How to Draw up
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a Haulage Contract
ONE effect of the Transport Act has been that many operators are endeavouring to arrange agreements with customers so as to take out contract A licences. Some hauliers have the impression that contract A licences are not affected by the Act and that they can run any distance under such licences. On the contrary, a contract-A licensee, no more than any other operator, may not go outside the 25-mile radius unless he has been granted an original, ordinary or job permit, unless he is carrying excluded traffic.
Also, the Licensing Authorities may not necessarily make an immediate grant of such applications. They now take the line that unless in their view a contract is such as to be likely to be economically sound in its operation, they can refuse to grant it. "Contract tonnage" is awarded only when a contract is for a period of not less than a year. Furthermore, a haulier may apply for contract tonnage only with reference to contracts for which he supplies the drivers.
Some operators are entering into agreements with customers, the conditions being such that the customer prefers to have his own drivers running the vehicles. In those circumstances, it is the customer who must take out a C licence, although the haulier takes care of the vehicles for him.. . : A particular haulier with whom I discussed this matter wrote to me asking how much he should quote. Following my answer, he said that he was to receive the order and wanted to know how the actual contract should be frdrned.
We met to discuss the matter. . . .
"Your proper course," 1 told him, "is to go to a solicitor, He won't charge much, and if the document be legally prepared, there is less likelihood of any mistake being made or any misunderstanding arising." "I have been to my local man," he answered, "and he asked me so many questions about what should go into the contract that I decided to go home again and think about it. Then, as I came away from his office, I changed my mind and decided to see you."
What to Put In " In that case," I replied, " I will leave it to your solicitor to provide the usual preamble, the references to the parties concerned, and so on. Putting the most important thing first, you must begin by telling your solicitor exactly what you are going to supply under the contract. Presumably that will include the vehicle and a driver and all things necessary to keep the vehicle on the road. If the vehicle is to be specially painted to suit your customer it is better to state the fact in the first paragraph, that being part of what you undertake to supply."
What you do mean, 'part of what I undertake to supply'?" Simply this: instead of merely stating in the contract that you are supplying a 2-ton boxvan, together with driver and all essentials, you will modify that statement so that it reads that you are to supply a 2-ton boxvan painted and lettered, together with driver, and so on. Do not put details of the painting and lettering in that paragraph, keep those separate. Your solicitor will probably advise you to embody them in a schedule to be attached to the contract."
" Why can't I put those details in right away and have done with it?"
" Because the contract itself should be kept as short as possible. Extraneous details, such as the colour of the van, and other matters of a similar nature which we shall discuss later, are best kept separate. The next thing that matters is 422 the period of the contract, note of any option to renew, and provision for termination of the contract."
But why do I need to say anything about terminating the contract when it is for a. given period?"
You must have some provision for terminating it. Either you or your customer might find it impossible to continue. Neither you nor he might like to be told that at a minute's notice. To prevent that happening, you must insert something in the form of a clause which provides for due notice to be given.
"The price at which the contract is to be carried out is also to be .embodied in the contract.. Tell your solicitor what you are to be paid, the maximum mileage to be covered by that payment, and the maximum number of hours per week covered by the terms of. the contract."
"You are not forgetting," interrupted my friend, "what I told you in my letter, that there is a likelihood that the maximum mileage will often be exceeded?"
Overtime Expenses
No, I haven't forgotten that. There must be included in this contract a reference to the possibility of excess mileage,. and 2 statement made as to the charge involved by that excess.. At the sarrie time, make some provision to ensure that your customer will appreciate that he must repay you any expense incurred on his behalf and for any overtime which you have to pay your driver, "Some reference must be made also to the way in which the mileage is to be calculated. As a rule, the place where the vehicle is to be garaged is named in the contract, and the daily mileage is presumed to start when the vehicle leaves its garage."
"But, surely, if the van be in my customer's service, all the mileage recorded by the speedometer will be debited against him? "
That is so, but there is just the risk that if no definite agreement had been made, your customer might claim that the record of mileage should start only from the time th:14 the vehicle arrived at his premises for the day's work. It necessary to provide against misunderstandings. In the document, therefore, make it quite clear that the mileage commences when the vehicle leaves the premises at which it is housed and finishes when it returns there."
"There is a point here which I would like to raise," he said. "What happens if for any, reason the speedometer goes out of action?"
"It is usual to make a reference to that in the contract," I replied. "The reading from the speedometer is recorded each day and that record kept. In the event of the speedometer's failing, the distances are to be estimated by reference to those past records. You should afrange for your solicitor to include a paragraph to that effect.
"You should also make a note in the contract stating that the vehicle must not at any time be loaded in excess of two tons. Have you discussed with your customer the times when he will need the van, whethe it will be wanted on Sundays or holidays, Saturday afiernoons, or anything of that kind? "
" He did say he wanted it every day, Saturday afternoon as well, but I don't expect he will want it on Sundays. I never thought to mention bank holidays."
" In that case you had batter word your contract accordingly, excluding Sundays and bank holidays, at the same time Stipulating that the basic number of hours is to be 44 per week from garage back to garage, excluding meal times All overtime, night work, Sunday work or holiday work shall be paid by the hirer in addition to the hire figure mentioned in the 'contract: In the same clause you must stipulate for regular payment of your accounts. What is your usual procedure? "
"1 matt out my accounts monthly."' "When are they usually paid?" " In a good many cases about the 19th day of the month after I send in the account—later rather than earlier."
