Farm management relationships can take a number of forms. Accordingly, my comments are general in nature and intended to emphasise that it is not just essential to have a written agreement in place between the parties to the relationship but that it is also essential that the content of the agreement be comprehensive and accurate.

 

The time spent at the outset of the relationship discussing the content of the agreement will benefit the parties in that they will enter into the relationship with a better knowledge of the issues arising and the approach of the other party. If all goes well the agreement may not be referred to again but it is there to resort to if necessary. That said, to avoid eroding the value of the agreement, it is important to monitor compliance with the agreement. If actual farm practice differs from what is contemplated in the agreement and nothing is done about it this may operate as a waiver of the rights and remedies that might otherwise have been available under the agreement.

 

In order for an agreement to have any bite, it must:

Setting out specific details increases accountability. Where general expressions are used such as to farm the property in accordance with the “best practice in the district” the parties might have different ideas about what this requires. From the farm owner’s point of view such an expression might be a useful “catch all” but only after specific obligations have been listed such as in relation to:

 

Termination is often not a desirable or practical remedy for breach. There are other options. Frequently, there may be provision for reference of a dispute to mediation or other forums for dispute resolution. Ideally if bargaining power allows it, a breach of a material term should trigger an obligation such as to pay compensation at a fixed level or as determined by reference to a formula.

 

In the case of Fielden Farms v Johnstone the sharemilker allowed cow numbers to drop below the required threshold and when numbers were built back up it was with inferior cattle. The owner gave notice under the agreement of the breach and eventually moved his own herd back on to the property effectively terminating the agreement. The court referred to the difficulties in interpreting the termination provision which unusually required termination to be confirmed by arbitration. The court was pleased it did not have to work out how this might work – the sharemilker having waived the right to arbitrate. It was also held that the agreement didn’t entitle termination for a breach of an obligation which had since been remedied and that the procedure followed in an effort to terminate didn’t comply with the agreement. The problem for the owner was that in attempting to enforce a defective clause in an agreement and in not following the notice procedure he had exposed himself to a claim for damages by the sharemilker.

 

The case serves to demonstrate the importance of making sure that contractual provisions are worded accurately and that the agreement provides appropriate remedies.

 

Finally, it’s worth keeping in mind that the value of any agreement is dependent on the ability of the parties to compensate one another if they should breach the agreement. Carrying out proper due diligence before committing to a relationship is a good start.

 

If you would like to discuss any issues arising, please contact our agricultural specialists.