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Duplicative Freight Refund Terms Enjoined


The inclusion of freight refund terms in rate solicitations for transportation of military service members' household goods was contrary to law, according to the Court of Federal Claims, because, when combined with statutory full replacement value liability, the terms violated federal carrier liability limitations and general principles of contract law. The pre-award protesters were small transportation service providers that challenged the freight refund terms that applied to lost or destroyed property. According to the protesters, 10 USC 2636a provided a complete remedy for the loss or destruction of personal property by requiring TSPs to pay "full replacement value," which implementing regulations defined to include shipping charges to replace the item at destination. The protesters argued paying FPV and then refunding the original freight charges to the government provided more than full compensation to the government and service members. The government justified the freight refund terms by relying on the Carmack Amendment (49 USC 14706) and Department of Transportation regulations at 49 CFR Part 375.

Beyond Compensation

The court determined the government's reliance was misplaced because 49 CFR Part 375 by its terms does not apply to government shippers and does not define "replacement value" to include shipping charges. Rather, the inclusion of freight refund terms along with FRV liability violated the Carmack Amendment's ceiling on carrier liability, which prevents recovery of freight charges if the measure of damages puts the shipper in the same position as if the carrier had successfully completed delivery. In addition, requiring TSPs to forgo freight charges in addition to including shipping costs in FRV went beyond the compensatory function of contract damages, and including additional damages to "incentivize" performance was contrary to well-settled contract law. Finding the freight refund terms would cause the protesters non-trivial economic injury by depriving them of the opportunity to compete for certain lanes and channels, the court enjoined the government from including or enforcing freight refund terms in rate solicitations. ( Binl, Inc., et al. v. U.S., FedCl, 56 CCF 79,840)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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