FROM MOTOR CARRIER

BROKER – WILL WANT BILL OF LADING TO BE
SUBORDINATE TO THE BROKER/CARRIER
CONTRACT

BROKER – WILL WANT RIGHT TO
OFFSET/WITHHOLD PAYMENT OF FREIGHT
CHARGES TO SATISFY CARGO CLAIM/DAMAGE
42
INSURANCE
REQUIREMENTS:
43

TYPICALLY CONTRACT REQUIRES $100,000
IN CARGO INSURANCE TO BE MAINTAINED
BY THE MOTOR CARRIER.

IN INSTANCES WHERE CARGO VALUE
EXCEEDS $100,000, CONTRACT MAY LIMIT
MOTOR CARRIER’S LIABILITY TO $100,000

MOTOR CARRIER - WILL WANT LIABILITY
LIMITED TO INSURANCE PROCEEDS

BROKER - WILL WANT GREATER
INSURANCE LIMITS
INDEMNIFICATION:

CONTRACTS WILL USUALLY REQUIRE THE MOTOR
CARRIER DEFEND AND INDEMNIFY THE MOTOR CARRIER
AGAINST CLAIMS FOR DAMAGES

STATE TRANSPORTATION ANTI-INDEMNIFICATION LAW MOST STATES NOW HAVE STATUTES RENDERING ANY
CONTRACT RELATED TO TRANSPORTATION SERVICE THAT
PURPORTS TO INDEMNNIFY THE INDEMNITEE FOR ACTS
OF ITS OWN NEGLIGENCE VOID
BROKER – WILL WANT BROAD INDENNIFICATION LANGUAGE,
BUT STATUTE LEVELS PLAYING FIELD
UNRESOLVED ISSUES:
WHAT CONTRACTUAL INDEMNIFICATION LANGUAGE
SURVIVES THE
STATUTES?
44

THE BROKER SHOULD ONLY BE INDENNIFIED TO THE
EXTENT THE DAMAGES ARE “CAUSED BY THE ACT OF THE
MOTOR CARRIER.”

ARE STATE ANTI-INDEMNIFICATION STATUES PREEMPTED
BY FEDERAL LAW? (“FAAAA – PREEMPTION” – 49 USC
14501(c)(1))
NO BACK SOLICITATION:

A NON-COMPETE - KEEPS BROKER FROM
SOLICITING LOADS FROM SHIPPERS
DIRECTLY - TYPICALLY FOR UP TO A YEAR
FROM END OF BROKER/CARRIER CONTRACT

TYPICAL PENALTY IS A PERCENTAGE (10-20%)
OF ANY FREIGHT CHARGE PAID TO THE
MOTOR CARRIER OWED TO THE BROKER

PROVISIONS ARE VALID
BROKER - WILL WANT FAR REACHING PROVISION
MOTOR CARRIER - MAY TRY TO LIMIT REACH OF
PROVISION
45
-
DURATION
-
PERCENTAGE TO BE PAID
FOOD SAFETY RULES - SEAL
PROVISIONS:
46

ON APRIL 5, 2016 CONGRESS ISSUED THE “FINAL RULE”
REGARDING TRANSPORTATION OF FOOD PRODUCT
APPLICABLE TO TRANSPORTATION ENTITIES (INCLUDING
BROKERS) – RULE TO TAKE EFFECT IN JUNE 2017 (SMALL
MOTOR CARRIERS ARE EXEMPT) (SEE, 21 CFR PART I)

SHIPPERS MUST ENSURE THE SAFE TRANSPORT OF FOOD
PRODUCT – IMPLEMENT CONTROLS TO PREVENT
CONTAMINATION/ADULTERATION OF FOOD PRODUCT

SHIPPERS MAY ASSIGN RESPONSIBILITY FOR
TRANSPORTATION OF FOOD PRODUCT IN COMPLIANCE
WITH THE FINAL RULE TO BROKERS AND MOTOR CARRIERS
– BROKERS MAY ASSIGN TO MOTOR CARRIERS

