E-Conomy Finance Group publishes articles focusing on different aspects of trucking industry. Issue 6

Carrier’s Possessory Lien and Holding a Shipment Hostage

A broker dispatched a carrier at an agreed upon rate set forth in a load confirmation. While en route a destination changed and a drop was added. The broker agreed to pay a higher rate over the phone. However, when the carrier made the first drop he called the broker and demanded a substantially greater amount be paid before he would make the second delivery. The carrier is refusing to release the load without receiving a full payment first.  This scenario is very common in today’s industry.

For greater certainty a carrier has a possessory lien for the agreed upon freight charges for the shipment it is transporting and has the right to be paid those freight charges before making delivery.  This right is established by the provisions of Highway Traffic Act in Ontario.  Since this is a possessory lien, the carrier loses it once it makes delivery.

Unless there is an explicit contract that states otherwise, a carrier’s cargo lien is a particular lien, not a general lien. This means, that a carrier can only lien cargo for freight owing for that particular shipment and not for debts from previous shipments or for any other charges. A proper cargo lien is particular only for that actual movement.

In the above scenario, the load confirmation set out the details of the shipment and was binding until the service requirements changed. Once the service requirements changed, the load confirmation became void as to the affected legs of the shipment. Although a new rate for the remaining legs was discussed, and maybe even agreed to verbally, it does not appear that a new load confirmation or any sort of written memo was prepared or signed confirming the new agreement.  As a result, the situation was a “broker says, carrier says” situation that the carrier took advantage of.

Again, this problem could have been avoided by producing a revised confirmation stipulating new rates and providing that in no event will the carrier refuse to deliver any shipment because of a rate dispute or other disagreement.

It is always a good idea for the carrier to have a valid reason for immediate payment, especially if the carrier extended credit term for his broker. The most common reason is the broker’s low credibility supported by Equifax report.