A carrier broker agreement is the written contract between a freight broker and a motor carrier that sets the terms under which the broker tenders loads and the carrier hauls them. A workable one does three things: it confirms that each party holds the federal authority and insurance the law requires, it allocates the risks the law leaves to the parties (cargo damage, payment, re-brokering, indemnity), and it sets the ground rules for ending the relationship. Everything else in the document is detail hung on that frame.
Who Can Legally Sign One
Both sides need active federal registration before the contract means anything. A broker must be registered with the Federal Motor Carrier Safety Administration under 49 U.S.C. § 13904, which conditions registration on the applicant being fit, willing, and able to comply with federal transportation regulations.1Office of the Law Revision Counsel. 49 U.S. Code 13904 – Registration of Brokers The carrier needs its own operating authority — a USDOT number and a Motor Carrier (MC) number from the FMCSA.2Federal Motor Carrier Safety Administration. Get Operating Authority (Docket Number)
List the legal business name, USDOT number, and MC number for both parties on the face of the agreement. Those identifiers let either side verify the other’s registration status and safety record in the FMCSA’s public databases before signing, and they let a court or surety identify the right entity later.
Both brokers and carriers must also file Form BOC-3, designating a process agent in every state they operate in. The process agent is authorized to accept legal papers on the company’s behalf, so lawsuits and regulatory notices actually reach it.3Federal Motor Carrier Safety Administration. Form BOC-3 – Designation of Agents for Service of Process
Federal law also draws a hard line between the two roles. Under 49 U.S.C. § 13102, a broker is someone who arranges transportation by motor carrier for compensation without performing the haul.4Office of the Law Revision Counsel. 49 U.S. Code 13102 – Definitions A broker that blurs the line risks reclassification, and 49 CFR § 371.7 separately prohibits a broker from representing its operations as those of a carrier, including in advertising.5eCFR. 49 CFR 371.7 – Misrepresentation The agreement should describe each party as what it actually is.
The Broker’s Surety Bond
A broker cannot legally operate without posting $75,000 in financial security, either as a BMC-84 surety bond or a BMC-85 trust fund.6Federal Motor Carrier Safety Administration. Broker and Freight Forwarder Rule Industry Presentation The bond exists to pay carriers and shippers when the broker doesn’t. If the balance drops below $75,000, the surety or trustee notifies the FMCSA within two business days, and the broker has seven business days to replenish before its authority is suspended.
A BMC-84 bond works like insurance: a surety company stands behind the $75,000 and the broker pays an annual premium. A BMC-85 trust fund requires the broker to deposit the full $75,000 in cash, letters of credit, or U.S. Treasury bonds with a federally insured bank or trust company for as long as it holds its license.
Reference the bond or trust fund by number in the agreement so the carrier knows where to direct a claim if the broker fails to pay. One structural limit to keep in mind: the $75,000 is a shared pool. If several carriers file claims against the same bond, approved claims get paid pro rata out of what’s available.
Cargo Liability and the Carmack Amendment
The Carmack Amendment, 49 U.S.C. § 14706, governs a carrier’s liability for lost or damaged freight. A carrier that receives or delivers property is liable for the actual loss or injury during transport.7Office of the Law Revision Counsel. 49 U.S. Code 14706 – Liability of Carriers Under Receipts and Bills of Lading Negligence isn’t the test; the carrier is on the hook unless it can show the loss resulted from an act of God, a public enemy, the shipper’s own fault, a public authority, or the inherent nature of the goods.
The agreement should state the carrier’s maximum liability per load, either at the full value of the cargo or at a specified dollar cap tied to the kind of freight tendered. Silence here is where damage disputes get expensive.
Federal law sets floors on claim timing that the contract cannot shorten. A carrier cannot shorten the window for filing a damage claim below nine months from delivery, and cannot shorten the window for filing suit below two years from the date the carrier issues a written denial of the claim.7Office of the Law Revision Counsel. 49 U.S. Code 14706 – Liability of Carriers Under Receipts and Bills of Lading A settlement offer isn’t a denial unless the carrier states in writing that part of the claim is disallowed and explains why. The agreement should reflect these minimums so neither side miscounts the clock.
