This presentation discusses a few of the major contractual issues that affect production agriculture including agriculture production contracts, purchase agreements (for land, livestock and farm equipment), leases (for land, livestock and farm equipment), special contracts (e.g., custom feeding arrangements, embryo transfer contracts, stocker cattle contracts, non-disclosure agreements) and partnership agreements. These materials were prepared for the Lawline presentation - more info on the webinar recording is available at https://www.lawline.com/course/overview-of-common-agriculture-contracts.

1. Overview of Common
Agriculture Contracts
Lawline.com
Live Webcast: July 28, 2016
By Cari B. Rincker, Esq.

2. Who I Am
• Principal Attorney at Rincker
Law, PLLC
• Food and agriculture
attorney
– Principal office in Midtown
Manhattan
– Satellite office in Champaign,
IL
• Licensed in New York, New
Jersey, Connecticut, District
of Columbia and Illinois

3. My Background
• Grew up on a beef cattle farm
in Central Illinois
• Past-Chair of the American Bar
Association, General Practice,
Solo & Small Firm Division’s
Agriculture Law Committee
• My food and agriculture client
base
– Farmers to ranchers
– Small to mid-size agri-business
– Food entrepreneurs

4. Overview
Agriculture Production Contracts
Purchase Agreements
Leases
Specialized Contracts
Partnership Agreements

5. Agriculture Production Contracts

6. 3 Types of Agriculture Production
Contracts
Sales
Contract
Personal
Service
Contract
Bailment

7. Sales Contracts
• Often used for the
sale of crops.
• Producer owns crop
until it is sold to the
contractor.
• Generally subject to
the Uniform
Commercial Code
(“UCC”).

8. Personal Service Contract
• Producer provides
service rather than
supplying a commodity.
• Contractor supplies
commodity and retains
full ownership interest in
the commodity
throughout the duration
of the contract.
• Generally subject to
applicable state common
law vs. UCC.

9. Bailment
• Producer has possession of
the commodity, but the
contractor retains title and
any resulting crop from the
commodity.
• Often used in seed
production contracts and
grain storage arrangements.
• Generally subject to UCC.

10. Advantages of Agricultural Production
Contracts
For Producers
• Income stability
• Improved efficiency
and expertise
• Greater access to
capital
• New market access
For Contractors
• Production and
quality control
• Supply management
• Expansion and
diversification
• Intellectual property
protection

11. Potential Disadvantages of Agricultural
Production Contracts
For Producers
• Loss of entrepreneurial
independence
• Assignment of risks
• Concentrated production
• Limited natural disaster
relief

12. State Regulations: Arkansas
Only for livestock and poultry
contracts, not crops.
Readability and disclosure
requirements for production
contracts, including disclosure
of a list of “material risks” such
as contract duration,
termination provisions, and
provisions affecting calculation
of a grower’s compensation.
Prohibition of any terms that
would inhibit growers from
associating and comparing
contract terms and seeking
professional, legal, financial, or
agricultural advice.
See Arkansas Livestock and Poultry Contract
Protection Act, Arkansas Code § 2-32-201

13. State Regulations: Georgia
Only for poultry
contracts
Requires that grower
be permitted to review
the contract with
advisors for three days
prior to execution.
Right for growers to be
present during
weighing that affects
compensation under
the contract.
See Georgia Code §2-22-1 – §2-22-5

14. State Regulations: Illinois
For grain, seed, livestock,
and other commodity
production contracts.
Readability and indexing of
the contract to ensure
equal understanding of the
contract’s terms by
producers and contractors.
Requires complete
disclosure and
explanations of special
provisions, such as disease
protocols or grain identity
preservation, to ensure
that producer is aware of
terms and requirement to
adhere to them.
Prohibits contract terms
that allow contractor to
unilaterally terminate the
contract.
See Agricultural Production Control Code,
§ 505-17-1 – § 505-17-99

15. State Regulations: Iowa
Use of confidentiality clauses
prohibited in contracts for the
production of livestock, raw
milk, or a crop.
An agricultural lien is created
for producers of livestock, raw
milk, or crops under a
production contract.
Provides for a mediation
process for disputes arising out
of livestock care and feeding
contracts. Mediation is
mandatory before a producer
may file suit in court.
See Iowa Code, Chapters 202, 579B, 654B

