Do You Know What is in Your Shipper/Carrier Contracts?
We live in world that has advanced tremendously because of the rapid progression of technology. Due to these advancements, a powerful new tool has emerged in the form of Artificial Intelligence (“AI”). From medicine to transportation, the world has quickly embraced the power of AI because of its ability to help reduce human error and to expedite time-sensitive and costly endeavors. AI does not replace the cognitive functions of humans, but it adds to our ability to increase productivity and to become more consistent. Between human intelligence and the precision and speed of AI, a new bar has been set in how we will measure productivity.
Transaction Expeditors (“TE”) is a company with deep expertise in transportation and insurance. We are a team that lives and breathes solving the problems companies face in reviewing and understanding their transportation contracts. Our goal is not only to revolutionize how the entire industry views contracts, but to empower the parties to understand the risks inherent in their contracts. By combining our expertise with the AI provided by our technology partner, LegalSifter, we can now quickly and consistently identify risk that is either found or missing in transportation contracts and track this information using data.
Let’s look at the data from some publicly available Shipper/Carrier contacts and see what it tells us. Since most of these contracts are drafted by the Shipper, frequently found missing and found provisions are good indicators of risk transfer.
Here’s what we found:
We found that most Shipper/Carrier contracts contained risk shifting provisions that might impact a Carrier’s bottom line.
For example:
A governing law provision was found 81% of the time, meaning that in most Shipper/Carrier contracts a shipper is likely choosing the state’s law that is most favorable to its business.
An indemnification provision was found 86% of the time, meaning that in most Shipper/Carrier contracts a shipper is contractually transferring risk via an indemnity provision.
Finally, unsurprisingly, a provision related to liability for loss or damage to cargo was found 76% of the time, meaning that specific provisions related to a Carrier’s liability for cargo loss or damage (either favorable or unfavorable) are found in most Shipper/Carrier agreements.
We found that most Shipper/Carrier contracts were missing important limitations on a Carrier’s liability.
For example:
A cap on the Carrier’s liability for cargo loss or damage was missing in 67% of contracts, meaning that a Carrier may be vulnerable to a large claim.
An overall cap on a Carrier’s liability for damages was missing in 71% of contracts, meaning that a carrier’s liability for damages (for example, for things like indemnification) is uncapped in most Shipper/Carrier contracts.
A provision regarding who bears the risk of a broken seal was missing in 86% of Shipper/Carrier contracts, meaning that the question of whether a carrier must pay a cargo claim for a broken seal is not addressed.
We also found that our AI solution makes it easy and fast to identify these risks.
You should know what is found or missing in your transportation contracts to better understand risk. To understand the revenue generated by a contract, you also must understand the risk you are assuming. With the help of technology, we are finally able to achieve this goal. TE is excited to help revolutionize how the transportation industry identifies the risk that lurks in its complex transportation contracts. If you’d like to learn more, contact us at info@transactionexp.com.