By Luis Lopez, founder of Freight Hub Corp and host of the Freight Guru Podcast
Most carriers sign a broker-carrier agreement in about ninety seconds, usually because a load is waiting and the onboarding portal will not let them book until they click accept. Then a dispute comes up six months later and both sides read the contract for the first time.
The agreement is where almost every broker-carrier lawsuit is won or lost. These are the nine clauses I would read first, whether you are the broker writing the contract or the carrier signing it.
1. Payment Terms
How many days until payment, and what starts the clock? Most agreements start it when the broker receives a clean invoice with signed proof of delivery, not when the load delivers. Look for quick-pay options and their fees, and for language that makes payment conditional on the broker being paid by its customer. A carrier should know before the first load whether it is extending 15, 30 or 45 days of credit.
2. Cargo Liability and Limits
For interstate moves, the carrier’s liability comes from the Carmack Amendment, and the default is the full actual value of the freight. The agreement will usually say whether that default stands or whether a dollar cap applies. Brokers typically want full value. Carriers want a cap that matches their cargo policy. What matters is that the number in the contract and the number on the insurance certificate are the same.
3. Insurance Requirements
Check the required limits for auto liability, cargo and general liability, and read the fine print on exclusions. A $100,000 cargo policy with an exclusion for unattended vehicles or refrigeration breakdown does not protect anyone on the loads where those risks are real. Carriers should confirm their policy actually covers the commodities they are agreeing to haul.
4. No Re-Brokering or Subcontracting
Nearly every agreement prohibits the carrier from handing the load to another carrier without the broker’s written consent. This is the clause behind most double-brokering disputes. Many agreements add a penalty: if the carrier re-brokers, the broker may pay the carrier that actually hauled the load and owe the original carrier nothing. If you ever need to move a load onto a partner’s truck, get approval in writing first.
5. Non-Solicitation of the Broker’s Customers
Also called back-solicitation. The carrier agrees not to do business directly with shippers it met through the broker, usually for 12 to 24 months, often with a commission owed to the broker on any freight hauled in violation. Carriers should check how broadly “customer” is defined and whether the clause would block them from accounts they already serve.
6. Indemnification
This is the clause that decides who pays when a third party sues. A one-sided indemnity can make a carrier responsible for the broker’s own mistakes. Many states have anti-indemnification laws that void provisions requiring a motor carrier to cover another party’s negligence, but the rules vary. A mutual indemnity, where each side covers its own negligence, is the fair standard.
7. Offsets and Deductions
Can the broker deduct a pending cargo claim, a late fee, or an unrelated chargeback from what it owes the carrier on other invoices? Some agreements allow it broadly. Carriers should push for language limiting offsets to undisputed amounts and requiring written notice with supporting documents. Unannounced short-pays are one of the fastest ways to turn a business relationship into a collections case.
8. Accessorials, Detention and Claims Procedures
The agreement or rate confirmation should spell out when detention starts, the hourly rate, what approval is needed for lumpers and layovers, and how quickly the carrier must report shortages or damage. If it is not written down before the load moves, expect an argument afterward. The same applies to the claim process: who files, with whom, and by when.
9. Governing Law, Venue and Dispute Resolution
The last page usually says which state’s law applies and where any lawsuit must be filed, often the broker’s home county. For a small carrier, litigating a $4,000 dispute a thousand miles away is not realistic. Look for arbitration or mediation options, and for an attorney’s fees clause, which should apply to whichever side prevails rather than only one party.
Two More Things Worth Knowing
The rate confirmation is part of the contract. Most agreements say the rate confirmation controls the specifics of each load. Read it every time, especially the fine print about fines for late delivery or missed check calls.
Carriers have a right to see the broker’s records. Under federal regulation (49 CFR 371.3), each party to a brokered transaction has the right to review the broker’s record of that transaction. Many agreements ask the carrier to waive that right. Know whether you are signing it away.
How to Use This List
- Carriers: read these nine clauses before you accept. If something is unworkable, ask for an addendum. Brokers who want a long-term carrier will often negotiate.
- Brokers: a balanced agreement is easier to enforce and attracts better carriers. One-sided contracts get signed by the carriers who do not read them, which is not the group you want.
- Both: keep a signed copy, keep rate confirmations with the load file, and put every change in writing.
A clear agreement does not prevent every problem, but it settles most of them before a lawyer is involved. For the disputes these clauses are meant to prevent, see my overview of the most common freight lawsuits, and for the broker’s own financial requirements, the guide to the BMC-84 freight broker bond.
About the author: Luis Lopez is a Miami-based logistics entrepreneur, the founder of Freight Hub Corp, and host of the Freight Guru Podcast.
This article is general information for the freight community, not legal advice. Talk to a transportation attorney about your specific situation.