Pointing Fingers: Under What Circumstances Can Recipients Of Goods Be Liable For Freight Charges?

A customer orders goods and the seller ships the goods but does not pay the carrier. Because that shipment was the obligation of the seller, it seems that the customer should not be liable for the seller's failure to pay the carrier. However, section 13706 of the Interstate Commerce Act (the "ICA") imposes strict liability upon recipients, or consignees, for goods delivered to them by a motor carrier unless they notify the carrier in writing, prior to delivery, that they are acting only as an agent without any beneficial title in the goods. Case law demonstrates that this liability arises as a consequence of an agreement, which can either be an express contract or an implied obligation inferred from the consignee's conduct.

An implied obligation to pay for freight charges commonly arises as a result of a consignee's exercise of dominion and control over the goods. In Chicago & N.W. Transport Co. v. Krohn Cartage Co., Inc., 79 Wis. 2d 39, 255 N.W.2d 310 (1977), a railroad carrier brought an action against a consignee to recover freight charges for two furniture shipments sent from New Hampshire. A portion of the load was unloaded in Chicago, and the remainder was delivered to the defendant ("Krohn") in Milwaukee. The railroad billed the shipper and the Chicago facility, but turned to Krohn for all the freight charges when they were unable to collect.

Because the shipper is primarily liable to the carrier for damages, recipient liability under the ICA arises only as a consequence of either actually or constructively accepting delivery. In Krohn, the shipping documents did not impose liability expressly upon Krohn, and merely being named as a consignee of the shipment in the absence of express liability or conduct did not obligate the consignee to pay freight charges. Consequently, Krohn's liability could only be implied through conduct. Since Krohn never exercised dominion and control over the portion of the shipment that was delivered to Chicago, it was not liable for the shipping costs of those goods. However, it was liable for the shipping charges relating to the goods it had actually accepted in Milwaukee.

A consignee's liability for freight charges can also arise through documents or other evidence indicating that the consignee has a beneficial interest in the goods being shipped. In O'Boyle Tank Lines, Inc. v. Beckham, 616 F.2d 207 (5th Cir. 1980), Coffee Construction Company ("Coffee") purchased asphalt from American Oil Company...