Reading the small print to avoid farm supplier contract disputes

Lucy Gray
Partner, Head of Commercial Litigation & Dispute Resolution

A range of different commercial contracts generally form the basis of business operation in pretty much every industry – but farming can often be a little bit different from the norm in this respect.

Farming partnerships, for example, should be based around formal documentation, but this isn’t always the case, primarily due to the length of and/or familial relationships between the different parties involved which may be viewed as strong enough not to need to be put down on paper.

Even in the closest of relationships, problems can arise when situations change, such as the differing wishes of the children of a farmer who has passed away. It’s always worth making sure all relevant parties have reviewed, carefully considered and formally signed up to a partnership agreement to prevent foreseeable problems arising when change inevitably comes.

A similar approach needs to be taken towards supplier agreements for essentials like animal feed, fertiliser or equipment, especially in the current climate where costs are rising quickly and farming incomes are not always as secure as they might once have been.

Farmers are not alone in not always being as assiduous as they might be when it comes to looking at the small print of a contract.

This can have consequences for the bills they have to pay over its duration, and which could in turn cause them significant operational problems or indeed threaten the viability of their business.

As a general rule, farm businesses don’t have a huge amount of surplus cash floating around to fund big ticket purchases, so subscriptions, hire purchase or finance agreements are often a necessity.

And as with anything contract-related, the best way to avoid issues arising is to make sure that the details of every document have fully examined, queried and clarified before anything is signed.

Involving all parties relating to the business, as well as your professional advisors, will allow you to collectively identify any potential problems that might been hiding in them and clarify what might happen if your situation changes.

Examine the termination provisions included in any contract, the length of notice that you must give in order to bring any agreement to an end and any clauses relating to annual/regular increases in payments linked to the rate of inflation, which are obviously particularly important in the present economic circumstances.

Given how indispensable expensive items like tractors and combines are to the operations of a modern arable farm, or supplies of feed are to the well-being of livestock, the impact of not being able to keep up with agreed payment schedules and potentially losing access to them can be catastrophic.

If you feel that you’ve been induced into a signing an unfair contract, or that the content and context of it have been misrepresented, there may be steps you can take to get out of it, but generally speaking, most finance agreements are pretty watertight on this front these days.

Ensuring all the details are properly covered at the start of any contract discussions is always the best way of avoiding nasty surprises somewhere down the line.

For further information and advice on contract and dispute management, as well as all aspects of farming/rural business operations, please contact Lucy or call 0191 232 8345.