Rural businesses are no different from any other producers in the market in the sense that the ultimate fruits of their labours are, at some point, sold to a third party, whether that is to a meat company, a fruit packer or exporter, or a wine or dairy company.
All sales of product are governed by a contract of sale, the terms of which are either set out by statute (see below) or in a supply agreement or a contract to purchase goods or services of some description. Most of these contracts are industry standard-type contracts and, in many cases, the rural producer has little say over what goes in those contracts; most large fruit exporters, winemakers or dairy companies have their standard terms and conditions and won’t negotiate individual contracts with individual suppliers.
Important to know standard contract details
Having little say in a purchaser’s contract does not, however, mean you don’t need to understand what those contracts mean. Just because a contract is ‘standard’ doesn’t mean it is not important to clearly understand its terms; if issues arise you should be aware of the implications if certain events happen.
Your own terms of sale
As well, in this day and age, sometimes the tables are turned and you might want to set your own terms and conditions. Increasingly, for instance, farmers will sell their stock on farm or they may sell crops such as hay or other feed crops directly to others.
In these scenarios, you should have your own terms of sale. To a certain extent the Contract and Commercial Law Act 2017 (CCLA) governs contracts of sale of
goods (this legislation replaced the old Sale of Goods Act 1908). The CCLA sets
out rules for:
- Contract formation and implied terms in a contract for the sale of goods
- The passing of property and risk in goods, and defects in the seller’s title to the goods
- The delivery, acceptance and rejection of goods
- The rights of an unpaid seller including the right to a lien, to resell and to stop goods in transit, and
- Other remedies of a buyer and seller for breach including the principles for the recovery of damages.
There are also implied terms such as:
- The seller will be able to give good title
- If the goods are sold by description the goods will correspond to the description
- The goods are reasonably fit for any purpose that the buyer communicates to the seller
- The goods are of merchantable quality, and
- If there is a sale by sample, the bulk of the goods correspond to the sample.
When setting out your terms of sale you will need to think about whether you are happy to rely on the CCLA or whether you want to prescribe your own terms of sale. Many of the provisions of the CCLA can be varied by contract, although some can’t.
If you are looking to sell directly from the farm it’s important to have clear terms of sale, whether it’s to cover payment terms or issues with the quality of what has been sold, or the ability to register a security interest over the goods being sold so you can recover those goods in the event payment is not made.
An understanding of what the CCLA does cover and what it doesn’t, and what might be able to be varied to reflect your own circumstances, is critical to protect yourself as a seller.
If you’d like to set up your own terms of sale, we’re happy to guide you through the process to ensure the terms achieve your goals.