Guides
Local delivery contract terms: the parts worth your attention
Local delivery contracts hide their risk in a handful of clauses, and those clauses decide who pays when a missed delivery window or damaged parcel goes wrong.
What to take away
- The clauses that cause disputes are the ones about service levels, claims, detention, fuel, indemnity and termination, not the ones about price.
- A contract that names a per-stop rate but never defines a stop will be argued about on the first route with a locked lobby.
- Cargo claims follow federal cargo-securement rules for interstate freight; a shipper's own packaging standard does not transfer that duty to the courier.
- Detention, fuel surcharge and reattempt language should be in the signed document, because a verbal understanding is not a rate.
- Keep signed contracts, rate schedules and claim correspondence for the period the IRS recordkeeping guidance describes, not just the life of the account.
A local delivery contract is a routing document with a signature on it. It decides what happens when the customer adds a stop, when a package is damaged, when the driver waits forty minutes, and when either side wants out.
This is general business information, not legal advice. Contract interpretation and carrier authority questions belong with a licensed attorney, and FMCSA operating authority and MC or DOT registration questions belong with FMCSA or your state DOT.
The clauses that actually get argued about
Service level and stop definition. "Next-day delivery" means nothing until the contract says when the clock starts, what counts as a stop, and whether a multi-unit drop at one address is one stop or five. Write the definition into the rate schedule so the invoice and the contract use the same word.
Contract clauses to check
- Service level and stop definition
- Cargo claim procedure
- Detention and waiting time
- Fuel surcharge basis
- Reattempt and return rules
- Indemnity and insurance limits
- Termination notice period
Cargo claim procedure. The contract should set a claim window, a form, who inspects, and what the shipper must prove. Interstate cargo securement is governed by FMCSA cargo-securement rules, and the driver's duty to secure a load does not disappear because the shipper packed the box.
Detention and waiting time. Free time, the rate after free time, and who authorizes the wait. Without this clause, a delayed dock becomes unpaid driver hours.
Fuel surcharge. Either a fixed surcharge or an index with a named source and a review date. An index with no source is a negotiation every month.
Reattempt and return. What happens to a package that cannot be delivered, who pays the second trip, and how long it sits before it becomes abandoned property.
Indemnity and insurance. Which party carries commercial auto, cargo and general liability, at what limits, and who is named as additional insured. Coverage questions go to a licensed broker and your state insurance regulator.
Termination and rate review. Notice period, final invoice terms, and how often rates can be reopened. A contract with no rate review is a contract that gets repriced by a competitor's phone call.
A worked example of a disputed invoice
A courier quotes a flat per-stop rate for a retail chain. Week one, the route runs 40 stops. Week three, the same route runs 62 stops because the chain added a second drop at each location, and the courier bills 62. The chain pays 40.
Stop definition changes billing
Distinct addresses only
- Week one stops
- 40
- Week three stops
- 40
- Courier bills
- 40
- Chain pays
- 40
Every drop counts
- Week one stops
- 40
- Week three stops
- 62
- Courier bills
- 62
- Chain pays
- 40
Nothing in the contract defines a stop, so neither side is lying. The arithmetic is simple:
- Stops billed = drops at distinct addresses
- Stops billed = drops at distinct addresses plus each additional drop at the same address
- Revenue per stop = contract rate divided by stops billed
Pick one definition, put it in the rate schedule, and the argument never starts. The same fix applies to detention: name the free minutes, the hourly rate after that, and the person at the customer who can approve the wait.
Before you sign or renew
- Confirm the contract defines a stop, a delivery attempt and a service day.
- Confirm the claim window, the claim form and the inspection responsibility.
- Confirm free time, the detention rate and who authorizes a wait.
- Confirm the fuel surcharge basis and the review date.
- Confirm insurance limits, additional-insured wording and who carries cargo coverage.
- Confirm the termination notice period and the final invoice terms.
- Confirm the rate review interval is written down.
- Confirm the customer's delivery window matches the route you can actually run.
Advertising those terms is a separate check. The FTC advertising guide for small business covers truthful claims and endorsements, which matters if you publish on-time percentages or customer quotes on the sales page.
Where the paperwork lives
Keep the signed contract, every rate schedule revision, claim correspondence and proof-of-delivery records together and retrievable. The IRS recordkeeping guidance describes what supports income, expenses and assets. A courier that cannot produce the signed rate schedule for a disputed month is arguing from memory.
Which markets will support the route density these contracts assume is a separate question, and it is worth checking against the best markets for a local delivery business before you sign volume you cannot serve.
Common questions
Does a verbal rate agreement hold up?
It is a fact question, not a formality, and it varies by state. The practical answer is that a signed rate schedule removes the argument. Put every rate change in writing and date it.
Who is responsible when a package is damaged?
It depends on the contract, the packaging, and whether the shipment crossed state lines. Interstate securement duties sit with the carrier under FMCSA rules. Claims handling and coverage questions belong with a licensed broker.
How long should I keep signed contracts?
Longer than the account lasts. The IRS recordkeeping guidance is the starting point, and your CPA or enrolled agent can tell you what your situation requires.
Can I change terms mid-contract?
Only if the contract says how. That is what the rate review and termination clauses are for. Without them, a mid-term change is a renegotiation the customer can refuse.
