For those involved in the agricultural sector, there are numerous elements largely or totally out of your control - whether it rains, whether it rains at the right or wrong time, unseasonably hot or cold weather, frosts and pests, just to name a few.
There is a lot of work and cost involved in livestock farming or growing a crop, with rapidly increasing costs such as for fertiliser and diesel.
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Often it seems like the hard work has been done once the crop, livestock or product is sold, but unfortunately there are many instances where the problems are just beginning as farmers and agricultural suppliers then have difficulties in recovering money owed to them.
This can be the result of the buyer of the crop, livestock or agricultural product being placed into liquidation.
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For farmers or suppliers in the unfortunate position of having supplied goods to a company in this position, it can often result in a significant hole in finances, or at the very least, a lot of stress.
While it seems very simple, an important first step is making sure there is a properly-drafted contract in place. It is surprising how often crops, livestock or products are supplied without any contract in place or a poorly drafted contract being used.
It is possible to rely on discussions as forming an oral contract, but it can cause many issues - with nothing in writing, it is one person's word against another if something goes wrong. This is why it is always preferable to have a written contract.
When it comes to the contract itself, there are some essentials, including working out which legal entities are entering into the contract. This is important as these are the parties who will be legally liable to each other.
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There have been instances where an agricultural supplier or farmer has had difficulty in recovering an outstanding debt with the contract not being executed by the party who received the product or the legal entity being incorrectly named.
As part of the contracting process, it may also be worth undertaking some investigations, such as a company search, to ensure comfort with the company in the contract.
When drafting the contract, there are a number of essential clauses that should be incorporated, including:
- clear and concise payment terms, detailing the manner by which the buyer will be invoiced and the timeframe for payment;
- terms as to the quality and quantity of the product;
- what happens if a party to the contract defaults, particularly in payments;
- when ownership of the product passes to the buyer; and
- whether there is any security for the items/products supplied.
If all of the parties are aware of their obligations from the start, this will help minimise the likelihood of issues arising.
While it is impossible to guarantee a full recovery of any debt, having a well written contract, signed by all of the parties, will assist greatly.
- Details: molawyers.com.au
