Customer holding payment due to another carrier missing FDA Stamp

[thecanman]

Hello,

I’m looking for some guidance on whether it is legal for a shipper to withhold payment on previously completed shipments due to a separate, unresolved claim.

We moved several loads for a customer involving rejected freight that required FDA clearance and the appropriate stamps before returning to Canada. We hired a carrier to handle the transportation, but the carrier failed to stop at the FDA office as instructed.

Our customer has since applied for relief with the FDA. In the meantime, they are withholding approximately $30,000 in payments until we agree to certain conditions. We have explained that once the final amount of the fine or penalty is confirmed, we will either pay it if the amount is relatively small or pursue a claim through the carrier’s insurance if appropriate.

However, the customer is now refusing to release payment on our other outstanding invoices, including invoices for shipments completed before this incident. Most of these invoices are more than 40 days overdue, and the freight was delivered to major big-box retailers.

My questions are:

1. Is the customer legally entitled to withhold payment on all our outstanding invoices because of this separate, unresolved claim?
2. Can we demand immediate payment of the overdue invoices while the FDA matter and insurance claim are being investigated?
3. If the customer continues withholding payment, would it be legally appropriate to contact the big-box retailers that received the freight to explore whether there is any way to recover the outstanding amounts directly from them, or could doing so expose us to legal risks?
4. What would be the best course of action to recover our outstanding payments without compromising our position regarding the insurance claim?

Our company is based in Ontario, Canada. I would appreciate any guidance on our legal position and the most effective next steps.

Thanks

 

[TMLJ13]

1- no
2- yes
3- Sorry to be a smart ass, I wish you luck. Perhaps You should at a minimum send the threat of contact to the customer...
4-There is no relation. Whether the claim if paid or not has no bearing on the monies owed...The claim if valid, should stand on its own merits.

 

[LrgCar]

I would recommend contacting a good contract lawyer as soon as possible and start reviewing the contract you have with the customer and developing a strategy based on the specific terms and circumstances. You may have clauses relating to set-off, disputed claims, or payment obligations that could affect your position.

Unfortunately, this is a fairly complex legal matter, and although very resourceful, inside transport may not be the best place to obtain legal guidance. Without access to the contracts and the full details of the situation, just not possible to provide sound advice on your legal position or the best course of action, given the amount of money at stake.

If someone has any recommendations on a good transport lawyer or even paralegal in Ontario, please feel free to share.

 

[thecanman]

We dont have a contract with them and never did. Everything is spot, we quote and win a few loads.

 

[LrgCar]

If that’s the case, you're in a good position. I recommend that you hire a lawyer and send a demand letter. It seems that the client isn't playing by the rules, and since we’re discussing this, I would say there’s not much of a relationship here. It will cost you a bit; but the first demand letter on professional letterhead will help get things rolling.

 

[loaders]

Unfortunatley, there is no connection between what is “legal” and what people can and sometimes do. As you are currently experiencing, yes they can withhold any payments they choose, are they legally entitled to do so, probably not. As others have suggested, get in touch with either a para legal with transportation experience or a lawyer to pursue this matter on your behalf. You should also reach out to your insurer and advise them of the situation.

 

[Fr8Guru]

We dont have a contract with them and never did. Everything is spot, we quote and win a few loads.

Just because it is spot doesn't mean there shouldn't be a contract involved outlining the agreed upon parameters of doing business.

When you set them up for billing, did you make them fill out a credit app? That would outline the terms and conditions. It sounds like you expect to be paid in 30 days, is that in writing?

 

[thecanman]

Just because it is spot doesn't mean there shouldn't be a contract involved outlining the agreed upon parameters of doing business.

When you set them up for billing, did you make them fill out a credit app? That would outline the terms and conditions. It sounds like you expect to be paid in 30 days, is that in writing?

We do have it on our invoices and on our credit app that all invoices need to be paid within 30 days. That's our net term. On all of our invoices we have net 30 and also a 2% interest on unpaid invoices after 30 days. On our website, we have our terms and conditions that that they down the rules for the customer on invoices, claims and so on.

 

[theman]

I remember having a customer many many years ago where the exact same thing happened. Now the carrier partner also screwed up or just didn't bother to adhere to instruction (we know THAT happens).

There is a proper way to make a claim and I agree, this is an insurable claim, whether by the carrier's own cargo insurance or worst case, the broker's contingent cargo insurance.

We weren't out that much when it happened with this customer but I remember we just fired them as a customer.

 

[thecanman]

I remember having a customer many many years ago where the exact same thing happened. Now the carrier partner also screwed up or just didn't bother to adhere to instruction (we know THAT happens).

There is a proper way to make a claim and I agree, this is an insurable claim, whether by the carrier's own cargo insurance or worst case, the broker's contingent cargo insurance.

We weren't out that much when it happened with this customer but I remember we just fired them as a customer.

Once the FDA petition is over, we don't mind paying the fee, that's why we have insurance and we ask for carriers COI, but just the way they went about it. Without even knowing the final price, the got very aggressive. Some of their clients are in the U.S that we deliver to, I will let interest build as we charge 2% interest on invoices over 30 days, and normally we dont enforce it, but looks like this time we will. We will go after their U.S customers since collecting money is easier in the U.S.

 

[tasuinam]

We actually went through this and it was a broker we do regular lanes for (I am the carrier) they withheld 20K for a 5K deductible - the load was not damaged - it was recovered and delivered. Insurance accepted the claim. The trailer was damaged and so that was the claim. I had to go to higher management and be a VERY squeaky wheel. We did finally after a month get the 20K minus 5K back - but it was a struggle.

 

[thecanman]

We actually went through this and it was a broker we do regular lanes for (I am the carrier) they withheld 20K for a 5K deductible - the load was not damaged - it was recovered and delivered. Insurance accepted the claim. The trailer was damaged and so that was the claim. I had to go to higher management and be a VERY squeaky wheel. We did finally after a month get the 20K minus 5K back - but it was a struggle.

Normal customers would normally just wait until the insurance paid it and it's not like we dont do regular business, they have plenty of opportunity to hold our payment on future orders, but they did it on old invoices. There is no damage, FDA refused the freight because they had a product that didn't clear U.S laws and their original carriers delivered it to the U.S anyway. My insurance company reached out to me about the claim since the customer filed a claim, but I told them to put it on hold since we are already dealing with the carriers insurance and they are holding our payment.