April 12, 2000
Contract Specifications and Steps in Contract Consideration
Steps in Contracting
1. Research the contractor's financial record and how he performs in
2. If any changes are made in the agreement, get them in writing.
3. A contract may seem fair, but it was written to be fair to the
4. Your questions may be satisfactorily answered before you sign the
contract but not after.
5. Ensure that the premium offsets any increased risk or higher production
and handling costs.
6. Read the contract and understand all of it before you sign it. Ask an
attorney to review it.
7. Know the other party in the contract and keep in close communication.
8. Don't sign a contract you do not like hoping to negotiate better terms
9. Realize that you have to complete the whole contract before you may
10. Do not assume the contractor will excuse you from performing part of
11. Oral promises should not be accepted either before or after signing a
contract. Get it in writing.
12. Document everything you do, what you produced and what you delivered.
Questions to ask when signing a contract
- If the contract specifies certain production standards, are those
standards well defined?
- What authority does the contractor have to enforce growing obligations?
- Does the contract contain a "passed acres" clause that lets the
contractor avoid buying acceptable crops?
- Does the contract require you to make capital improvements or buy
expensive equipment? Is the duration of the contract adequate to recover your investment?
- Does the contract require special storage facilities for
- Do the requirements of the contract increase production costs above
those normally expected? Are you required to buy inputs from a certain
Payment and Delivery Issues
- How are you being paid? Are the terms for payment clearly stated?
- What does the contract require as to the condition of the grain? Are
there federal quality standards established for this grain?
- Who conducts the quality tests and when? Can you get a third-party
independent test if you disagree?
- Are you penalized for quality non-compliance if it was caused by
adverse weather conditions or other factors beyond your control?
- Are you required to deliver a set amount of grain under the contract?
Do you have to find substitute supplies to fulfill the contract if you have
- Can you make adjustments in number or location of acres if weather
- What is the time length between delivery and payment? Are the terms
for delivery clearly stated?
- Who owns the crop? Who bears the risk of loss of the crop in the
field, in storage, in transport?
- · Is this a contract sale of grain or are you simply being paid for a
Other Legal Issues
- What legal relationship does the contract create between you and the
contractor? Is it landlord/tenant, employer/employee, independent
contractor, partnership, joint venture, agency?
- Are disputes resolved in the court or by an arbitration panel?
- Is the contract being interpreted under the laws of the state in which
you live or the state in which the contractor is headquartered?
- Does the contract let the company release the crops without
compensation late in the growing season?
- Can the contract be assigned or transferred by you or the contractor
to other parties?
- Are there clauses about migrant or seasonal worker protection
standards that could open you to liability?
- Under what conditions can the contractor terminate the contract?
Who determines if those conditions have been met?
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