Sell my clothes I’m going to heaven!

There are still companies that are apparently based on the famous saying of the poet K.W.J. Ferdinand Sauter (*1804, + 1854). Although they take care of their business properly, they do not take care of the contracts on which it is based. Apparently, Sauter had already had experience with customers in this regard, having worked for an insurance company for a number of years.

Sauter’s words were finally set to music for a well-known wine tavern song. And while we’re on the subject of songs, let’s add one more thing, a children’s song – modified to fit the topic: “Vallerie and vallera – contracts are there to be checked!”

But now specifically: The author of this article was recently shown by a south-east European freight forwarder – it could of course also have been an Austrian one – very proudly of the framework agreement he had created himself for orders from customers, with which the freight forwarder wanted to limit his liability as much as possible. But more on that later!

Freight forwarder or carrier: a small difference with a big impact

In most countries with a developed legal culture there is a clear terminological distinction between freight forwarder and carrier. To put it very simply: freight forwarders organise transports, carriers carry them out.

Freight forwarders usually have quite limited liability, while carriers have stricter liability with higher amounts. However, as far as liability is concerned, there are exceptions to this rule in some countries, e.g. Austria, whose UGB is quoted below:

  • Self-admission: § 412 reads: (1) Unless otherwise specified, the freight forwarder is authorised to carry out the transport of the goods himself. (2) If he makes use of this authority, he also has the rights and obligations of a carrier or shipper; he can demand the commission, the costs that otherwise regularly occur in forwarding transactions and the usual freight.
  • Fixed-cost forwarding: this is regulated in § 413 (1): If the forwarder has agreed with the consignor on a certain rate of transport costs, he exclusively has the rights and obligations of a freight forwarder. In such a case, he can only demand commissions if this has been specifically agreed.
  • Groupage forwarding: § 413 (2) determines: If the freight forwarder effects the shipment of the goods together with the goods of other consignors on the basis of a freight contract concluded for his account for a groupage, the provisions of paragraph 1 apply, even if an agreement on a certain rate of transport costs has not taken place. In this case, the freight forwarder can demand freight that is reasonable under the circumstances, but no more than the freight that is customary for the transport of the individual goods.

“Having the duties of a carrier” means, among other things: also, to be liable like a carrier in this case. To show the difference: A freight forwarder is generally liable – without going into details such as maximum amounts, waiver of liability in certain cases etc. – according to the General Austrian Forwarder Conditions with 1.09 EUR per lost kilogram of gross weight, but a freight forwarder according to Art 23 of the CMR usually with 8.33 SDR per kilogram gross weight, converted with about 10 EURO/kg. Being burdened with only about a tenth of the standard liability in the event of damage naturally makes it attractive for freight forwarders not to have to be treated like a freight forwarder in terms of liability.

Forwarder or carrier: a question of liability

What are the reasons why freight forwarders have the duties of a carrier in the aforementioned cases? In the case of § 412 UGB it is obvious: why should a forwarder who concludes a forwarding contract – but is not just a so-called “sofa forwarder” with a desk, laptop and telephone, but does not have his own vehicle fleet – but then himself carries out transport with its own vehicles, be treated differently than any other carrier?

In the case of so-called fixed-cost forwarding, the explanation is that a freight forwarder could be tempted to choose a good, inexpensive carrier, but not the best, who might also have higher freight rates. In the case of freight forwarding at fixed costs, the freight forwarder generally does not disclose his commission and is therefore tempted to focus on maximizing profits at the expense of the carrier’s quality. They may not have the latest equipment, not the best drivers, not the most modern technical equipment, not the best know-how about transport routes, guarded parking lots, etc., which means that damage can occur more easily. And because this increases the risk for the customer of the freight forwarder, he is also subject to stricter liability. Similar considerations apply to groupage shipping. In the case of consolidated loads, goods are also more likely to be damaged or lost, as experience has shown.

Back to the introductory remarks! The supposedly resourceful freight forwarder had created an “order document” which was entitled “transport order” and with which clients were to place orders with him. In the form itself it was pointed out that the contractor acts as a freight forwarder – also under commercial law – and acts on the basis of the general freight forwarder conditions of his association, but the text then referred to “freight payment”, “due date of freight” etc. Due to the text in the document, the conclusion of an “original freight contract” can be assumed. In this case, there is no need for a “detour” via self-employment, fixed-cost or groupage freight forwarding, since the CMR (“Convention on the Contract for the International Carriage of Goods by Road”) as an international treaty is mandatory for international road haulage. Article 1 of the same states: “This Convention applies to every contract for the carriage of goods by road for reward by means of vehicles…”. And Art. 41 CMR stipulates that an agreement may not be used to deviate directly or indirectly from this convention, otherwise it will be void and have no legal effect. It follows that in this case anyone who concludes a contract of carriage (also known as a transport contract or contract of carriage) by accepting a “transport order” (or similar) is liable under freight law. This also applies to freight forwarders.

The “resourceful” freight forwarder should have had his “order document” checked by a lawyer, or e.g. by a knowledgeable employee of GrECo. An insurance broker like GrECo, who runs “Transport” as a group practice, is of course able to advise customers on how to minimize liability risks and ultimately save on insurance premiums due to dealing with a large number of claims. It goes without saying that GrECo, if a claim does occur, supports the policyholder with expertise and accompanies him through the settlement of the claim in the best possible way. Experience is one of the most important assets that GrECo can offer, especially with internationality in transport , apart from excellent contacts to lawyers, average adjusters and experts whose involvement is often a necessity in the event of major claims.

Related Insights

Otmar Tuma

Instructor Transportation & Logistics