16. State Regulations: Kansas
Swine production contracts
• Contractors must “pay a fair
price” and “make all payments
promptly.”
• Contract must provide for
disputes to be submitted to
mediation or arbitration.
• See Kansas Statutes §16-1501 –
§16-1506
Poultry production contracts
• Expressly protects contractors
from disclosure of trade secrets.
• Prohibits contractors from
terminating contractors with
producers that have performed
all of their obligations under the
contract.
• Prohibits denying producer
ability to address a dispute in
court (binding arbitration).
• See Kansas Statutes §16-1701

17. State Regulations: Minnesota
Applies to crops,
livestock, & poultry.
Provides for mandatory
cover sheet to all
contracts alerting
producers of potential
legal rights and
obligations associated
with the contract and
indexing its provisions.
Contract must contain
written disclosures of
risks to producers.
Provides for a process by
which Commissioner of
Agriculture reviews the
contract.
See Minnesota Statutes § 17.90 – § 17.98

18. State Regulations: Wisconsin
Applies to vegetable
procurement contracts and
livestock, including poultry.
Contract must be in writing
with a 72-hour cancellation
period for producers and clear
& conspicuous disclosure of
terms, including payment
amounts and formulas.
Prohibits charging producers
more than fair market value of
seeds or services and charging
producers for defective seeds
for which the contractor has
been reimbursed.
See Wisconsin Administrative Code
§ 101.01 – § 101.07; § 100.04

19. New York Agricultural Production
Contracts
Production contracts are used by a limited
number of farms in New York.
The 2012 US Census revealed that of the 914
farms in New York that sold broilers and other
meat-type chickens, only two farms raised and
delivered them under production contracts.

20. NY Agricultural Production Contracts
Commodity 2012 2007
Farms Numbers Farms Numbers
Broilers and other meat-type chickens 2 No data 5 541,800
Eggs, chicken (dozens) 7 2,313,000 4 No data
Layers 6 71,200 N/A N/A
Pullets for laying flock replacement 4 228,200 5 286,030
Custom fed cattle shipped directly for slaughter 1 No data 1 No data
Hogs and pigs 11 8,457 12 5,845
Replacement dairy heifers 16 219,380 23 268,020
Other cattle, sheep, livestock, or poultry 241 53,956 N/A N/A
Grains and oilseeds 43 N/A N/A N/A
Vegetables, melons, and potatoes 2 N/A 3 N/A
Other crops 15 N/A 39 N/A
2012 Census of Agriculture

21. Illinois Agricultural Production
Contracts
Illinois does not have a large use of
production contracts on its farms.
Of the nearly $17 billion in value of
commodities from farms in Illinois, only
$715,000 accounts for commodities
related to production contracts.

22. IL Agricultural Production Contracts
Commodity 2012 2007
Farms Numbers Farms Numbers
Broilers and other meat-type chickens 7 142,829 4 No data
Eggs, chicken (dozens) 8 2,464,937 5 2,000,000
Layers 7 123,100 N/A N/A
Pullets for laying flock replacement 2 No data N/A N/A
Custom fed cattle shipped directly for slaughter 22 1,680,558 32 1,746,118
Hogs and pigs 39 42,702 74 71,290
Replacement dairy heifers 387 3,437,664 424 3,819,982
Other cattle, sheep, livestock, or poultry 80 17,561 N/A N/A
Grains and oilseeds 12 N/A N/A N/A
Vegetables, melons, and potatoes 123 N/A 133 N/A
Other crops 52 N/A 61 N/A
2012 Census of Agriculture

23. United States Stats for Agriculture
Production Contracts
In 2008, agricultural contracts covered
39% of U.S. agricultural production.
More than 90% of broiler, sugar beet, and
tobacco production is through contracts
whereas less than 30% is used for corn,
soybean, and wheat production.
2012 Census of Agriculture

24. Purchase Agreements

25. Purchase Agreements
Farm/Ranch
(Land)
Livestock
(Animals)
Farm Machinery
(Equipment)

26. Land Purchase Agreements

27. Land Purchase Agreements:
Inspecting the Property
Potential
Issues
Boundaries of property
Zoning
Ownership search
Water rights of property
Buildings
Terrain
Previous use of land
Environmental contamination

