Stealing Customers and Failing to Pay Commissions Eventually Costs Carrier!
In a recent case,All-Ways Logistics v. USA Truck Inc., the court found that USA had breached it's contract with All-Ways. This case is interesting on several levels, because it presents the court with a very common issue: When one party breaches part of an agreement, what is the effect when the other party continues to do business with the breaching party?
The defense of USA was simply this: All-Ways waive the breach of contract by USA! The facts are simple. All-Ways is a freight broker. USA contracted with All-Ways to find business for USA, and USA would pay them a 5% commission. All-Ways found some large customers for USA, and all went well for 2 years. After two years USA told All-Ways they would no longer pay commissions on a large customer, and they solicited the business themselves. All-Ways understandably objected, but continued to solicit business for USA from other customers. After a while, USA terminated the agreement completely.
All-Ways sued for breach of contract and unpaid commissions. All-Ways wanted the commissions for freight hauled during the term of the contract, even if USA solicited the customers directly. USA claimed that All-Ways waived the breach of contract. The jury found that USA had breached the contract and awarded damages of $2,966,880, plus the court awarded prejudgment interest of $583,000, attorney fees of $1,000,000, and costs of $18,000. USA appealed.
Part of the decision concerned the trial courts refusal to give specific jury instructions relating to waiver; the argument being that All-Ways continued to receive the benefits of the contract after USA breached the contract. The trial court refused to give the instructions to the jury. The trial court determined that the commission agreement was a severable agreement, so that the breach of one part is not a breach of the others. In other words, if USA refused to pay commissions on one shipment or from one shipper, All-Ways did not waive the breach by accepting commissions on other shipments.
The circumstances of the parties in this case are common. One party contracts with another, and at some point the party making payments finds another less expensive way to get the same result. Meanwhile, the 1st party is stuck. Do they walk away from a good contract because the other party stole a customer?
This case could have gone the other way, with the court finding that there was a waiver. In my opinion that would have been an unfair result, but it is not difficult to waive your rights under a contract. Any party can waive their rights. The answer is that parties to a contract in this situation need to carefully consider the consequences of their actions. There is no simple answer and each case stands on its own merits. In the present case, it cost USA a lot of money to steal the customers. So Buyers Beware!
