Beware of COD Requests
By Henry E. Seaton

September 2003
Reprinted from etrucker.com


Q Our small trucking company accepted a bill of lading that required us to pick up a certified check upon delivery for $31,575. Our driver picked up an uncertified company check in that amount, which we forwarded to the shipper and it was deposited. Several months later the shipper, advised that the check had been dishonored and demanded payment because the driver did not pick up certified funds. Now the shipper has withheld freight charges in an amount equal to the check. What should we do?

A Sue the shipper! CODs — bills of lading notations that often require a carrier to pick up “cash, a cashier’s check or a certified check, etc.” — are particularly troubling. At least one court has expressed some sympathy that requiring a driver to determine whether a cashier’s check was valid is tantamount to “calling on UPS drivers to be moonlighting law students, skilled in the arcane mysteries of the UCC.” As a practical matter, few drivers know the difference between a bank check, a corporate check or certified funds. The best advice to be given is to stay away from CODs if at all possible.

Most sophisticated carriers place “COD” or “Collect on Delivery” language in their tariffs that have the effect of saying the carrier will pick up apparently valid checks in payment, but the shipper bears the risk of nonpayment and forgery. Remember, a shipper usually puts a consignee on a COD basis only because it has reason to believe the consignee is uncreditworthy and will not be around if valid payment is not paid at the time of delivery.

Unfortunately, the case law is mixed and driver ignorance is no defense if you clearly failed to pick up cash or certified funds and the bill of lading clearly required you to do so. As a result, all carriers should carefully instruct their drivers to watch out for COD certifications on the bill of lading and to communicate any such requirements to you before the delivery is made. Then, special arrangements need to be made before the driver turns loose possession of the goods at the freight dock and accepts some form of check he does not understand.

Fortunately for you, the facts you present give rise to a defense. It is a generally held principle that a shipper’s acceptance and deposit of uncertified funds, without reservation of rights, relieves the carrier of the obligation to accept only a cashier’s check or certified funds. The acceptance of a tender of payment in a form other than originally required has been described as a novation relieving the carrier from further liability.

So the shipper should not have taken the consignee’s check you sent it without recourse and then expected you to make good on the funds when it was subsequently dishonored.

Unfortunately, because your shipper followed the despicable practice of setting off a disputed claim against freight charges, you now must sue it to resolve this issue. I recommend that you do.

If you have a good provision concerning interest and attorney’s fees, you should ultimately recoup your freight charges and be made whole without bearing the sting of an all too frequent surprise that results from the mishandling of a COD shipment.

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