28. Land Purchase Agreements: Terms
Contract
Considerations
Description of property
Payment methods and terms
Title insurance
Property taxes
Changes to property, i.e. limiting them
Condition of property, i.e. “as is”
Easements/access
Water rights
Mineral Rights

29. Livestock Purchase Agreements

30. Livestock Purchase Agreements: Terms
Contract
Issues
Description of animals
Health of animals
Payment method and terms
Delivery
Inspection of animals upon delivery
Insurance
Confidentiality Clause

31. Seedstock Livestock Purchase
Agreements: “Suggested Sale Terms”
Contractually, the terms of an agreement for
seedstock livestock are not binding unless the
parties decide to make them so. If the parties
do not make them binding, these are considered
“suggested sale terms.”
Suggested sale terms include choice of law,
health requirements, registration, identification,
pedigree, guarantees for fertility/breeding,
embryo transfer history, disclosure of genetic
defects and other material information.

32. Seedstock Livestock Purchase
Agreements
• Both parties must
agree to the terms to
make them legally
binding.
• UCC Statute of Frauds
applies to sales over
$500, therefore the
agreement must be in
writing.

33. Seedstock Livestock Purchase
Agreements
• Seller should have copy of
suggested terms by breed
association available for all
potential buyers, if he or
she would like to abide by
those terms.
• Seller should be clear in
sale catalog about sale
abiding by suggested terms.
• Think about having Seller
agreeing to suggested
terms and any other terms
in writing upon registration
at sale.

34. Seedstock Livestock Purchase
Agreements
• Buyers should pay
attention to what is not
included in the
suggested terms.
– For example, the ASA
Suggested Sale Terms
and Condition are silent
about a guarantee for
the bull’s semen’s ability
to freeze.
“Cow Selife” with my Father

35. Farm Machinery Purchase Agreements

36. Farm Machinery/Equipment
Types of Purchase Agreement
Outright Sale
• Ownership transferred to buyer and seller is paid in full at one time.
Installment Sale
• Buyer obtains immediate possession and use of machinery while seller
obtains payment on a set schedule.
Gradual Sale
• Line of machinery is sold one or two items at a time.
Lease with Option to Buy
• Allows a party to lease equipment for a set term and then purchase upon
completion of lease.

37. Farm Machinery/Equipment
Types of Purchase Agreements
Lease with Gradual Sale
• For parties that are leasing multiple pieces of equipment
and wish to purchase them upon the termination of the
lease.
Rollover Purchase
• Allows purchaser to acquire new or nearly new equipment
each year or couple of years where purchaser pays
difference between price of new model and the trade-in
value of old model.

38. Benefits of Purchasing Farm
Equipment Over Leasing
Owner has more control over how
much the machine is used and for
how long (leases have a set
number of hours the machine can
be used).
Owning farm machinery builds
equity for farmers because the
machinery holds its value for
many years and serve as collateral
to obtain funds for other ventures.

39. Farm Machinery Purchase Agreements
Terms of Agreement
Contract
Terms
Description of machinery, including make, model, and serial
numbers
Delivery
Title – when does it transfer to buyer
Maintenance and repair
Insurance
Default by buyer (for installment contracts)

40. Leases

41. Types of Leases
Farm/Ranch
Leases (Land)
Bull/ Station
Leases (Animals)
Farm Machinery
Lease
(Equipment)

42. Farm/Ranch Leases

43. Farm Leases: Type of Leases
Cash-Rent Lease
• Tenant usually pays a fixed dollar amount in rent on a per acre
or whole farm basis.
Crop-Share Lease
• The landlord will share input costs (seed, fertilizer, fuel) while
the tenant provides the labor and remaining input costs.
Hybrid Leases
• The landlord will receive a minimum fixed rent while sharing in
some of the profits, losses, and decision making.