Waiving Carmack by Contract
Under 49 U.S.C. § 14101, a carrier and shipper can enter a written contract that expressly waives rights and remedies otherwise available under federal transportation law, including Carmack protections.8Office of the Law Revision Counsel. 49 U.S. Code 14101 – General Authority The waiver has to be explicit and in writing, and it cannot reach registration, insurance, or safety-fitness provisions. Where Carmack is waived, the exclusive remedy for breach is a court action unless the parties agree otherwise.
Insurance the Contract Should Require
Federal minimums cover public liability (bodily injury and property damage from accidents), not cargo. For carriers hauling non-hazardous property in vehicles over 10,001 pounds, the floor is $750,000 in public liability coverage.9eCFR. 49 CFR 387.9 – Financial Responsibility, Minimum Levels For certain hazardous materials, the floor rises to $1,000,000 or $5,000,000 depending on the type and quantity.10eCFR. 49 CFR 387.303 – Security for the Protection of the Public, Minimum Limits
Cargo insurance is different. There is no federal minimum cargo requirement for general property carriers, so cargo coverage is almost entirely a contract matter.11Federal Motor Carrier Safety Administration. Insurance Filing Requirements Most broker-carrier agreements require the carrier to maintain motor truck cargo insurance at $100,000 per occurrence or more, scaled to the value of the freight the broker typically tenders. Many agreements also push auto liability above the federal floor, often to $1,000,000, especially when the mix sometimes includes regulated materials.
Require a Certificate of Insurance naming the broker as certificate holder and, where appropriate, as additional insured. Require the carrier’s insurer to give the broker advance notice of cancellation or lapse. Without that notice, a broker can keep tendering loads to a carrier whose coverage dropped weeks earlier.
Payment Terms and Accessorials
Payment language belongs in the agreement in specific, unambiguous form. Net 30 is the common default — the broker pays within thirty days of receiving a clean invoice and proof of delivery — but Net 15 and Net 45 both show up. Spell out what paperwork starts the clock: typically a signed bill of lading or proof of delivery plus an invoice matching the rate confirmation.
Factoring adds a wrinkle. Many carriers sell their receivables to a factoring company. If the carrier factors, the agreement should require the carrier to notify the broker and send a notice of assignment, so the broker pays the factor rather than the carrier. Paying the wrong entity is a fast route to a collections dispute.
Loading and unloading delays cost carriers money, and detention terms should be settled before the first load moves. Grace periods commonly run two hours, after which detention accrues. Dry van rates typically fall in the $50 to $75 per hour range; specialized equipment like step decks or hazmat-rated trailers runs $75 to $125 per hour. Address the other accessorials too: layover fees for overnight waits, lumper fees for third-party loading or unloading, and charges for rescheduled or missed appointments. Decide in writing which are reimbursable and which the carrier absorbs.
Double-Brokering
Double-brokering is when a carrier accepts a load and then hands it off to another carrier, or re-brokers it to a second broker, without authorization. It is one of the industry’s biggest fraud vectors. Under 49 U.S.C. § 14916, providing brokerage services without proper FMCSA registration and a surety bond is illegal, and anyone who knowingly authorizes or permits unauthorized brokering faces civil penalties up to $10,000 per violation plus liability for all valid claims with no cap.12Office of the Law Revision Counsel. 49 U.S. Code 14916 – Unlawful Brokerage Activities That liability runs jointly and severally against the entity and against individual officers, directors, and principals.
The contract should prohibit the carrier from re-brokering, assigning, or subcontracting any load without the broker’s prior written consent, and should make a violation grounds for immediate termination. Beyond the penalties, double-brokering opens insurance gaps, destroys the broker’s visibility into who actually has the freight, and makes cargo claims very hard to settle.
Indemnification and the Broker’s Vetting Duty
A workable agreement includes mutual indemnification. The carrier agrees to defend and hold the broker harmless from claims arising out of the carrier’s transportation of the freight, including injury, death, or property damage caused by the carrier’s operations. The broker indemnifies the carrier against claims caused by the broker’s own negligence or regulatory failures. Neither party should carry losses the other caused.
