This document discusses a court case that examined whether a Master Service Agreement (MSA) or bills of lading determined liability limits when goods were lost during shipment. The Exel v. Southern Refrigerated Transport case involved an MSA between a broker and carrier that provided for full replacement value liability, but bills of lading signed by both parties that limited liability. The court found that the bills of lading signed by both the broker and carrier provided the shipper notice and opportunity to choose liability limits as required. Thus, the carrier's liability was determined by the bills of lading limits rather than the unlimited MSA terms. The document advises carriers to include liability limits in both MSAs and bills of lading to best

1. RESPONDING TO UNLIMITED LIABILITY
CLAUSES IN MASTER SERVICE
AGREEMENTS

2. MASTER SERVICE AGREEMENT VS.
BILL OF LADING –WHAT PREVAILS?
• In a situation where there is a both a Master Service Agreement and Bills
of Lading, which document prevails in establishing the limits of liability
when a shipment is lost or stolen?
• The United States Court of Appeals for the Sixth Circuit examined this
issue in Exel vs. Southern Refrigerated Transport, Inc.
• In Exel, Southern Refrigerated Transport, Inc. (SRT), an interstate carrier,
lost pharmaceutical products
• SRT had agreed to transport for the shipping broker, Exel, on behalf of
their client, Sandoz, Inc

3. MASTER SERVICE AGREEMENT VS.
BILL OF LADING –WHAT PREVAILS?
• Exel and SRT executed a Master Transportation Services Agreement
• Exel also issued Bills of Lading, which was signed by personnel from both
Exel and the SRT driver
• The MSA provided that the SRT should be liable to Exel for the replacement
value of any loss
• The Bills of Lading limited the liability of the loss to a per pound limit of
liability
• The shipment was stolen and the goods never recovered
• The MSA full replacement value of the shipment was $8,583,631.10, but
under the Bills of Lading the recovery would be limited to $56,766.36

4. THE QUESTION AT HAND
With respect to Specialized Transportation, one of the
greatest challenges the transportation industry faces
with regard to contracts is the unlimited liability that is
being requested in Master Service Agreements.
How do you respond to these unlimited liability
clauses? Can your Bills of Lading be a partial solution?

5. DISCUSSION
HOW MUCH IS THE CARRIER RESPONSIBLE TO PAY?

6. HOW DOES THE EXEL COURT HANDLE
THE ISSUE OF MSA VS. BILLS OF
LADING?
• The Exel MSA was a standard agreement that Exel executes with any
carrier it hires to transport its clients’ goods
• The MSA sets the billing arrangements and insurance requirements and
various delivery terms. It does not contain shipment- specific terms.
• The MSA provided that SRT is liable to Exel for any loss to commodities
shipped per the agreement and that measure of the loss is the
replacement value
• Prior to the shipping, Exel prepared bills of lading on Sandoz’s behalf—
these bills of lading were executed by both Exel and SRT

7. HOW DOES THE EXEL COURT HANDLE
THE ISSUE OF MSA VS. BILLS OF
LADING?
• The bill of lading specifically limited the liability of loss to “RVNX $2.40,
times the weight of the cargo”
• The Exel court was posed with the issue of whether SRT was responsible
for the full replacement of the shipment--$8,583,631.10– or, instead, was
the liability limited the terms of the bill of lading-- $56,766.36?
• The court, in part, examined the Carmack Amendment. The Carmack
Amendment restricts a carrier’s ability to limit their liability for cargo
damage unless the shipper has agreed to some limitation in writing
• SRT (the carrier) argues that the bills of lading are the only “contracts”
between Sandoz and SRT as Sandoz is not a party to the MSA

8. HOW DOES THE EXEL COURT HANDLE
THE ISSUE OF MSA VS. BILLS OF
LADING?
• SRT further argues that even if the MSA applies, the bills of lading and
MSA should be read together as such that the replacement value in the
MSA is capped by the bills of lading
• Exel, in opposition, asserts that the MSA should govern. The court points
out the issue Exel has with this argument in that the MSA in this case
was not signed by the shipper, only the bills of lading were.
• The Exel court noted that a carrier must give a shipper a fair opportunity
to choose between levels of liability and reasonable notice of any
options that would limit the liability of the carrier

9. HOW DOES THE EXEL COURT HANDLE
THE ISSUE OF MSA VS. BILLS OF
LADING?
• The court notes that it is important to consider that the bills of lading at
issue were drafted by the shipper’s representative and that the shipper
was familiar with all of the terms and conditions on the bills of lading
• The fact the shipper drafted the bills of lading is relevant in deciding
whether the shipper was offered, and agreed to, a limitation of liability
by the carrier
• The court also points out that the shipper inserted the terms “Item
60000 Class 85, RVNX $2.40” but failed to declare a value in the declared
value box
• The court ultimately rules that whether SRT’s liability is limited by the
bills of lading is a question of fact for the district court

10. PRACTICAL STEPS TO LIMIT LIABILITY
• As seen in Exel, bills of lading can be helpful in attempting to limit unlimited
liability clauses in Master Service Agreements
• Making certain bills of lading executed by all parties is essential
• Carriers should negotiate to include a limitation of liability clause in the Master
Service Agreements
• If the carrier is unable to include a limitation of liability clause in the MSA, it should
certainly seek to limit liability in the bills of lading
Robert C, Moore– Southwest Industrial Rigging and Colleen C. Abbott– Moore & Schulz., LLC

11. If you have further questions, please contact Robert Moore at ______or
Colleen Abbott at cca@mooreschulz.com
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