Let's look at some of the issues.
Equally if the agreement states you need to milk between 300 and 350 cows then you are bound to do so. 290 is not enough and 355 is too many.
Occasionally you hear of a person who, without reading an agreement, signed in haste and inevitably got caught. Beware, there are some scurrilous people out there.
Important areas include:
There may be clauses in the agreement that are incorrectly worded causing misunderstandings and a lot of expense. Litigation is expensive, heart wrenching and upsetting.
Failure to seek advice before signing could also mean you have to pay a lot more GST on the transaction. Be very careful with Going Concern transactions and ensure you get it right the first time.
For more information on this refer to "Some of the GST implications of property transactions".
You must insist on a trustee's limitation of liability clause which must be inserted into every document you sign as a trustee. The liability of the trustee is limited to their capacity as a trustee of the "XYZ" Trust and to the funds and assets of that trust and shall not be construed or enforced as a personal liability. Fine print - get it right and all will be well - get it wrong and it all gets grumpy. It's off to your lawyer who has the red carpet out; it could be litigation fees for him.
As an example, a client sold a service stag for $20,000. The money changed hands at the point of sale. The purchaser rang up and said the stag was no good. The client should have given the purchaser his $20,000 back and picked up his stag. But no, he knew better and spent $90,000 trying to defend the virility of his stag!
In this case there was no fine print so there was no regress under contract law.
In summary, this article highlights some of the issues around fine print. Getting it right and reading the fine print is crucial in any farming business. I'll admit I am not good at detail so I always ensure that my professional team read the fine print for me, keeping me informed and protected.
As farmers, we should always make sure we are not too busy, too tired, can't find our glasses, or are just not interested in reading the "Devil in the fine print".
Sharemilking agreements
Any sharemilking contract which is signed by both parties, is binding on both parties. If it says you have to leave 20,000 kg of dry feed, then that is your obligation. If you don't, it's going to cost you money to provide the feed and possibly even some very expensive solicitors and/or arbitrators.Equally if the agreement states you need to milk between 300 and 350 cows then you are bound to do so. 290 is not enough and 355 is too many.
Occasionally you hear of a person who, without reading an agreement, signed in haste and inevitably got caught. Beware, there are some scurrilous people out there.
Farm leases
Farm leases are generally very thorough and, whilst I believe better for the "tenant" than 50:50 sharemilking, it is a fixed term contract and the written word is binding.Important areas include:
- Who pays for what?
What happens if the owner wishes to sell?
How much supplement is to be left?
Do you have an actionable right of renewal?
Is there compensation for improvements?
Sale and purchase agreements
Sale and purchase agreements are long documents for which we should always seek professional advice before signing. Take care to be absolutely sure that the agreement is correctly worded. Check with your solicitor and accountant to ensure it meets your circumstances and all legal and accounting matters.There may be clauses in the agreement that are incorrectly worded causing misunderstandings and a lot of expense. Litigation is expensive, heart wrenching and upsetting.
Failure to seek advice before signing could also mean you have to pay a lot more GST on the transaction. Be very careful with Going Concern transactions and ensure you get it right the first time.
For more information on this refer to "Some of the GST implications of property transactions".
Trustees
Anything you sign should be considered carefully, very carefully. From my own experience, a friend asked me to be a Trustee for his (somewhat naughty) son. I signed the sale and purchase agreement as well as the mortgage. The son subsequently defaulted on the mortgage and I got notice served on me. I had to go to court and defend myself at great legal cost. Whilst I'd done nothing wrong, along with my signature on the documents, was fine print.You must insist on a trustee's limitation of liability clause which must be inserted into every document you sign as a trustee. The liability of the trustee is limited to their capacity as a trustee of the "XYZ" Trust and to the funds and assets of that trust and shall not be construed or enforced as a personal liability. Fine print - get it right and all will be well - get it wrong and it all gets grumpy. It's off to your lawyer who has the red carpet out; it could be litigation fees for him.
Settling disputes
Personally I believe attempting to negotiate a settlement first is the best option. You need to take a good objective view before you launch in to try to recover or avoid paying out a lot of money.As an example, a client sold a service stag for $20,000. The money changed hands at the point of sale. The purchaser rang up and said the stag was no good. The client should have given the purchaser his $20,000 back and picked up his stag. But no, he knew better and spent $90,000 trying to defend the virility of his stag!
In this case there was no fine print so there was no regress under contract law.
In summary, this article highlights some of the issues around fine print. Getting it right and reading the fine print is crucial in any farming business. I'll admit I am not good at detail so I always ensure that my professional team read the fine print for me, keeping me informed and protected.
As farmers, we should always make sure we are not too busy, too tired, can't find our glasses, or are just not interested in reading the "Devil in the fine print".
