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Direct Shippers Association, Inc. v. KR Candies, Corp.

A-6207-92T5 (N.J. Super. App. Div. 2004) (Unpublished)

BILLS OF LADING—When a carrier accepts a shipment under a prepaid bill of lading, it first must look to the shipper for payment, but if it is not paid, it can look to the consignee who may be entitled to an equitable credit for what it paid to the shipper.

A candy company hired a shipper to deliver products to its customers. If the candy company paid the freight bill within twenty-one days, it was to receive a sixty-five percent discount on the freight charges. The goods were transported under a “pre-paid” bill of lading. Over a period of about two weeks, the trucking company delivered goods to a particular customer, but was not paid for the transportation charges. It then sued the candy company and the candy company’s customer. By the time of suit, the candy company was insolvent and the customer denied liability. It contended that it had no responsibility for the freight charges because the bills of lading bore the legend “prepaid.” The lower court was convinced that because the bill of ladings were, in fact, prepaid,” those documents served as proof that the customer had paid the transportation costs. The Appellate Division disagreed.

“A bill of lading constitutes a receipt and the basic transportation contract between a consignor and carrier. ... The consignor is primarily responsible for the freight charges until the consignee accepts shipment. ... However, upon acceptance of the shipment, the consignee as owner is prima facie liable for the full amount of the freight charges whether or not demanded on delivery. ... When a carrier delivers goods under a bill of lading marked ‘prepaid,’ it must first look to shipper for payment. However, the fact that the bill of lading is labeled ‘prepaid’ does not prevent the carrier from seeking payment from the consignee for freight charges not paid by the shipper.” For that reason, the Court remanded the matter to the lower court to determine whether the customer had paid some of the transportation charges to the candy company, for which it would have an equitable credit.

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