NEW AREA OF CONTRACT

NEW PROVISIONS TO DEVELOP

IMPLEMENTATION OF CONTROLS - A NEW PROCESS –
CONTROLS MAY BECOME PART OF CONTRACT

BROKER/MOTOR CARRIER CONTRACTS MAY DEFINE
DAMAGE TO CARGO AS A BROKEN TRAILER SEAL - BUT
WITHOUT ANY EVIDENCE OF PHYSICAL DAMAGE TO CARGO
MOTOR CARRIER - WILL ONLY WANT TO BE
LIABLE FOR ACTUAL DAMAGE TO PROPERTY AS
UNDERSTOOD UNDER CARMACK
BROKER - WILL WANT BROAD DEFINITIONS OF
DAMAGE TO APPLY AS BROKERS WILL HAVE TO
PAY SHIPPER CLAIMS FOR POSSIBLE
CONTAMINATION
47
JASON E. ENGKJER
[email protected]
(612) 336-9303
DRAFTING MOTOR
CARRIER AGREEMENTS:
ANTICIPATING AND ADDRESSING
CARGO CLAIMS, CARRIER INDEMNITY
OBLIGATIONS AND MORE
BEGIN WITH UNDERSTANDING
THE OWNER-OPERATOR
RELATIONSHIP
• RELATIONSHIP DIFFERENCES BETWEEN
OWNER-OPERATORS AND EMPLOYEES
• CONTRACTUAL REQUIREMENTS
• MISCLASSIFICATION
TODAY THE FOCUS IS ON THE CONTRACT:
• CONTRACT HAULING AGREEMENTS
• EQUIPMENT LEASE AGREEMENTS
49
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
A common problem is failing to understand the
importance of operating a proper OwnerOperator program
CLASSIC OWNER-OPERATOR RELATIONSHIP:
1. Owner-Operator provides the equipment;
2. Operates under the motor carrier’s authority; and
3. Under a written contract.
A troubling number of “Owner-Operators” do not have properly
drafted contracts with the carrier!
50
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
•
The most common problems with
Owner-Operator programs is
compliance (or non-compliance) with
the Truth-in-Leasing (TIL)
regulations, 49 CFR § 376.1, et al.
– Adopted and enforced by the Federal
Motor Carrier Safety Administration
(FMCSA)
•
51
If you engage in interstate commerce
and operate an owner-operator
program, then you must comply with
TIL regulations.
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
THE BASICS
•
TIL governs the “lease” of equipment by an owner-operator to the authorized motor carrier. 49
CFR § 376.1(a)
–
52
Also governs the “interchange” of equipment between motor carriers. 49 CFR § 376.1(b)
•
Owner-Operator relationships must be governed by a written lease agreement, commonly
referred to as a Contract Hauling Agreement (CHA). 49 CFR § 376.11(a)
•
Owner-Operator is the “lessor” of the equipment, while the motor carrier leases the equipment
as the “lessee”
•
Owner-Operator runs under the motor carrier’s authority. 49 CFR § 376.11(c)
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
Generally, the written lease must:
1.
Identify the parties and detail the use of the equipment;
2. Identify the equipment and the length of time (including start
and end dates) that the lease covers; and
3. State that the carrier shall have “exclusive possession, control
and use” of the equipment for the duration of the lease.
49 CFR § 376.12(a)-(c)
HOW DOES THE “CONTROL” REQUIREMENT EFFECT INDEPENDENT
CONTRACTOR STATUS?
DOES IT RAISE QUESTIONS OF MISCLASSIFICATION?
53
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
“CHECKING IN” AND “CHECKING OUT”
“Receipts” dictate the time and possession of the equipment
by the motor carrier.
The Owner-Operator “checks-in” and “checks-out” with
the carrier.
1.
When checking in, the receipt identifies the equipment subject
to the lease, with the date and time the lease was activated; and
2. When checking out, the receipt identifies the equipment, with
the date and time possession of the equipment ends.
49 CFR § 376.11(b)
54
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
COMPENSATION
The CHA must clearly state:
1.
How compensation is paid; and
2. How deductions are administered
Compensation can be “expressed as percentage of gross revenue, a flat rate per
mile, variable rate depending on the direction traveled or the type of commodity
transported, or by any other method of compensation mutually upon by
the parties.” 49 CFR § 376.12(d)
IF CONSIDERING ANOTHER “METHOD OF COMPENSATION,” CONSIDER HOW THAT
MAY AFFECT THE INDEPENDENT CONTRACTOR’S STATUS AS AN OWNER-OPERATOR.
55
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
DEDUCTIONS
Deductions and final settlements are an area where motor carriers