This language isn’t filler. It decides who pays defense costs when a lawsuit names both parties, which is routine after a serious highway accident. Without it, broker and carrier litigate against each other before anyone addresses the plaintiff.
Brokers also face a distinct exposure called negligent selection: if a broker hires a carrier with a poor safety record and that carrier causes a crash, the broker can be liable for having chosen an unfit carrier. Courts look at whether the broker did reasonable due diligence before tendering the load.
The practical answer is a documented vetting process referenced in the agreement. At minimum: check the carrier’s FMCSA safety rating and Safety Measurement System BASIC percentiles, verify active operating authority and insurance, review inspection and crash history, and keep records of why the carrier was selected. Require the carrier to warrant in the agreement that it meets all federal safety standards, maintains drug and alcohol testing programs, and will notify the broker of any safety rating change. The agreement is where the broker builds the paper trail that proves it took selection seriously.
Non-Solicitation
Non-solicitation provisions keep the carrier from cutting the broker out by going directly to the broker’s shippers. The usual form prohibits the carrier from soliciting or accepting freight directly from any shipper whose loads the carrier moved under the agreement, typically for twelve to twenty-four months after the last shipment. Some agreements extend the restriction to the carrier’s affiliates, agents, and employees.
Enforceability depends on the terms. Courts generally uphold clauses that are reasonable in duration and scope, but a clause that tries to block the carrier from a shipper it had an independent prior relationship with may not stand. Pair the clause with a liquidated damages figure, because proving actual damages from a lost client relationship is difficult in practice.
Termination, Breach, and Disputes
Every agreement should spell out how either side ends the relationship, with and without cause. The common structure allows either party to terminate without penalty on thirty days’ written notice. Say what happens to loads already in transit or booked when notice is sent; most contracts require both parties to complete existing commitments through delivery.
For termination with cause, define material breach. In freight contracts the standard examples are the carrier operating without valid authority or insurance, double-brokering, failing to deliver freight, and the broker failing to pay within the contractual window. A cure period gives the breaching party a chance to fix the problem before termination takes effect, typically five to fifteen days for curable issues. Insurance lapses and unauthorized re-brokering usually warrant immediate termination with no cure.
Decide on arbitration versus litigation, and specify the governing state’s law. Arbitration is faster and cheaper for smaller claims but limits appeal rights. Litigation preserves more procedural protection and takes longer. Under 49 U.S.C. § 14101, when a written contract exists between carrier and shipper, the exclusive remedy for breach is a court action unless the parties agree to an alternative.8Office of the Law Revision Counsel. 49 U.S. Code 14101 – General Authority
Records, Taxes, and Execution
Brokers must keep a record of every brokered transaction under 49 CFR § 371.3, including the consignor’s name and address, the originating carrier’s name, address, and registration number, the bill of lading or freight bill number, and the compensation the broker received.13eCFR. 49 CFR 371.3 – Records to Be Kept by Brokers Each party to the transaction has a legal right to review the broker’s record of it, and broker-carrier contracts frequently include a clause where the carrier waives that right. Records must be retained for three years. Carriers should keep their own copies of agreements, rate confirmations, and proofs of delivery for at least as long; claims surface late.
On the tax side, the IRS does not require a Form 1099-NEC for payments made strictly for freight or storage services, regardless of amount.14Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC If the broker pays a carrier for non-freight services — warehousing labor, consulting, or accessorial work that isn’t freight or storage — the ordinary 1099 rules apply. Collect a W-9 from every carrier at the start of the relationship.
Once the terms are set, the agreement needs signatures from authorized representatives of each company. Electronic signature platforms produce a verifiable audit trail with timestamps and signer identification, which is better evidence than a faxed or scanned wet signature. Each party should hold an identical copy of the fully executed document, and should keep it well past the three-year regulatory floor. The agreement is the single most important piece of paper in a cargo claim, a bond claim, or any contract dispute that follows.