Growers warned to check supply contracts if crops affected by drought

Growers faced with not being able to meet their commitments to supply crops because of the hot, dry weather need to carefully scrutinise and understand their contracts, warn advisers.

Force majeure may be invoked under certain circumstances, but the term means different things in different contracts, points out lawyer Julie Robinson, a partner with law firm Roythornes.

“The prolonged period of exceptionally hot, dry weather following a wet spring means some potato growers will struggle to fulfil forward supply contracts,” says Ms Robinson.

“Most growers sign their supply contracts without paying too much attention to the small print. In years like this – where weather conditions have combined to make anything like average yields impossible on many farms – the terms of the contract become all important.”

See also: How to resolve commercial disputes and keep costs down

Including a force majeure provision in a contract is a way for parties to manage risk. The parties are agreeing that if certain kinds of events happen that are outside a party’s control, that party is freed from its obligation to deliver on all, or part of, its side of the deal. The other party cannot then claim damages for non-performance. 

“Any force majeure clause needs to be read carefully, to see what is covered, what is not and – importantly – whether an affected party needs to take any steps in order to benefit from its provisions,” advises Ms Robinson.

For example, notice of an intention to invoke a force majeure clause is often required and must be served in a certain form and within set timescales if a grower is to have a chance of relying on the clause.

Contracts checklist

  • Check the small print of any contract, especially any force majeure clause
  • Act in accordance with any of its requirements – don’t leave it too late to serve a notice
  • Always serve the notice in the way, and to the address, specified in the contract
  • Make sure you have independent evidence to support your claim that circumstances beyond your reasonable control have occurred
  • Describe those circumstances carefully, in a way that is supported by the evidence
  • Consider talking to your buyer – a deal can often be reached

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

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