tend to struggle.
Lease must clearly state who is responsible, the owner-operator or
carrier, for all charges associated with the contract, including:
•
•
•
•
•
Fuel and fuel taxes
Empty mileage
Permits
Tolls and ferries
Detention
49 CFR § 376.12(j), (h)
56
• Base plates
• Licenses
• Insurance / Cargo
Damage
• Administrative fees
• ANY unused portion
of such items
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
INSURANCE
Carrier is obligated to maintain insurance coverage for the
protection of the public.
Carrier’s responsibility for insurance must be clearly specified in the
lease.
Deductions for insurance, whether deductible for primary or
chargebacks for insurance purchased through the motor
carrier, must be clearly specified.
DOES RESPONSIBILITY FOR INSURANCE SEEM COUNTERINTUITIVE TO THE
INDEPENDENT CONTRACTOR RELATIONSHIP?
49 CFR § 376.12(j)
57
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
ESCROW FUND
Money deposited by the lessor with either a third party or the lessee to guarantee
performance, to repay advances, to cover repair expenses, to handle license and
State permit costs, and for any other purposes mutually agreed upon must be
deposited in an escrow fund.
•
CARRIER MUST PROVIDE ACCOUNTINGS / INDIVIDUAL SETTLEMENT SHEETS
REFLECTING DEDUCTIONS FROM THE FUND.
•
OWNER-OPERATOR CAN DEMAND ACCOUNTINGS ANY TIME.
•
CARRIER MUST ACCOUNT FOR AND PAY INTEREST ON THE FUND TO THE OWNEROPERATOR.
•
LEASE MUST CLEARLY SPECIFY THE CONDITIONS UNDER WHICH FUNDS ARE
DEDUCTED AND RETURNED.
49 CFR § 376.12(K)
58
CONTRACTUAL
OWNER-OPERATORS & TRUTH-IN-LEASING
TRUTH-IN-LEASING: PRIVATE RIGHT OF ACTION
• A motor carrier’s violation of the Truth-in-Leasing Regulations
entitles the Owner-Operator to a “private right of action”
–
49 U.S.C. § 14702
• Allows the Owner-Operator to collect actual damages, as well
as attorney’s fees and costs
59
CONTRACTUAL
OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
EQUIPMENT LEASE AGREEMENTS
Many owner-operators do not own equipment or have the financial
ability to purchase equipment.
Result is an Equipment Lease arrangement between the owneroperator and equipment owner (carrier or affiliated equipment
leasing company)
The Equipment Lease and CHA are separate contracts with
differing sets of rights and obligations.
Can be interrelationship between an Equipment Lease and CHA.
60
CONTRACTUAL
OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
EQUIPMENT LEASE TERMS
•
Lease payments with a combined option to purchase the equipment
at termination for the stated “termination value.”
•
Title remains with the “Lessor.”
– Do not confuse a “Lessor” under an Equipment Lease with the
“Lessor” under a CHA.
•
May include warranty disclaimer, indemnity and events of default.
– Installment contract option.
– Arguably not a lease?
61
CONTRACTUAL
OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
EQUIPMENT LEASE SECURITY
• Establishment of an escrow fund.
– TIL compliance.
• Pledge a CHA with the identified motor carrier.
– Authorizes Motor Carrier deductions from final settlements under the CHA to
fund the lease payments.
– Authorizes additional security payment (e.g. 20% of the termination value) in
the event of termination.
– Can require consent of the equipment lessor for a substituted carrier with
combined authorization for direct payments.
62
OPERATING AN OWNER-OPERATOR PROGRAM
1.
Organization
– Is the client properly organized to facilitate lease arrangements and help
limit liability?
2. Contractual
– Does the client have proper CHAs and Equipment Lease Agreements that
comply with applicable laws and regulations, including Truth-In-Leasing
regulations?
3. Relational
– Does the client have proper mechanisms in place to ensure that
contractors are treated like contractors, and employees like employees?
63
THE DECLINE OF THE
OWNER-OPERATOR?
THANKS!
I’M HAPPY TO ANNOUNCE I’VE CHANGED FIRMS:
JASON ENGKJER
1000 INTERNATIONAL CENTRE
920 2ND AVENUE SOUTH
MINNEAPOLIS, MN 55402
TOLL FREE (800) 752-4297
DIRECT: (612) 336-9303
E-MAIL: [email protected]
64