44. Farm Lease
Terms of Agreement
Contract
Terms
Parties
Purpose
Property description
Lease term
Renewal terms
Lease price & payment terms
Duties and prohibitions
Rights to natural resources

45. Farm Lease
Terms of Agreement
Contract
Terms
Reporting requirements
Default
Ability to assign or sublease
Notice
Termination
Indemnity clause or hold-harmless agreement
Choice of law/choice of forum
Alternative Dispute Resolution
Confidentiality Clause
Severability Clause

46. Termination of Farm Lease
Proper
notice
required as
per terms
of the lease
Important
to comply
with state
laws

47. Liability for Tenant Activities
For nuisances, such as with a tenant
who spreads manure or uses
pesticides, everyone who creates the
nuisance or participates in
maintaining the nuisance is liable,
including the landowner.
When creating a farm lease, keep an
eye out for indemnification and hold
harmless clauses/agreements.

48. Grazing Leases
• Grazing lease is an
agreement in which a
landowner allows a
tenant to graze livestock
on the landowner’s
property.
• The livestock can be of
any species (cattle, sheep,
goats) and of any class
(dairy, beef, breeding).

49. Grazing Leases
Terms of Agreement
Contract
Terms
Parties
Term
Description of land
Record keeping
Services provided by landowner
Water supply

50. Grazing Leases
Determining Lease Rate
The Market Value
Approach
• Lease rate is based on local
rental rates for grazing. Rate is
increased or decreased based
on size of land, forage quality,
availability of stock water,
presence of poisonous plants,
and responsibility of making or
maintaining improvements.

51. Grazing Leases
Determining Lease Rate
The Anticipated Income Approach – This approach
looks at the expected returns for landowner and
tenant.
• Landowner: Wants to cover property taxes, opportunity cost of
the land (what income it would have generated if used for another
purpose), depreciation of improvements and operating costs.
• Tenant: Wants to be assured of reasonable economic return for
grazing, which takes into consideration livestock production costs
and expected price of livestock.

52. Grazing Leases
Determining Lease Rates
The Alternative Feed Approach – Estimates the
value of the grazing land by comparing it to an
alternative feed source, such as hay or stubble
aftermath.
• Alternative feed source that is compared to price of grazing
should provide livestock with similar nutritive value.
• Price of the alternative feed should be compared at the local
level.

53. Grazing Leases
Expressing Lease Rates
Per Acre
• Will vary based on productivity of grazing resource and lease
conditions.
Per Whole Tract
• For leasing a block of land or ranch for a specified annual fee.
Per Animal Unit Mouth (AUM)
• Allows for multiple types of livestock to graze land. Requires
calculating stocking rate for each type of animal that will graze
land.

54. Grazing Leases
Expressing Lease Rate
Per Head or Per Pair
• Usually charged per month or season & varies based on animal.
Per Share of Gain
• Applies to seasonally grazed, weight gaining animals, where
price is charged per pound gained by animal during season.
Variable Lease
• Use a base rate that is fixed for term of lease and variable rate
that allows lease rate to vary annually based on livestock
prices.

55. Grazing Leases
Additional Terms of Agreement
Contract
Terms
Stocking limitations
Care of livestock
Maintenance and improvement responsibilities
Insurance
Security deposit
Landowner’s Rights to Property
Vehicles
Termination Terms
Liability and Indemnification
Choice of law
Dispute Resolution

56. Livestock Leases
Bull
Leases
Stallion
Leases
Ram
Leases
Boar
Leases

57. Bull Leases

58. Bull Leases
Terms of Agreement
Contract
Terms
Term
Number of bulls
Payment
Bull owner
representations
Bull’s health, body condition score, fertility,
breed, registration, pedigree, structural
soundness, libido, genetic DNA markers,
strength with Expected Progeny Differences.

