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A Handshake Just Won’t Cut It

Farmers and ranchers are constantly dealing with family, friends, and people that they have had a business relationship with for years and years.  Because of these long-term relationships, it is easy for farmers and ranchers to trust the other party in this type of business transaction.  It is not rare for farmers to make oral contracts with one another with a “handshake” or sign a boiler-plate lease or contract that has been used repeatedly without even reading what is says.

I am not saying that farmers and ranchers should not trust one another.  I believe the agriculture community consists of the most honest hard-working people I know.  But things happen in life that are out of a person’s control.  For example, you could be leasing farm ground from a property owner with a year-to-year lease and the government comes in right before harvest and decides that it will develop an easement for a right-of-way that it recorded years before.  Will the landowner reimburse you for the reasonable costs of your destroyed crop?

It is also important for farmers and ranchers to understand that oral contracts dealing with the tenancy of land are not enforceable under the Statute of Frauds.  So that oral agreement did not create a legally enforceable contract.  Similarly, the Statute of Fraud also applies with the sale of goods more than $500 under the Uniform Commercial Code (“UCC”).  Therefore, an oral agreement for the sale of a horse, replacement heifer or embryo that is over $500 is also not enforceable under the Statute of Frauds.

Furthermore, farmers and ranchers should not just sign a contract without reading and understanding the terms of the agreement even if the transaction is with a trusted friend.  Ellen Victor, a small business lawyer on Long Island, wrote this great blog about being cautious to sign “boilerplate” contracts without reviewing the language.  In her blog, she very accurately observed a common misconception:  “[d]on’t assume that just because the contract is on a standard or pre-printed form that it cannot be negotiated.”  (You can also follow Ellen on Twitter here).

We’ve all been there.  The lease or contract just looks “so official” and “boilerplate” that it’s surely not adverse to my interests.  Or, “there’s nothing that I can really do about it anyway so I might as well agree to the terms.”  But this couldn’t be further from the truth.  Paragraphs, sentences and words and get crossed out.  Insertions can be made.  Whole leases and contracts can be modified.  This also applies to contracts with governmental agencies.  Though you might feel that the all powerful government has your hands tied, suggestions and edits to the contract can still be made.

I know what you are thinking.  I’m an attorney.  Of course I want farmers and ranchers to hire a lawyer to review contracts.  After all, it is how I pay my Manhattan rent.  But this is what I am really saying:  retention of counsel to review and negotiate contracts is a sound business practice.  Attorneys always think of the “what ifs” and the worst possible scenarios.  As a business person, you should also and a handshake just won’t cut it.

Admittedly, sometimes it doesn’t make economic sense to hire an attorney.  In those circumstances, get the terms of the agreement on paper and carefully review the terms before you sign it.  Don’t rely on oral contracts to protect you.

"This blog is for informational purposes only and is not intended to create an attorney-client relationship. It is recommended that you speak to an attorney licensed in your jurisdiction before relying on the information in this blog."

4 Responses to A Handshake Just Won’t Cut It

  1. Crystal says:

    Good post Cari. I think that a lot of people in the purebred cattle business need to take some of your advice. You hear of more and more deals going south because there were no written terms. Farming is evolving just like any other business.

  2. Ellen Victor says:

    You make many great points. I would only add that getting good advice before signing a contract is great insurance for avoiding costly, complex, stressful legal hassles.

  3. […] I do is still on a handshake but anything I do with friends I actually obtain contracts for.  I want everything laid out so that a friendship is not compromised for business. Nationwide restrictions seem to change on a weekly basis.  I see most young producers needing […]

  4. […] livestock producers put terms of sale in writing?  Very few.  I have previously blogged on the legal implications of doing business with a handshake.  Simply because you have a contract does not mean that you do not trust the other person.  In my […]

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