In this agreement you should stipulate that payment should be made on or before the 14th day of each month after that in which hiring was performed. In the case of a running contract like this, you must have regular payments. If you make a reasonable and definite stipulation in the contract, you have justification for pressing for payment earlier than you might. care, to do if there were no such stipulation.
" Strictly speaking, you should include in the contract a clause stating that should the account not be paid by the 14th day of. the month following, then you shall bie under no liability to continue your part of the agreement, and you shall be entitled immediately to suspend or terminate same without prejudice to. any claim you may have against the hirer, as well as for damages for breach of contract." That seems a bit stiff," he said. "Isn't it likes/ that he Will be offended when he reads that?" " He shouldn't be. After all, this is a business contract and he will surely recognize that it is up to both of you to set out your intentions at the beginning so as tO avoid risk of misunderstandings.' Anyway, tell him it is the usual clause and let it go at that. "
" The principal matters have been covered in what we have discussed up to now, but there are Many other pOints which you must note and put before your Solicitot, so that he can embody them in this contract," Lcontinued. .
Alterations in Prices
"For example, you might want to alter the terms of the contract at some time. l need only mention two reasons; suppose the price of petrol were to rise and suOpose there should be a considerable alteration in the rate of wages which you must pay your drivers. Also there is the possibility of alterations in rates of taxation, prices Of tyres, and so on. Tell your solicitor to provide against these things.
"Now for some of the minor details. You might reserve the right to withdraw the vehicle from service on, say, one day per calendar month to enable you to make adjustments and carry out maintenance. On the other hand, it is most likely that your customer will want to stipulate that if you keep it off the road more than one day at any one time you must agree to supply him with another vehicle of Similar capacity. That is one of the liabilities which a haulier who enters into a contract for hire takes upon himself."
But that's going to cost me something."
" Of course it is, but you needn't wotry. There was allowance made for that contingency in the figure which recommended you to quote. It is not set out as a separate item but is actually included in the establishment costs. You say that your customer has practically agreed to give you 'the order so that you need be Under no apprehension on that score..
.Another safeguard which you must take is to arrange to have a clause inserted providing that if a breakdown occurs because of overloading, your customer will have to bear the cost of the vehicle which is to be hired to replace it, as well as the expense involved in effecting a repair."
• " But you have already mentioned a clause about the. vehicle not being loaded beyond two tons. Isn't that going to be sufficient?"
" It ought to he, but you never know. There may be some time when, under the stress of an emergency, your customer desires to put something on the van which takes the gross weight considerably over that stipulated. That is something you can hardly prevent, for it is not likely that your driver's intervention will have much effect. This is an additional clause which might prove useful to you in the event of the kind I have mentioned.
"The next clause is one Awhich is designed to protect you and your customer. It concerns the possibility of
an accident and provides for the payment of compensation. It .stipulates that all essential iniwrances shall be taken out and the premiums paid by you."
"Is the cost of that included in the cost of operation. you gave me?"
" Yes, it is included in the establishment costs. Another point which you must discuss with your solicitor is the provision of some clause which will protect you against liability in respect of persons who ride on your vehicle without your permission.
No Responsibility
" Next you must make it quite clear that you take no responsibility for the loss of any of the goods, however that loss may be brought about, nor for any money entrusted to the driver. It should he made a condition of the contract that the goods and any money paid in connection with the work on which the vehicle is engaged are entirely under the control of the customer, "The usual clause about strikes, lock-outs, wars and other abnormal conditions will probably be suggested by
your solicitor without any prompting from you, but you ini,g1st find it advisabk, to remind him that a commercial vehicle .is in a somewhat unique position in this matter. as , in the event of an outbreak of war it -is likely to he commandeered.
"There are stilt one or two safeguard clauses. One is that -the terms of the contract are not to be considered to be varied except in writing."
"But isn't that making it a little too stiff and formal?"
"Not really. he'object is to prevent you from being bound by promises that your drivers might make without consulting you. Arrange also for a clause to be inserted providing against the,carrying of dangerous goods. Insist. if you like, that, if the customer's business fairly permits. it, the vehicle will be used only on hard roads. Get your solicitor to insert the customary bankruptcy clause.
"Finally, you must make it clear in the written contract that the fulfilment of this agreement by you is contingent upon , your c,btaining the necessary licence from the Licensing Authority."
" But surely." he protested, " this is unnecessary. Obviously I cannot enter into a contract properly if I do not get the licence."
" Agreed, but don't you realize that you won't get the licence unless you produce a signed contract, and once the contract is signed it cannot be altered. You have to enter into this agreement fully before you go to the Licensing Authority, and if he turns your application down, you will then have on your hands a contract which you must fulfil, and although I do not imagine that a claim against you for breach of such a contract would carry much weight, it, is nevertheless a possibility which will be excluded if you put in such a clause as I have just suggested.
"There may be other clauses, but your solicitor will insert them as a matter of course, and I think if you give him the main headings we have discussed he will draw up a form of agreement into which you Will be perfectly safe to enter." S.T.R.