59. Bull Leases
Terms of Agreement
Contract
Terms
Lessee Representations on
Cow Herd
Herd health, fertility, number of cows that
bulls can breed with, nutrition programs
that cows follow.
Health
Delivery of bull to cow herd
Movement of bull from
lessee’s farm
Death, injury or illness of the
bull
Injuries to people

60. Bull Leases
Terms of Agreement
Contract
Terms
Insurance
Performance
Management
Feed and nutrition
Right of inspection
Ownership of bull
Option to purchase
Title of progeny

61. Bull Leases
Terms of Agreement
Contract
Terms
Relationship of the parties
Termination
Confidentiality
Choice of law
Dispute resolution

62. Horse Leases

63. Horse Leases
Terms of Agreement
Contract
Terms
Payment for shoeing, including horse’s farrier or training expenses.
Lessee does not have right to sub-lease the horse and no other riders
are authorized to ride horse.
Care of horse, including hoof care and where horse shall be kept.
Insurance, including mortality, major medical, or loss of use insurance.
Clause indicating lessor not responsible for injuries due to elements of
nature that scare horse.
If horse used for horseback riding, lessor may be responsible for injuries
resulting from irregular footing on particularly rough terrain.

64. Ram Leases

65. Ram Leases
Terms of Agreement
Contract
Terms
Description of rams
Guarantees of animal health
Feeding
Housing
Ownership

66. Boar Leases

67. Boar Leases
Terms of Agreement
Contract
Terms
Term and pricing
Description of boar
Health warranties
Care of boar
Delivery
Title/ownership
Insurance
Assignment of agreement

68. Farm Machinery Leases

69. Farm Machinery Leases
• 16% of farmers lease farm machinery compared to 32%
in other industries.
• Benefits of leases:
– Tax deductibility of payment
– Cash flow
– Keeping up with latest technology
– Not clouding balance sheet with another asset and liability
• Best for farm operations who need equipment for
short term, or when farmer has ability to deduct cost
of purchase, or equipment will have low residual value.

70. Farm Machinery Lease
Terms of Agreement
Contract
Terms
Parties
Description of machinery
Rental terms
Repairs
Insurance
Dispute resolution

71. Farm Machinery Leases
Lease-to-Own Contracts
If, at end of lease term, machinery can be
bought for little to no cost or can be
bought for a set price, it may be treated
as a disguised sale by the IRS.
Other warning signs include having a
lease term that is longer than 75% of the
useful life of the machinery.
20/20 Test – To determine if lease is truly
a sale, the machinery should have 20%
value remaining in it and 20% of the
useful life of the equipment remaining.

72. Specialized Contracts

73. Specialized Contracts
Custom Feeding
Arrangements
Embryo Transfer
Contracts
Non-Disclosure
Agreements

74. Custom Feeding Arrangements

75. Custom Feeding Arrangements
Terms of Agreement
Contract
Terms
Identification of livestock – Type, weight, sex, breed/coloring
Feeding and nutrition – Feeding regime, expenses
Division of profit or loss
Marketing of livestock
Delivery
Shrink

76. Custom Feeding Arrangements
Terms of Agreement
Contract
Terms
Management practices
Repossession of livestock
Manure handling
Veterinary care
Risk of loss

77. Custom Feeding Arrangements
Feeding Specifications
Feedlot should provide ration
composition report which includes
the amounts of each feedstuff and
note the total ration’s energy,
protein, and major vitamins and
minerals.
Cost of feed charged by feedlot may
be marked up to cover overhead
costs or may charge a yardage fee.

78. Custom Feeding Arrangements
Money Considerations
Yardage fee
• Usually charged on a dollar/head/day basis.
Cost of arrival
• Treatments required for vaccination, dewormer, implants.
Labor costs
• May be included in yardage fee.
Billings
• Should reflect ration ingredient cost and if financed through a feedlot, look for statement of
interest on bill.
Taxes
• Consult tax preparer for deductions related to paying feed bills in advance.

79. Embryo Transfer Agreements

80. Embryo Transfer Contracts
Recipient Agreement
Where the cattle producer is selling a bred embryo transfer
recipient cow to another cattle producer.
Terms to include:
• Purchase/lease price of Recipient Cow
• Payment terms, including late payment penalties
• Instructions for receipt or shipment of frozen embryos
• Embryo transfer fees for open cows
• Dates/procedures/costs for pregnancy checks
• Duration recipient cow stays under care of owner
• Limitation of liability for congenital birth defects or reasonable birthing difficulties
• Security on embryo transfer progeny
• Fee for genetic testing

81. Embryo Transfer Contracts
Breeder Agreement
Cattle breeder can have agreement that may or may not be
implemented into Recipient Agreement.
Terms to include:
• Shift burden to Recipient Owner to ensure cow is healthy with necessary
vaccinations, within appropriate age range, has acceptable body
condition score, certain breed/color, and structurally sound.
• Breeder can include clause holding recipient liable for gross negligence or
intentional misconduct relating to care of recipient cow and progeny.
• Breeder may want to list special management terms if recipient owner
will be raising progeny until weaning and retaining ownership of
recipient.

