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Shipping relationships are governed by a contract between the customer and the shipper. The agreement needs to be well-thought-out ahead of time to protect the shipper in the event of surge disruptions. Otherwise, the shipper could be on the hook for damages in a lawsuit. Even still, shippers may try to cut corners during periods of freight disruptions, putting their own employees at risk. The experienced maritime injury attorneys at The Law Offices of Preston Easley APC fight for the rights of injured maritime workers.
If you are a worker who has been injured on the high seas, speak to a maritime injury lawyer at The Law Offices of Preston Easley APC to learn more about whether you can file a negligence-based lawsuit against your employer. We will review your case during a free initial consultation and discuss a potential legal path forward.
Freight surges have become seemingly more common these days in light of commercial disruptions caused by things like the pandemic, tariffs and supply chain bottlenecks. If a shipper has not planned for potential disruptions in advance through the contracts that they have signed, they could be facing significant legal liability. Here are some contract clauses that exist to protect shippers in a freight surge disruption.
Force Majeure
When there are certain unforeseen occurrences, one or both parties may be excused from their contractual obligations. These actions could include major storms, government actions or even labor disruptions. The clause itself would likely specify which events are considered to be force majeure. A party’s obligation to perform could be suspended, or even terminated, in light of the force majeure. The party who is excused from performance would be protected from liability if they are sued.
Rate Adjustment Clauses
The amount that the customer may need to pay the shipper could escalate based on the circumstances. The contract could provide for a rate escalator that could allow the shipper to charge if certain things occur. The shipper may not need to solely bear any increased costs from disruptions. The contract should have clear and specific price adjustment clauses that define trigger events for a rate adjustment, calculation methods, and caps or thresholds for price changes.
Volume Commitment Clauses
A shipper may consider obtaining a commitment for a minimum amount of volume from their customer. At the same time, they should be wary of making commitments on their end to delivering a certain minimum amount of cargo because they may not be able to honor the agreement in the event of a surge disruption.
Termination and Re-Negotiation Clauses
The shipper may be able to exercise and out in the contract in the event of a surge disruption. The initial agreement may provide for circumstances under which the shipper could either terminate or renegotiate the contract. Depending on how the contract is written, the shipper may even be able to terminate it for convenience, depending on the circumstances. The shipper would be bound by the termination clause as written in the contract, and they would not be able to change it once performance is underway, unless both parties agree to a contractual modification.
Liquidated Damages or Delay Penalties
A liquidated damages clause could protect both parties in the event of a surge disruption. From the shipper’s vantage point, they may have some certainty about what they may need to pay if they are found to have breached the contract. However, it is not necessarily a foregone conclusion that the shipper would have committed breach of contract in the event of a surge disruption. From the customer’s standpoint, they would have some certainty about the amount of damages that they would recover.
Dispute Resolution & Jurisdiction
Every type of contract should have a dispute resolution and jurisdiction clause to give a mechanism to resolve disagreements and some certainty about where a potential lawsuit could be filed. A dispute resolution mechanism could direct the parties to consider some type of mediation before one could file a lawsuit in court. The parties should also choose the venue for a potential lawsuit ahead of time, so there is no uncertainty about where they may need to litigate.
Shippers need to ensure that they negotiate all of these clauses before they agree to a contract. They should work to minimize their own legal risks. Although it is never acceptable to jeopardize the safety of workers by cutting corners, shippers should at least reduce some of the pressures that they face through their contractual agreements.
Contact a Maritime Injury Law Firm Today
Get legal help from an experienced California maritime injury attorney at the law offices of Preston Easley APC if you have been hurt on the high seas. We help injured maritime workers in California and Hawaii. You can schedule a free initial consultation by messaging us through our website or by calling us today at (310) 773-5207.
Preston Easley is a graduate of the United States Naval Academy in Annapolis, MD. He served five years of active duty as a Naval officer — three years as a deck officer on a fast frigate and two years as a patrol boat skipper. Mr. Easley also served aboard a tank landing ship in the reserves. Learn more here.
