Are you about hiring a truck driver for your business? If YES, here are 10 important clauses to include in the agreement between the truck owner and driver.
When running a business, especially one where you will have reasons to partner with others, one very important thing you should not take for granted is a contract.
What is a Contract?
A contract is your guarantee that the other party would keep to his or her side of the bargain, and if they don’t, stiff penalties would be meted out.
But before a contract would be legally binding and enough to keep the other party in check, it has to contain some very important clauses.
Without these clauses, the contract is mostly valueless as it contains basically nothing. The trucking business involves a lot of risk as you will be entrusting your very expensive truck to a basic stranger with the hopes that he or she will faithfully make returns to you at the end of each trip.
This kind of responsibility is not what you entrust to another by faith, even though the person is very much known to you or may even be a family member. That is why contracts are very important for a truck driver and the owner of the truck.
Contracts usually come with a template, but it is now left for you to modify the clauses in the contract to suit what you want to use it for.
For a truck owner who wants to entrust his truck to a driver, these are some of the most important clauses you should have in your contract that would ensure that you have all the basics covered.
10 Important Clauses You Must Include in the Agreement Between Truck Driver and Owner
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Personnel requirements
Personal requirement is usually one of the basic clauses in a contract. This clause is especially important in the trucking industry as it is where you would outline who you would be giving your truck over to.
Maybe you want them to have two years’ minimum (driving) experience and not to have any DUIs, it has to be listed whether the driver passed those criteria.
And as long as the criteria is reasonable, then you can legally put it in the contract. Some people want drivers who are more than 21 years of age, if this is something which is of concern to you, you can stipulate it in the contract.
The bottom line is that your personally requirements should include all that you want in a driver before you can work with him or her. If the driver gives the wrong information, they can be sued.
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Operating authority
Interstate Operating Authority is authority granted by the Federal Motor Carrier Safety Administration (FMCSA) to allow your trucking company to work for-hire across state or national borders.
In general, companies that do the following are required to have interstate operating authority (MC number) in addition to a DOT number:
Operating as for-hire carriers (for a fee or other compensation) Transporting passengers, or arranging for their transport, in interstate commerce.
This is a very important clause because the truck driver would want to be sure that he has the required authority to do his duties.
This is important because if the CVOR rating does change, and you want to cut ties with the carrier, you can do so if you stipulate that in the contract.
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Insurance
“Insurance is a big deal when it comes to truck driving. The truck driver would want to make sure that the vehicle and the company he is working for has the right insurance.
Ideal carriers should have three kinds of insurance: commercial generalized liability insurance, automotive insurance and cargo liability insurance. Typically, it is recommended that the carrier has $5 million of CGL and automotive and that’s per occurrence.
In addition, if you’re dealing with a broker, make sure they have contingent liability insurance. This is very important as a truck driver would be committing a crime hauling load without the right insurance.
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Liability clause
It is a truth universally acknowledged that transport operators will have no liability for any loss or damage to the goods they carry. The trend amongst large shippers today is to include an indemnification clause in their freight contracts with carriers.
The purpose and intent of these clauses is to transfer all liabilities for damage to property or persons to the motor carrier – even where the incident occurs as a result of the shipper’s negligence.
This is why this clause is very important to protect the driver from negligence that is not his or her own. If you have a Bill of Lading, the normal carrier liability is $2 per pound. However, the beauty of a contract, is the shipper/consignee can ask for more than $2 per pound.
Typically, what people have in their liability clause is if the carrier damages the product, then the carrier should pay either the wholesale value of the product, the retail value of the product, or the warehouse value of the product, etc.
You can put down in your liability clause, what value you want attributed to the product. If your product is light, you should make sure that in the clause that it’s valued at more than $2/lb.
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Indemnification
Indemnification is the most important part of any contract. What it means is that the carrier will indemnify the shipper for any accident, loss, or damages which occur during the transportation.
Having an indemnification clause in your contract is crucial because if there is an accident during transportation, you have in it the contract that the carrier will indemnify you if there is a lawsuit.
The purpose of the indemnity agreement is to transfer the risk of financial loss from one party (the indemnitee) to another party (the indemnitor).
This transfer or shifting of financial consequences is often called noninsurance contractual risk transfer and is considered a risk financing technique.
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Subcontracting
A subcontractor to transport companies is a carrier that signs a contract to perform part or all of a transport company’s contracts. A subcontractor can use either its own vehicles/equipment or use those of their contractor.
As a driver, anytime your carrier decides they want to use another carrier, you want to make sure that you have the required ability to authorize it.
Subcontracting needs to be an exercise you are aware of as a consignee of a contract. The driver should ensure that they include a clause in the contract that stipulates that the carriers they want to subcontract should have the same obligations are the original carrier.
And as a consignee or shipper, you don’t want them to be subcontracting with a carrier that doesn’t have enough insurance, or doesn’t have a good record or an unsatisfactory CVOR.
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General Provisions
The clause in general provisions state that any losses sustained during the transportation from point of loading to the final destination will be deducted against the transport invoice.
In the event of theft from a truck by armed men, or any other person with fire arms, the case will immediately be investigated in collaboration with local law enforcement.
The Service Provider will not be held responsible for such a loss arising from armed attack until investigation is complete and case is closed. This may be modified or extended by written agreement of both parties.
In the event of an disagreement arising out of this contract, the parties agree to Negotiate a settlement of this agreement, or failing to reach a settlement submit the Disagreement to mediation prior to any case filings.
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Penalty Clause
The penalty clause is a clause that decides what happens in the case of a breach. Should delivery be delayed to due the Service Provider’s own misconduct or gross negligence, Service Provider will be granted 48 hours to complete delivery.
If the provider is unable to correct the issue within the allotted time the client will reserve the right to charge the transporter for the delay at the rate of $20.00 per ton per day for each day the convoy/truck is delayed after 48 hours. Furthermore, Client will reserve the right to hire another Provider to complete delivery of any delayed shipments.
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Termination of Agreement
To terminate a contract means to end the contract prior to it being fully performed by the parties. In other words prior to the parties performing all of their respective obligations required by the contract, their duty to perform these obligations ceases to exist. This is another important clause in a trucking contract.
In this part of the contract, the truck driver and the owner agree to the best time to terminate a contract. Typically, the client reserves the right to terminate the contract at any point with prior written notification.
In such termination, except when the termination is due to a breach of this agreement by transporter, the driver shall pay cost per ton up to the location of termination to Service Provider.
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Force Majeure
Event of Force Majeure means an event beyond the control of the Authority and the Operator, which prevents a Party from complying with any of its obligations under a Contract, including but not limited to: act of God (such as, but not limited to, fires, explosions, earthquakes, drought, tidal waves and floods); war, hostilities; rebellion, revolution, insurrection, or military or usurped power, or civil war, etc.
Any delays happening in the instance of “Force Majeure” where one or both of the contracting individuals becomes unable to perform their obligations under the terms of this contract; then no party shall be held responsible for termination of contract. This should be agreed and signed to in the contract.