Form of Contract
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Page 73
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In Their Mutual Interests Both Customer and Haulier Should Ensure that all Foreseeable Events are Covered in the Terms of Hiring Agreements
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TN the last two articles in this series some of the factors which should be considered when assessing the respective
merits of either hiring or owning commercial vehicles have been discussed, By placing the responsibility for the correct selection and subsequent economic maintenance of a vehicle with a contract-hire specialist the operator of the .vehicle is then able to concentrate on his main function of manufacture or distribution.
According to the particular type of operation, the driver should be in the employ of either the haulier or his customer, with a contract A or C licence as appropriate. Because each
• contract will be drawn up to meet a particular customer's needs the division in the number and amount of the 10 items of *rating costs 'will vary‘ correspondingly. But before a tender . is submitted to a customer it will be advisable for the haulier to ensure that the responsibility for the payment of all 10 items has been mutually agreed.
'When ownership and complete responsibility for the acquisition, operation and maintenance of a fleet of vehicles are under consideration, the time, responsibility and experience required , to run an ancillary transport department efficiently should not . be underrated. Other factors to be considered are the successful integration of such a department with other sections of the organization, whilst the availability of capital and the return obtainable by its employment elsewhere must also receive consideration. The competitiveness of the local labour market must obviously not be ignored.
A substantial amount Of general.haulage is arranged between operators and customers as a result • of yerbal agreement, possibly over the telephone. In the majority of such traniactions no difficulty subsequently arises as to the price decided upon, or the terms and conditions of each particular job.
When, however, haulier and customer are entering into an agreement for the supply of one or, more vehicles, usually exclusively, over a tong period, it is prudent and in their mutual interests to complete a form of contract. Additionally, when the haulier is supplying the driver, and the vehicle is therefore operated under a'contract A licence, the existence Of a contract for a minimum of one year's work -is essential in order to comply with the requirements of the Road Traffic. Act, 1960.
DESPITE this legal minimum period of one year, there will be Many instances where it would be uneconomic for the haulier to enter into an agreement for the exclusive use of a vehicle, by a customer for less than, say, two or more years. Particularly would this be the case when expensive vehicles with specialized bodies were requested. Only by spreading out the resulting high initial outlay over a long period could the cost of depreciation be reduced to reasonable proportions in such instances, whilst the specialized nature of the vehicle would probably make it unsuitable for other work should the contract terminate prematurely.
When a haulier is Considering hiring out a vehicle on contract for the first time he would be well advised to engage the services of a solicitor to draw up the contract, whilst the advice of a trade organization such as the Road Haulage Association would be invaluable. It is therefore not intended to detail a recommended form of contract here, but rath'er to suggest some of the items which should be included in such an agreement.
In the opening sentences the designation of the two parties concerned should be defined, it being usual for the haulier to be termed "the contractor" and similarly the customer " the hirer:' The next item to be set down will probably be the period of hire. It will have to be borne in mind, however, that although the commencement date would also be given, the carrying out of the contract would be dependent upon the granting of the appropriate licences.
1334 Whilst both parties may have every reason to believe that such licences will be granted, it would nevertheless be prudent to include a clause permitting the cancelling of the agreement if they were not. Otherwise the haulier might find himself in the unfortunate position of having contracted to undertake work which in the event would have been illegal.
Apart from the licensing aspect, it .would have to be recognized that, as a result of circumstances which could not have reasonably been foreseen by either party, it could be that one or the other would be unable to carry out MS part of the bargain. It would therefore be advisable to anticipate such a possibility by including a clause in the agreement setting out the minimum notice required to terminate the contract should. such a set of circumstances unfortunately arise.
Conversely, if the contract proves satisfactory to both parties so that a renewal is contemplated it would be beneficial to have a further clause determining the notice required to .extend or renew the contract.
THERE would then be specified the vehicle, or vehicles, which 1 the contractor was undertaking to provide for the customer's use. Such specification would, in addition to the total number. indicate the size and type, and any sPecial features stieh as bulk bodies. It would, hoWever, probably be found more convenient to omit minor details_ which both parties might subsecjiiently mutually agree to vary. Examples of these would be the type and colour of paintwork and lettering and possibly minor items of equipment. These could all be included on a separate-schedule, so avoiding unnecessary .legal expense in having to redraft the main agreement every time some minor alteration to a vehicle was made.
When vehicles are being hired out by a haulier complete with driver under contract-A licence, a clause must be included in the agreement stating that the haulier is in fact responsible for the provision and paynient of the driver, and the con
' ditions under.which. he is to Work; '
' Undir such cireumstanosi the haulier, as the, holder of the contraCt-A licence, would be responsible for the action. of 'his drivers: It.is therefore imperative, in the haulier's interest, that a statement should' be included in the agreement that the hirer of the Vehicle must not instruct, encourage or condone the driver's contravention of the law. An obvious example of such a possibility would be for the hirer to detail the driver of a contract-A vehicle to complete a round of deliveries which could not possibly be effected within the maximum legally permitted hours of work as laid down in Section 73 of the Road Traffic Act, 1960.
