Whether you are a freight broker, carrier, owner-operator, or independent driver, understanding each section of the Broker Carrier Agreement (BCA) is crucial. Let's get familiar with 6 primary sections of the BCA and how they impact each party member.
What is a Broker Carrier Agreement?
A Broker Carrier Agreement (BCA) is a legally binding contract that a carrier, owner-operator, or independent driver will enter into with a Freight Brokerage to move freight that a Brokerage or Broker has to offer. A BCA is often included as part of a larger setup onboarding packet provided by a Broker called the Carrier Packet or Carrier Onboarding Packet. The BCA details the different parties, duties, responsibilities, requirements, liabilities, specifications, and expectations of the agreement. More specifically, the contract will delineate who is responsible for certain tasks, insurance requirements, payment terms, invoicing process, and other key information for a successful relationship. Suppose specifics of the business arrangement are not properly laid out. In that case, brokers run the risk of receiving less than stellar service, being held liable for damages, and being charged higher rates and fees. At the same time, carriers are at risk of experiencing a poorly planned and executed process and not getting paid what they are owed or deserve, for example.
Like all contracts, there are standard boilerplate sections and then there are very nuanced and detailed sections of the BCA that must get proper attention from each party. BCAs vary based on a number of things including the type of freight being transported, the parties involved, and the scope of the business relationship.
Let's discuss 6 primary sections in the BCA that you NEED to know and understand.
Basic Representation and Terms (Start/End Dates)
This section is typically where each party discloses vital information like full name, company name, and address information. The agreement between brokers and carriers sometimes has defined start and end dates for the contract. The contract will also clearly specify any processes for ending the contract early. Brokers can use carrier information to access the FMCSA’s Company Snapshot to review a carrier’s operating status. Likewise, a carrier can use the broker's information to investigate the broker’s operating status. This information helps avoid any disputes if any issues come up in the future.
Scopes of Service | Description of Service
The Broker Carrier Agreement will have details about the expected services performed during the life of the agreement. Most broker carrier agreements will have the scope of moving freight from point A to point B, but there are cases where carriers may be asked to perform additional tasks. A list or schedule of potential accessorial fees or as-needed charges, like driver load/unload, will at times be specified in an appendix or as an addendum to the BCA or in the Rate Confirmation. Additional tasks or requirements can be spelled out in a contract addendum or in a rate confirmation. The broader agreement will also indicate actions that are not allowed and would be considered violations of the agreement. For example, a carrier that acts on their own in driving beyond the allowed drive time would be violating HOS regulation as well as the Broker Carrier Agreement.
The duration of the agreement will also be found in this section. It is not uncommon for brokers and carriers to keep the ongoing agreement in their records, adding each other to their shipping network which removes the need for additional agreements if the parties work together on future shipments. If the agreement is not intended to be ongoing, then the BCA will indicate the end date of the contract. Most agreements are ongoing with language that indicates continuation until one of the parties elects to end (terminate) the agreement. Another key piece of information in the Scope and Services section will detail invoicing processes for carriers and payment terms (e.g., Net 30). The agreement can specify the time frame the carrier has to invoice the broker after the delivery is complete. Brokers may request proof of delivery (signed bill of lading) along with the invoice for services immediately after the delivery is complete or there can be a deadline that it is required by.
Independent Contractor
This section makes clear that the relationship between Broker and Carrier is that of independent contractors. None of the terms of a BCA, or any omission, shall be construed to express or imply a joint venture, partnership, principal/agent, or employer/employee relationship between the Parties. This arrangement typically means that the broker has no right to discipline or direct the specific performance of any driver, employee, or contractor of the Carrier. The Carrier then agrees to provide the sole supervision and shall have exclusive control over the operations of its drivers, employees, and contractors as well as all vehicles and equipment used to perform its transportation services.
Liability and Insurance
The liability and insurance section of the contract is important for determining who will be responsible for losses, including any lost or damaged cargo. For instance, many agreements (and bill of ladings) will indicate that carriers are responsible for freight while it is on their equipment and must guarantee its safe delivery. If damage occurs or the freight is lost after it was in the carrier’s possession, then the Carrier will be responsible for any related claims and expenses. The insurance section will indicate that a carrier must have proof of insurance before they can load any cargo. Brokers and carriers alike must make sure their insurance will cover the cost of the freight they are transporting.
Non-Solicitation
The non-solicitation section forms an agreement between the parties that there will be no back solicitation. The Carrier agrees to not solicit transportation or accept shipments from any clients (shipper, consignor, or consignee) of the Broker while the agreement is in effect, and for a period of usually 12 months to 24 months following termination of the agreement.
Non-Exclusive Agreement
This section typically acknowledges that the contract does not bind the respective parties to exclusive services to each other. Either party may enter into similar agreements with other carriers, brokers, dispatchers, or freight forwarders.
A few honorable mentions:
Indemnification
Dispute Resolution
Force Majeure
Handling loss or damage
Claims resolution process
If you would like to learn more about each of the sections included in a Broker Carrier Agreement, check out our Broker Carrier Agreement Template here!
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.
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