The Importance of Incorporation

Freight forwarders, road hauliers and warehouse keepers generally operate under trading conditions that limit or exclude their liability for loss of or damage to goods that are entrusted to them.

But to ensure that they are fully protected, they need to ensure that those trading conditions are properly incorporated into their contracts with their customers.

Generally those involved in the carriage or storage of goods base their charges on the weight (or sometimes volume) of the goods to be carried, and those charges do not vary according to the value if the goods. So, if goods are lost or damaged, it’s only fair that the amount of compensation that is paid to customers should also be based on weight (or volume), rather than value.

This is fine, so long as the customer fully understands that liability is limited, so the exclusions and limitations in trading conditions need to be brought to the attention of the customer. The process of making the contract with the customer subject to the conditions is called incorporation.  For the conditions to apply, they must be properly incorporated into the contract.

If trading conditions are not incorporated, a forwarder, carrier or warehouse keeper may find themselves liable for the full value of the loss or damage. Typically most insurance policies will only respond to this increased liability if the policyholder has systems in place that would have been adequate had they been followed, and the failure to incorporate only results from an isolated oversight.

Guidance for Forwarders, Carriers and Warehouse Keepers

The best way to ensure incorporation is to advise customers at the outset of the trading relationship that services are provided subject to your trading conditions, and to remind them of this at every available opportunity:

  • Send a copy of your trading conditions to new customers before you do any work for them, and get them to acknowledge in writing that the conditions apply, perhaps when signing a credit application form.
  • Ensure that all subsequent quotations state that services are provided subject to your trading conditions and that further copies are available on request.
  • Refer to your trading conditions on all your documentation and correspondence, such as quotations, consignment and delivery notes, and invoices.
  • Refer to your trading conditions on your web site, making copies available to download.
  • Write to every customer periodically (at least once a year), reminding them that services are provided subject to your trading conditions, attaching the conditions or a link to download them.
  • Write to every customer whenever you adopt new or updated trading conditions, for example when trade bodies publish new versions, attaching the conditions or a link to download them.

 

Disclaimer

The guidance is intended to provide general information only, and should not be used as a substitute for legal advice.

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