As shippers, Canadian retailers and manufacturers should be aware of potential liabilities related to payment of freight charges. The transportation of a product commonly involves several stakeholders: freight forwarders or brokers and multiple carriers. Who should then be paid?
In the province of Quebec, the shipper is discharged by paying one of the carriers. The outstanding carriers must then address their claims to the paid carrier. However, payment of the freight charges directly to a broker does not generally discharge a shipper of its liability to the carriers.
Where a shipper can get involved in a dispute over the payment of freight charges is when brokers, voluntarily or unknowingly, act as carriers, even though they in fact do not operate any commercial motor vehicles. The shipper may, in this case, be discharged by the payment to the broker, acting as carrier, but other carriers, if any, may of course dispute the qualification of the broker as such. To determine if a broker acted as a carrier, contracts and other arrangements will be scrutinized, as well as exchanges (via e-mail, telephone or other means), the freight charges, the invoice and prior and further arrangements between the parties. It could be difficult to assert that a broker acted in that role only (and not as a carrier) in circumstances in which it has designated itself as the carrier on a bill of lading.
It may also be a challenge to determine if the parties to a transportation contract agreed that the freight charges would be discharged by their payment to the broker, or if the carrier acted in a manner that would suggest that the broker had the mandate to receive the payment. In such cases, if the parties agreed or acted in a manner suggesting that the broker was entitled to receive the payment of the freight charges, the shippers will be discharged by the payment of the freight charges to the broker.
Otherwise, shippers that paid their brokers rather than the carriers may face lawsuits from carriers that have not been paid by their brokers, and eventually be ordered to pay twice, i.e. they might also end up paying the carriers for the same freight charges that were already paid to the brokers.
To ensure payment of the carriers in case of payment of the freight charges to a broker, and avoid paying the freight charges twice, considerations include: (i) the alternative adopted by Ontario law: requesting that the amount received as payment of the freight charges be maintained in a trust account for payment of carriers; and (ii) requesting a quittance from a carrier upon payment to the broker.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
