Contract Authority: Everything You Need to Know
Contract authority refers to the ability given to an individual or agency to act on another's behalf in order to carry out a specific task.3 min read
2. Common, Contract, and Broker Authority
3. 33 U.S. Code § 891d - Contract Authority
4. Interstate Commerce vs Intrastate Commerce: Frequently Asked Questions
Contract authority refers to the ability given to an individual or agency to act on another's behalf in order to carry out a specific task.
Lack of Authority vs. Apparent Authority
A lack of authority refers to a party acting on behalf of another without having been granted the permission to do so, or a party who has been granted permission to act on another's behalf interfering with areas that they have not been granted specific permission to handle. In this instance, any action made is not legally binding.
There are two instances where a party operating under a lack of authority may legally bind another:
- When authority is approved after the fact.
- Cases of apparent authority.
Apparent authority is similar in the sense that the acting party was not given explicit permission to act on behalf of the other, but such permission is reasonably implied. For example, employees often act on behalf of their employer and have the ability to bind them in contract with another entity. Apparent authority is often a necessary component of business, as many companies would be unable to function if responsibility was not shared.
Common, Contract, and Broker Authority
In the case of the Federal Motor Carrier Safety Administration, which regulates haul transportation between states:
- Common authority involves for-hire transportation services provided to the general public by a common carrier.
- Contract authority involves for-hire transportation services provided to a specific entity by a contract carrier.
- Broker authority involves a company finding for-hire carries to transport cargo that belongs to an additional party.
33 U.S. Code § 891d - Contract Authority
According to the 33 U.S. Code § 891d, multiyear contracts require:
- Funding be obtained throughout the duration of the contact to avoid ending the contract.
- The contract must promote the best interests of the country through the promotion of economic efficiency and competition.
Similarly, multiyear contracts require certain provisions:
- Payment depends on the availability of funds prior to payment.
- The expectations of the contract must be clearly outlined.
- Plans outlining what will happen in the event of early contract termination, including amounts liable.
Prior to entering into a service contract, there are many considerations to make:
- It must be in the public's best interest.
- The duration of the contract does not exceed seven years.
- The contract must cost less to execute than other available options.
Interstate Commerce vs Intrastate Commerce: Frequently Asked Questions
Interstate commerce involves crossing state boundaries. With this, there must be a physical cross of state lines, or the intent to cross, made by:
- The vehicle.
- The passengers.
- The cargo.
When interstate commerce is involved, safety and operating regulations must be followed on both the federal and local levels. The state in which a vehicle is registered must be aware of the intention of interstate commerce before state lines are crossed to ensure compliance with the International Registration Plan and the International Fuel Tax Agreement.
The state in which the vehicle is registered is responsible for collecting fees and distributing them according to the other states that will be involved.
Intrastate commerce does not involve crossing state lines. In this case, local regulations need to be followed in addition to three federal laws:
- All drivers must have a commercial driver's license.
- All drivers must be tested for drugs and alcohol.
- Maintain financial responsibility for hazardous materials and substances.
Similarly, a USDOT number will be needed if:
- The vehicles used are over 10,000 pounds.
- If there will be between nine to 15 passengers being transported for compensation.
- If there will be over 16 passengers being transported.
- If hazardous materials are involved (in the case of interstate commerce).
A For-Hire carrier involves receiving compensation for the service provided. These carriers need:
- A USDOT number (these are not transferable).
- Operating authority, which is called an MC number (this will not change in the event of a change in name, nor will a new certificate be issued with the updated name).
Merely applying for the correct permits is not enough. Until the correct permits have been issued, interstate transportation is not allowed. A simple search of the FMCSA database can determine if operating authority is active.
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