ISSUE 4 2011


INSURANCE/NEWS


Some thoughts on service agreements


It’s worth taking time to scrutinise the small print, says


Peter Lole & Co’s Rodd Bankier As the Hollywood film producer Samuel Goldwyn famously declared: “A verbal contract isn’t worth the paper it’s written on.” Very witty, but not the whole truth.


In most transactions, a verbal contract is in fact just as valid as a written one (but difficulties can


occur when it comes to enforcing it). Although expressed in writing, in several types of contract the document produced is little more than a memorandum of the agreement concluded between the parties concerned.


For instance, a marine insurance policy is said to evidence the contract of insurance between assured and insurer and, equally, a bill of lading is evidence of the contract of affreightment - not the contract itself. Thus, the contract is something that exists outside of the world of words on paper and relates to a bargain struck between two people in order to achieve an agreed (desirable) result - a consensus ad idem - complete accord. Whether expressed in writing or not, the essentials of a legally enforceable contract - legality, capacity, possibility, offer, acceptance, communication of acceptance, consideration and performance - remain the same but, paramount amongst all of these, both parties must be in agreement as to what they want to accomplish - the consensus ad idem.


Previously, many contracts for


the provision of freight services were concluded verbally and paperwork was limited, perhaps, to delivery notes and invoices. However, lately we have noticed an increasing trend towards principals requiring written service agreements (contracts) with those freight forwarders they employ on a regular basis. As specialist insurance brokers, we are often asked by our clients to analyse these agreements and, while we offer advice to the best of our ability, it must be stressed that we are not solicitors. Nevertheless, it may be useful to look at some of the clauses that may be encountered and a few that should be sought. These service agreements are generally drawn up by the principal’s solicitor - or, if he doesn’t want to incur that expense, hacked together from similar contracts he has come across. In either event, expect them to be weighted in your customer’s favour. For clarity, it is useful to begin with definitions of the terms to be used in the contract. These should include the identities of the parties involved and how they will be referred to in the wording (for example, contractor, sub- contractor or principal) as well as explanations of some of the terms to be used - KPI, or key performance indicator, is a particular case in point. Next, a statement containing the aims of the agreement may be useful before ploughing into


the details of exactly how these are to be achieved and in what terms success (or failure) should be measured. Towards the end of the document, remuneration should be mentioned and, if the forwarder is paid a fixed fee for services rendered, this may be mentioned. However, service agreements are frequently remunerated on a charge per unit basis and these may well be set out in an appendix or schedule to the contract. Finally, a few points to look out for - and beware of - in service agreements:


• Law: A contract


between UK companies should be subject to English or


Scottish law, even if the


services are to take place abroad. However, if you are contracting with a foreign company, you will have to come to agreement on a suitable forum. If it’s an agreement with a foreign forwarder for a mutual exchange of


services,


why not decide the forum (and applicable conditions) according to the instigating (or charging) party?


• Your standard trading


conditions. Beware of contracts that say something like: ‘This Agreement constitutes the entire agreement between the parties.’ This precludes you from incorporating your trading conditions, which should form a part of the contract - preferably by way of a Clause Paramount - or your insurers are likely to want an additional premium. Sub-contractors - be


•


careful of contracts that forbid you to subcontract any part of the services and those that make you totally responsible for all the actions and faults of your sub-contractors. Check your sub-contractor’s trading conditions carefully to ensure they are not taking less responsibility than you do. Lastly, if you are in any doubt, check with your solicitor and also your specialist broker or insurers to ensure you are properly protected.


Rodd Bankier is a director


of specialist insurance broker Peter Lole & Co Ltd


www.peter-lole.co.uk PD Group Advert 170hmm x 133w.indd 1 24/03/2011 13:41


13


Longer trucks – winners and losers


Allowing longer trucks to use UK roads could help improve efficiency and cut emissions, but there would be winners and losers, says UK shipping and logistics minister Mike Penning. He told the Coastlink conference that increasing volumes – but not total truck weights – could help “sweat assets” and, according to TRL research, lead to “fewer vehicles moving the same amount of freight”.


But the downside was not only that it could not hit other modes of transport such as waterways or rail, but also harm smaller road hauliers who would be less able than the big operators to rapidly invest in new fleets to take advantage of any new length limits.


Penning also poured scorn on attempts by Brussels to “poke their nose” into UK affairs and try to impose overall height limits


in Britain. Some EU countries have height limits but the UK has never seen the need to follow suit, mainly because overbridges in this country tend to be much higher


than in many other


countries. If higher vehicles were an issue elsewhere in Europe, “that’s their problem, not mine” Penning declared.


In a statement published on


21 June, when consultation on the issue closed, the Rail Freight group warned that longer lorries would reduce domestic rail freight growth by two thirds by 2025. RFG policy manager, Maggie Simpson said: “It is deeply worrying that despite the huge impacts on domestic rail freight growth, DfT wish to allow longer lorries to operate. This cuts across all their previous commitments to multimodal transport, to congestion relief and to climate change. We urge


Ministers to look again at this damaging proposal.” The Freight Transport Association meanwhile called on the government “to take a level headed view on longer semi-trailers” and not be swayed by “emotive language and unsubstantiated claims by stakeholders wanting to derail the proposals.”


It said its own research suggests that high volume semi-trailers


will deliver both


efficiency and carbon savings for companies through the cutting of vehicle mileage and not all sectors will migrate to these vehicles - it will mostly benefit those businesses such as retailers, parcel companies and manufacturers of high volume, low


weight products where


existing 13.6 metre semi-trailers become full before they reach their gross weight.


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