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Drawing up an Agreement
Page 124
Page 127
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for Contract Hire
THERE is renewed interest in contract-A licences, under the terms of which a vehicle is operated for one customer and must not be used for any other purpose. It used to be that the Licensing Authorities would grant a contract-A licence as readily as a C licence. Indeed, it is a C licence in effect, but the vehicle is run and maintained by a haulage contractor instead of the user.
Recently, however, the Authorities have been refusing contract-A licences unless they are fully satisfied that the terms of the contracts are such that the operators may• reasonably expect to make a profit. This came about because there was a tendency for hauliers to enter into such contracts without making sure that the rates specified would be profitable. As time went on the hauliers found that they lost money and then used vehicles to carry goods for other persons in order to increase revenue.
It was felt that the temptation to operate in this illegal way would not arise if the terms of the contracts Were favourable for the hauliers, and it is to eliminate that temptation that the., Licensing Authorities take the economic aspect into account and refuse to grant a licence if the terms are unedcinomic.
See a Solicitor I have been asked to draw up a form of contract which could be used in connection with an engagement Of this kind. As a prelimink„ I recommend the. haulier to•see a solicitor about this_ One of my correspondents to whom I gave this advice came back to me with the 'request that I should let him have a memorandum, indicating the principal clauses which should appear. He had been to his solicitor who had asked him for that information, and I give it here for the benefit of this particular correspondent and for others who have the same problem.
When putting the matter into the hands of a solicitor, the first thing that he will ask will be what the haulier is going to supply under the contract. Usually that includes the vehicle and the driver and all things necessary to keep the vehicle on the road. As a rule, the vehicle is specially painted to suit the customer, in which case that should be noted in the first paragraph as part of what the operator undertakes to supply.
This is something like how the contract will begin. The preliminary statement will be that the haulier is to supply a 2-ton boxvan, painted and lettered, together with the driver, A38 etc. It is not advisable to put the details of the painting and lettering in that paragraph. That information should be kept 'separate. The solicitor will probably advise the operator to embody it in a schedule to be attached to the contract. Often enough, when I have been discussing this matter, the haulier will ask why I cannot put those details in right away: However, extraneous details are best kept separate.
Option to Renew The next clause relates to the period of the contract, with a note of any option to renew and provision for termination. •This is necessary because circumstances may arise in which either the haulier or his customer might find it impossible to continue. Neither of the parties to the contract will like to be told that at a minute's notice. To prevent that circumstance, something should be inserted in this clause for due notice to be given. The price at which the contract is to be carried out must also be embodied in this clause. The operator should advise his solicitor what the payment is to be, what is the maximum mileage to be covered by that payment, also the maximum number of
, hours to be worked per week.
The next provision should refer to the possibility of excess mileage being run and the extra charge involved. At the same time, some provision should be made to ensure that the customer will appreciate that he must reimburse.
• the haulier for any extra expense incurred on his own behalf as well as for any overtime. Some reference must be made 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.
It is advisable to make that matter clear as I have come across a number of cases in which, there being no definite agreement on the point in the contract, the customer claims that the record of mileage should start only from the time when the vehicle arrives at his premises. It is perhaps unlikely that a customer will take that line, but it is necessary to provide against misunderstanding.
The next thing to provide for is the times when the vehicle will be needed, whether it will be wanted on Saturdays, Sundays, holidays or anything of that kind. If the customer says he wants it every day, Saturday afternoon as well, then provision must be made for that in the cohtract. The operator should provide, in assessing the amount which he will expect to be paid, for wages to cover the driver working on Saturday afternoon. • Next, there must be a stipulation as to the payment of accounts. Most contracts provide for monthly payments, and the usual clause agrees that payment should be made on or before the 14th day of the month after which the hiring was performed.
Regular Payments
The clause is not always as effective as it should be. There will always be customers who will put off paying until they have to, but in the case of a contract such as this, a running contract, regular payments are necessary if the operator is going to be able to carry on. If a reasonable and definite stipulation is made in the contract, the haulier has justification for pressing for payment earlier than he might care to do if there were no special stipulation on this point. .
These are the principal matters to be included in these two clauses, but there are many other points which must be noted. The next provision is for altering the terms of the agreement at any time if that appears desirable to either of the parties concerned. As a rule, this clause deals with the possibility of alterations in basic costs such as the price of petrol, the standard rates of wages for drivers, or variations in taxation.
