Cover Yourself in a Contract
Page 66
Page 69
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Points, to be Settled in an Agreement with a Customer Before Applying to the Licensing Authority for the Grant of a Contract-A Licence : Legal Preparation of Document to Lessen the Likelihood of Mistakes being Made. Operator's Liabilities in -Case of Breakdowns
MOST hauliers are aware of the preliminary steps to be taken before applying for a contract-A lieence. Theoretically, the Licensing Authority is bound to grant such an application just the same as he would a C licence, which is almost the same. The outstanding feature of a contract-A licence is that the applicant must be intending to carry for one customer only, the vehicle to which the licence applies being set apart. for the use of that one customer and for no other. The licence will not be granted unless the applicant brings with him a signed contract of hire, covering a period of not less than a year.
Until recently that was all that was required, but there arose many cases of hauliers entering, into such agreements . at uneconomic rates, usually because they were ignorant of costs and quoted rates lower than required to show a profit. Finding themselves in straits, the hauliers quite naturally looked around for means for increasing their revenue.
The most obvious means to that end was, of course, that of accepting traffic from other customers, usually in the form of back loads. That was a breach of the terms of the licence. The outcome was a change in the attitude of the Authorities towards the granting of such licences. It was made a rule that the Licensing Authority could, before granting such a licence, satisfy himself that the terms were economic, and the rate sufficient to show a reasonable profit and remove the temptation to break the terms of the licence.
There is a large number of operators who have contractA licences: .over 5,000 out of a total of nearly 50,000 hauliers operating for hire or reward. The reason is not far to seek.
Hauliers, anxious to extend their operations, find it impossible to obtain ordinary A or B licences and seek to widen their scope by entering into contracts and applying for the appropriate licence. Provided the-terms satisfy the Licensing Authority, there is no bar to prevent the licence being obtained. \ Number of Inquiries
As an outcome of this tendency I receive quite a number of inquiries as to the form which an agreement should take. In the past I have been in the habit of loaning a typed copy of a specimen agreement, asking particularly that the form be returned to me. In only one case out of many was there compliance with that request, the result being that I have now no typed copies. As it takes time to have such copies typed, and as my secretary is busily engaged on other work, I am no longer able to supply them. I am writing this article for the benefit of those concerned, and if anyone in future requires a form of agreement I am going to refer him to this article, and the concluding part to appear next week. .
One more point before I settle down tothe main body of this article. It is not written to be capable of being used as an agreement. I have made no attempt to put it into legal language. The haulier must have his agreement properly drawn up by a solicitor. Let the solicitor have this article, by all means, as affording a guide to the points to be watched and the matters to be kept in mind, but no more. I have not drawn up a legal document, nor am I going to attempt to do so.
B34 The subsequent paragraphs are based on extracts from a contract of this nature which, I understand, is operating satisfactorily,, and the data may be used as a basis for other contrasts of a similar nature. I must again emphasize that it is not put forward as being complete in itself or. ready for instant use. Apart from the considerations I have already mentioned, there is always the possibility that there may be some special factor to which reference should be made.
The hau-her to whom this contract was originally supplied started by establishing himself in business as an express carrier. • As time went on his business prospered and he improved the service by adding to the number of journeys' made per week and by the use of a larger vehicle. All this time, it should be mentioned, he had one vehicle only. He came thus into the " owner-driver " category.
Opportunity came to take on more work for one specific customer, to do which necessitated the addition of another vehicle. He could not get an A or Et licence for this second vehicle, and so decided to apply for a contract-A licence. As a preliminary step he needed to have a contract drawn up and, as I had helped him from time to time on other occasions in connection with his costs and rates, he came to see me about it.
"Go to a Solicitor"
"Your proper course," I began, "Is to go to a solicitor. He won't charge much, and if the document is legally prepared there is less likelihood of any mistake being made."
" I've been to see my legal man," he answered, " and he asked me so many questions about what should go into the contract that I decided 'togo home and think about it. Then, as I came away from-his office, I changed my mind and decided to come and see you."
"You want me to tell you about the points that must be kept in mind, leaving your solicitor to' put my recommendations into legal form? In that case, 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. I suppose 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 best to state the fact in the first paragraph, that being part of what you undertake to supply."
"What do you mean= part of what I undertake to supply '? "
"Simply this: instead of merely statingin 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 yeiu are to supply a 2-ton boxvan, painted and lettered, together with driver, etc. Don't put the details of the painting and lettering in the paragraph. Keep them separate. Your solicitor will probably advise you to embody them in a separate schedule to be attached to the contract,"
"Why can't we put these details in right away and have done with it? " he asked.
"The reason is that the contract itself should be kept as
short as is reasonably possible. Extraneous details, such as the colour of the van, are best kept separate.