82. Embryo Transfer Contracts
Flush Agreement
• This type of agreement is used if a cattle
producer is purchasing an embryo transfer flush
from another cattle owner
Provisions for Purchaser to
Consider
• Minimum number of
transferable embryos
• Grade of the embryos
• Date/procedures for receipt
of frozen embryo
• Guarantee that flush is
what was ordered
Provisions for Seller to
Consider
• Payment terms, including
shipping expenses
• Does not bear
responsibility for transfer
of embryos to Recipient
Cow or for birthing
problems

83. Stocker Cattle Contracts

84. Stocker Cattle Contracts
For when a cattle producer hires someone to
feed out the progeny through weaning.
In addition to payment terms, agreement
should specify:
• Feed and nutrition
• Animal health
• Control of pests
• Promises regarding average daily gain

85. Non-Disclosure Agreements

86. Non-Disclosure Agreements (“NDA”)
Types of NDAs
Mutual or Bilateral
• Where both parties will be supplying
information that is intended to remain secret.
One-sided or Unilateral
• Where one party wants to disclose
information to another party and needs that
information to stay secret.

87. Non-Disclosure Agreements
Terms of Agreement
NDA
Terms
Parties exchanging information, i.e. both or one
Purposes for exchanging information
Identification of confidential information
Exceptions to confidential information
How information will be used and by whom
Methods for maintaining confidence
Length of agreement
Ownership of confidential information
Consequences of breach

88. Partnership Agreements

89. Partnership Agreements
A partnership arises when
two or more people agree to
share profits and losses in a
business.
Types of partnerships:
• General Partnership
• Limited Partnership
• Limited Liability Partnership

90. Partnership Agreements
General Partnership Agreements
Contract
Issues
Names and addresses of the partners
Name of the partnership
Purpose of the partnership
Term of the partnership
Initial contribution of each partner
Additional contribution requirement
Assets of partnership
Liability of partnership
Allocation of profits and losses
Distribution of profits
Duties of partners

91. Partnership Agreements
General Partnership Agreements
Contract
Issues
Confidentiality
Salaries and other benefits of the partners
Expenses of partnership
Management of the business
Effect of a default
Amendments to partnership agreement
Partner changes
Assignability
Alternative Dispute Resolution (“ADR”)
Forum Selection
Choice of Law
Attorneys’ Fees
Dissolution and Winding Up

92. Partnership Agreements
Limited Partnership Agreements
• In most states, a limited
partnership agreement must
be executed along with a
Certificate of Limited
Partnership
• Terms to include:
– Name of partnership
– Rights and responsibilities of
limited partners
– Additional limited partners
– Other forms of compensation

93. Partnership Agreements
Limited Liability Partnership Agreements
• In some states, including New
York, California, Oregon, and
Nevada, limited liability
partnerships are only available
to professionals.
• Terms to include:
– Name – Must contain one of
the following:
• Registered Limited Liability
Company
• Limited Liability Company
• RLLP
• LLP

94. Oh, P.S. – I Wrote a Book!
Cari B. Rincker & Patrick
B. Dillon, “Field Manual:
Legal Guide for New York
Farmers & Food
Entrepreneurs” (2013)
Available on Amazon,
Kindle and iBooks
www.newyorkagriculturelaw.com

95. Questions on Being an Agriculture Lawyer
Fridays with Cari Skype
Calls
– First Friday of the
month at 2pm ET
– RSVP to
cari@rinckerlaw.com
– No charge

96. Contact Me
535 Fifth Avenue, 4th Floor,
New York, NY 10017
(212) 427-2049
cari@rinckerlaw.com
www.rinckerlaw.com
Twitter: @CariRincker @RinckerLaw
Snapchat + Periscope + IG: @CariRincker
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