The next point is how the mileage is to be recorded. If there is a speedometer on the machine that, of course, is a great help, but speedometers sometimes go wrong, in which case some other method must be adopted. Probably the best way is to provide that in the event of the speedometer going out of action the basis for payment should be an average of four weeks before this occurrence.
In another clause, the operator should reserve the right to withhold the vehicle from service on say one day per calendar month to enable adjustments to be made and carry out maintenance operations. It is likely that the customer will want something to be stipulated that if the operator keeps the vehicle off the road for more than one ,day at a time another vehicle of similar capacity should be supplied. In making an estimate of establishment costs. there is usually provision to cover occasional payments for hired vehicles required at such tinies.
Paying for Breakdown
Another safeguard is a clause that if a breakdown results from overloading, the customer will have to bear the cost of the vehicle which has to be hired to replace it, as well as the costs involved in effecting the repair.
The next clause is one which is designed to protect both the haulier and his customer. It concerns the possibility of an accident and provides for the payment of compensation. The driver, of course, is employed by the haulier. That must be so, otherwise he will not be granted a licence. The presumption is that the operator will have properly arranged for insuranCe to cover himself against any claim under the Workmen's Compensation Act.
If an insurance has been taken out, it is still necessary for something to be inserted in the agreement stipulating that the haulier indemnifies his customer against all claims. by the driver under the Workmen's Compensation Act, as well as against claims by third parties in respect of injury or damage, where that may be caused by the negligence of the driver.
Another point which must be noted in this connection is the possibility of persons riding on the vehicle without the permission of the haulier. There must be a clause protecting the operator against liability on account of such persons, also against those who ride on the vehicle just to suit the convenience of the customer. Next, it must be made clear that no responsibility is taken by the haulier 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 be made a condition of the contract that the doods and any money paid in connection with the work on which the vehicle is engaged are entirely under the control of the customer and not of the contractor.
The usual clause about strikes, lock-outs, wars and other abnormal conditions will probably be suggested by the solicitor. There is, however, a peculiar condition which applies to commercial vehicles in the event of an outbreak of war in that the vehicle is likely to be commandeered. Reference to this possibility should provide that the customer may not claim compensation from the haulier. A good many haulage contractors were seriously disturbed in that way in September, 1939, and it may be as well to profit by their experience.
Safeguard Clauses
There are one or two safeguard clauses which should be included. One is that the terms of the contract are not to be considered to be varied except in writing. One of the objects of this clause is to prevent the operator from being bound to promises that the driver may make without reference to his employer. Another clause which must be inserted provides against overloading and the carriage of dangerous goods.
It is not usual in the case of a contract such as this for the haulier to take out a goods-in-transit policy of insurance, and he does not hold himself to be responsible for any loss or damage to goods carried in the van. It should be stipulated that no goods other than those belonging to the customer are to be carried. The hirer should provide all the necessary information to enable log sheets to be completed. There should be a clause exempting the haulier from any risk in respect of goods left in the van after the conclusion of the day's work.
Licensed Driver
Another clause of importance states that the vehicle shall be driven only by the driver duly licensed and qualified to drive the vehicle. In the case of the hirer recommending a man whom he wishes to drive the vehicle, that man shall be approved and authorized by the contractor. He shall comply with the rules in use by the contractor. If required by the contractor to do so, the driver must pass the contractor's standard driving test.
In the event of a driver being unable, by reason of the hirer's business, to return to the usual garage on the same day upon which he was dispatched therefrom, the hirer shall pay all the recognized out-of-pocket expenses for each night spent away, including costs of garaging and additional costs of petrol, but the hirer is not to be in any way responsible for any expenses of the driver arising from breakdown or accident.
In another clause, the hirer shall not, by instructions to the servant of the contractor or otherwise, do anything which may cause a contravention of the Road Traffic Act, 1930, and the Road and Rail Traffic Act, 1933. In the event of the hirer giving instructions which if carried out would cause such a breach, the contractor's servant or agent shall have the right to refuse to carry out such instructions, and the contractor shall have the right to terminate the agreement immediately without prejudice to any rights which may have accrued to the hirer, and the hirer shall be liable for all losses, damages and fines which the contractor may incur. Finally, the customary bankruptcy clause should be included.