"The next thing that matters is 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 would like to 'be told that at a minute's notice. To prevent that happening you must insert something in this clause which provides for due notice to he given "The price at which the contract is to be carried out is also to be embodied in this clause. Tell your solicitor the terms on which, I understand, you have provisionally agreed, the maximum mileage to be covered under the conditions of the contract and the maximum number of hours per week."
"You're 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?"
"No, I haven't forgotten that, and you are right to bring it forward at this point. There must be included a reference to the possibility of excess mileage and a statement made as to the extra charge involved. At the same time, make some provision to ensure that your customer will appreciate that he must repay you any extra expense incurred on his behalf and for any overtime for which you roust pay your driver.
Calculating Mileage
"Some reference must be made to the was' 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 is in my customer's service, all the mileage recorded by the speedometer will be debited against him?"
"Thal is so, but there is just the risk that if no definite agreement has been made, your customer might claim that the record of mileage should start only from the time when the vehicle arrived at his premises for the day's work."
" He wouldn't do that sort of thing, I am sure."
"1 don't suppose he would, but it is 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. Have you discussed with your customer the times when he will need the van, whether it will be wanted on Sundays or holidays, Saturday afternoons, or Saturdays at all, or anything of that kind?"
"He d:d say he wanted it every day, Saturday afternoons as well, but I don't expect he wants it on Sundays. 1 never thought to mention Bank Holidays or anything like that."
Bank Holidays
"In that case you had better word your contract accordingly, excluding Sundays and Bank Holidays. In the same clause you should stipulate that your accounts must be paid regularly. What is your -usual procedure?"
"I make out my accounts monthly."
"When ale they usually paid?"
"In a good mapy cases, about the 19th day of the month after that in which the account was rendered, 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 wh=ch the hiring was performed."
"Do you think that will have any effect?"
"It might and it might not, but, obviously in the case of a running contract such as this, you must have regular payments if you are to carry on. If you make a reasonable and definite statement in the contract, you have justification for pressing for payment earlier than you might care to do if there were no such stipulation.
"Thoseware the principal matters, but there are still many other points which you must note and put before your solic;tor, so that he can embody them in the contract. Here is a matter which I think you will agree is of great importance Suppose the price of petrol or oil fuel were to be increased. What would you do about it?" I asked him.
"I don't quite know. Probably 1 should go to my customer and ask him to agree to a rise in the rate sufficient to cover the extra expense."
"And if he is the sort of man you have given me to understand, he would probably agree. But again, this is like the clause about payment of accounts, which you didn't want to put in because you thought, knowing your customer as you do, that he would pay in good time without needing a clause in the contract. So with this matter of compensation; you must have a clause in the agreement providing for alteration of its provisions at any time when that becomes necessary. • You should appreciate that thereare other things besides fuel prices which may alter, either in your favour or in that of your customer, such as tyre cost, wages, etc."
Speedometer Failure
"You did mention that you had something more to say on the subject of mileage recording."
"So 1 did. Have you any ideas on the subject? How do you propose to check the mileage anyway?"
"Why, there's a speedometer on the machine. Won't that do?"
"Certainly, but what is going to happen when it gets out of order, as speedometers sometimes do?"
"Well, I suppose we'd have to guess the mileage," he replied.
"Guessing is all very well when you are working out costs, but you can't put guesswork into an agreement that is to be legally binding. You may state that the mileage is to be measured by the speedometer, but provide that if the instrument goes out of commission the mileage during that period must be based on an average.
" I suggest you take an average of the mileage covered during the four preceding weeks, with a provisional note that if foe any reason the four preceding weeks were exceptional, one way or the other, another period of the same duration shall he agreed upon."
"Is there anything more?"
Maintenance Work
"Quite a lot of items which you may think are trivial but should be included in the agreement. You will reserve the right to withhold the vehicle from service on, say, one day per calendar month, to enable you to make adjustments and carry out maintenance operations. On the other hand, it will be most likely that your customer will desire to stipulate that if you keep it off the road for more than or.e day at a time you must agree to supply him with another vehicle of similar capacity."
"Shall I have to do that? It's going to be a bit awkward"
" You certainly will, and 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 worry. There was allowance made for that contingency in the figures which I recommended you to quote. It is not set down as a separate item, but is included in the establishment costs. You may remember that you thought my estimate of those costs was unduly high. Now perhaps you will see the justification for some of them. "Another safeguard you must take is to arrange to have a clause providing that if a breakdown results from overloading, which, incidentally, should be forbidden by the terms of the contract, your customer will have to bear the cost of hiring a vehicle to take the place of the one engaged in the contract, as well as any expense involved in effecting a repair." S.T.R. (To he continued)