In addition, it would be advisable to include a clause. providing that if, nevertheless. such 'an instruction 'was given to a driver, he would have the right to refuse to carry it out, or at least that part of the instruction which would involve contravening the law, and also giving the haulier the option of terminating the contract if he considered this advisable.
When a vehicle was supplied under a C-hiring arrangement, it would be in the haulier's interest to include a clause in which it was recognized that, whilst the driver would then be an employee of theshirer, he should nevertheless be acceptable to the haulier. This is necessary because the haulier has undertaken to supply and maintain a vehicle at a price presumably arrived at on the basis of normal usage. If no such clause was, infact, included in the contract-hire agreement, and it subsequently transpired that the hirer was employing a low standard of driver, the haulier would inevitably be faced with exceptionally high maintenance costs, which he would probably be unable to recoup from the customer. Should difficulty arise between haulier and hirer as to the suitability of a prospective or existing driver, _the,adoption -of an impartial driving test as carried out by a recognized motoring school would provide a solution to this problem.
In fairness to the hirer a corresponding clause should be included in the agreement giving him the right to ask for the replacement of a driver provided by the haulier when a vehicle was operated under contract A licence, provided, of course. that the grounds of complaint were reasonable.
A major clause in any contract-hire agreement of.vital interest to both haulier and hirer would be the amount, to be charged, with an indication of the method by which such charge was calculated, and the manner and time at which payment had to be made.
Because the customer, when asking for a tender for the supply of vehicles, is already aware of a comparatively specific set of circumstances under which such vehicles are to be operated, there should be greater opportunities for a detailed estimate of the subsequent cost than could usually be expected when dealing with general haulage. As stated last week, however, the fact that vehicles are being hired out does not invalidate the basic principle of commercial vehicle coifing, namely. the division of the 10 items of expenditure into standing and running costs. What does vary, however, is the division of responsibility for these -10 items as between haulier and hirer according to individual circumstances.
Because of the incidence of standing costs it would be prudent for the -haulier to include, in the agreement a guarantee that he receive adequate payment for any Period when the vehicle was not operated, although available, through no fault of the haulier.
Similarly, whether the total charge is calculated on the basis of tonnage, mileage, time or any. other factor, the agreement should set out the amount to be paid for additional mileage over and above any fixed amount, or alternatively overtime working. Prior agreements between, hatilier and hirer must also be reached as to whether payment is to he made for the mileage run between the premises of the haulier and those of the customer where vehicles do so run. Although this may he comparatively short, a substantial mileage could be run over the minimum contract period of one year applicable to .a contract A -Vehicle. •
It will also be necessary to detail, either in the agreement or on thc attached schedule, the maximum capacity of every vehicle provided under the terms of the contract, so giving
effect to a following clause prohibiting the overloading of a vehicle by the customer. If, despite this prohibition, a breakdown results from such overloading, this clause should include a statement to the effect that the customer would then be responsible for the cost of any repairs made necessary, and for the provision of a replacement vehicle when appropriate. In addition to providing some insurance to a haulier against excessive repair bills, this clause would also be necessary relative to the legal aspects of overloading if and when this occurs.
Because many of the items of expenditure which go to make up the cost of operating a commercial vehicle are beyond the control of the haulier it will be advisable for him, when negotiating the hire of vehicles, to have a proviso in the agreement to permit the adjustment of charges following any variation in the cost of such items as fuel and wages.
Agreement should also be reached between the contractor and hirer as to whether payment for the hire of the vehicle should be made at weekly, monthly or other intervals. Such provision would then give the contractor good grounds for terminating the contract in the event of non-payment, and for taking proceedings to recover the amount outstanding.
Responsibility for the goods carried would be the hirer's when the vehicle was operated under C licence, since the driver would then be his employee. It would still be advisable, however, even when the haulier was himself supplying the driver and the vehicle was being operated under A contract licence, for a Clause to be included in the agreement stating that the customer would be responsible for the goods carried; and 'further that the haulier would not be liable either for the loss of any goods carried nor for cash which the driver might have to collect for the hirer.
The carriage of dangerous goods should be expressly prohibited in the agreement unless special arrangements are entered into. As with any differences that might arise between contractor and hirer as to the working of excessive hours or overloading of vehicles, some indication should be laid down in the agreement as to the extent to which a driver was expected to carry out the instructions of the hirer.
Another clause to be included in the agreement would indemnify the contractor should he be unable to supply vehicles through such events as strikes, lock-outs, riots, or wars, over which he would obviously have no control. In addition, the usual clause relating to bankruptcy should also be included and a method of arbitration specified when, despite the existence of the contract, there was subsequent disagreement between contractor and hirer. S.B.