A Brief Introduction About the Transport Contract
A transport contract or agreement is an agreement that is entered into by a client and a transporter for transporting products or goods. It is a legally binding contract that lays out the terms and conditions for the transportation services being provided. Whenever a company needs to transport goods, it will hire a transportation company. It may do so by using a transportation bidding process.
The transport Agreement specifies the details of this job. It should mention the payment, the expected time for delivery; what will happen in case the transporter fails to deliver in the promised time, etc. The transportation agreement is used for securing the conveyance of freight via motorway, railway, domestic waterways, and domestic non-vessel operating common carrier. Do note that a transport agreement is not used for the movement of goods via international waterways and domestic and international airways.
Trucking contracts and freight contracts are some other names that are used for transport contracts. Every company in the transport business should be familiar with and should always insist on a transportation contract. The contract protects both clients and the service provider.
Who Takes the Transport Contract – People Involved
The transport agreement letter has two signatories – the client and the service provider. The client is the company or the party that needs the goods or products to be transported. The client pays the transport company or the service provider for moving the goods based on the condition specified in the transport contract. The service provider is the one involved in the actual transportation of the goods.
Purpose of the Transport Contract – Why Do You Need It
The purpose of the transport agreement is to specify with clarity the terms of the agreement between the two parties. It legalizes the previously agreed upon terms between the client and the service provider. The transportation agreement form is the first and foremost document to be signed after the company wins the transportation bid. By specifying in writing the terms and conditions and the course of action for every possible scenario, the rights of all parties involved are protected. Both parties are required to read, understand, and agree to all the conditions before signing the document. This way, everyone is clear on what is expected from them and what shall happen if they falter.
In the transport business, it is vital to be clear on intricacies of the agreement, such as how much goods are to be transported, the timeframe within which the products should reach the destination, and the complete list of responsibilities of the service provider and client. When it comes to the transport business, one should always be prepared for extraneous circumstances that can prevent the goods from reaching the destination on time. The transportation agreement should specify the course of action when that happens.
The purpose of the agreement is to put things in writing so that no party can take undue advantage of the other. The transport agreement should also list the penalty in case of negligence by the service provider. In addition to this, it should also list out the actions that shall be considered as negligence. You can understand the contents of such contracts by going through the transportation agreement sample.
Contents of the Transport Contract – Inclusions
Transport agreements will vary on a case by case basis. The content will differ based on the relationship between the two parties or their priorities. Despite this, certain fundamental items will be included in all transport contracts. They are listed below:
- Scope of Services: What services will the transport company provide? Who is responsible for the maintenance, insurance, and fuel charges of the vehicle? Is there any additional service that can be provided upon payment? If so, what are they? Answers to all these questions and more should be covered in the agreement.
- Client Responsibilities: The client is also expected to perform specific duties such as inspecting the goods before and after delivery, providing a bill of lading, etc. All of this should be specified in this contract.
- Billing: Every service requires payment. The transportation contract should specify the amount as well as the time for the payment. It should also mention the consequences of late payment.
- Termination: It is not recommended to enter into an indefinite contract with anyone. Therefore, the contract should specify the terms for terminating the contract and the procedure to do so. If you would like to renew the contract periodically, then specify the procedure for the same.
- Liability: If there is a claim that arises out of the services provided, then how much is the service provider liable for? The clause safeguards the interests of the transport provider by limiting their exposure.
- Force Majeure: These are certain unforeseeable conditions that prevent either party from fulfilling the terms of the contract. If the contract cannot be fulfilled due to the conditions listed in this section, none of the parties will be held responsible.
- Warranties: The minimum level of service that the transport provider promises to deliver should be stated clearly. This is done to avoid any disputes in the future.
- Subcontracting: The transport company may sometimes subcontract to another company to deliver the required services. If the company plans to do so, it should be stated beforehand. The contract should also mention whether the subcontractor or the transport provider signing the contract is responsible for the delivery of the goods in this case.
- Dispute Settlement: If a dispute arises between the two parties during the contract, the means for resolving the dispute should be laid out in the freight contract.
How to Draft the Transport Contract
Here are the steps to be followed by both parties to draft the transportation agreement:
- The client and the transport company or the service provider must work out all the specifics of the contract. Ensure that all the points mentioned above have been covered. More details may be included if the need arises. The quality of service, details of the delivery, expected a payment, etc. should be discussed by both parties.
- Both parties should be in agreement on all the terms and conditions. The signees may choose to hire a lawyer from the start to protect their interests. This is vital if the signees of the contract are unfamiliar with the legal language of the document.
- Once the completed contract has been drawn up, it should be reviewed thoroughly by both parties. The lawyers can explain all the intricacies to their respective clients and ensure that they are on board with all the terms and conditions. At this stage, there shouldn’t be any confusion regarding the critical aspects of the transaction. Complete transparency is the key to avoid future disputes.
- To make the agreement legally binding, both parties must sign it. They should also enter their contact addresses and numbers on the document.
The transport contract should not unduly favor any one party. It should be balanced. At a later stage, none of the parties should have any regrets or feel like they received an unfair deal. To this end, all the clauses must be understood and discussed in detail during the drawing up the contract. The transport company should be adequately compensated for conveying the goods from the source to the destination. The client should receive the level of service that was promised.
Benefits & Drawbacks of the Transport Contract
Here are the benefits of having a transport agreement:
- Since the contract covers a host of topics related to transporting goods, the client and the transport company will have to discuss and negotiate each of those points before drawing up the contract. It helps both parties to reach an agreement on all aspects of service. Without the contract, many of those points might not have been discussed, and the consequences will only present themselves at a later stage.
- The agreement protects the client from negligent conduct by the transport provider. Since the contract mentions the timeframe within which the goods are to be delivered, penalizes failure to do so, and also penalizes the company is goods are missing, the client’s products and interests are protected.
- Similarly, the transport contract also lays down the timeframe and mode of the payments. It also specifies the actions to be taken if the client doesn’t comply. This protects the interests of the transport company.
- The contract also lays down the avenues for resolving disputes between the client and the service provider. When such a situation arises, this well-established road map can be used to resolve.
The only drawback of having a transport agreement is that if the agreement was drawn to favor one party, then the other party may find themselves caught in an unfavorable position for the duration of the contract.
What Happens in Case of Violation of Transport Contract ?
Every transport agreement should have a section that deals exclusively with violations. It will establish the course of action when such a violation takes place. The transportation agreement will have a penalty clause that specifies the penalty that will be imposed on the transport company if the shipment gets delayed or goods are lost or destroyed due to the negligence of the company. The contract also includes the course of action if the client breaches the contract by not performing their responsibilities.
When a dispute arises about the contract and its terms, the parties may specify how such disputes will be settled. The first recourse is always an out of court settlement. The representative of both parties can try to reach an agreeable conclusion within a specified timeframe. Upon failure to do so, the parties may go for arbitration. If arbitration fails, the dispute will be taken to court. In such cases, the contract may also specify who bears the legal costs of the party that was not in breach.
The course of action mentioned above is one of the ways of dealing with a violation. The signees may choose a different path or choose to go to court directly. However, the path to be taken should be mentioned in the contract under the dispute section to ensure clarity.
Many businesses need to transport products and goods, and they hire transport companies for this purpose. The transport contract is a vital document for every company in the transport business. It establishes and legalizes the relation between the transport company and the client. The contract becomes the basis for all interactions between the two parties. As seen above, it should cover every single scenario that may arise during the contract.
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