Patchy growing conditions could mean some cereal growers are unable to fulfill their grain contract requirements this year.
Clive Phillips, head of land and rural business at Brodies solicitors, explains it is important for growers to act quickly and know how the contract affects their business.
Most UK traders issue terms and conditions based on the Agricultural Industries Confederation (AIC) No 1 Grain and Pulses contract.
These are legally binding documents. If the grower fails to meet the contracts there could be penalties.
It is possible that the grower might have to source grain from elsewhere, at no extra cost to the buyer, to fulfill the contract.
Alternatively, the buyer sources the extra grain, but the grower is obliged to meet the difference in cost between the contract price and the market price.
Growers should be aware of the provisions on tolerances. Generally, these will allow for delivery of plus or minus 5t or 15% of the contractual quantity – whichever is less.
Tolerances
No tolerance will be permitted if the contractual quantity is set out as a range of weights, for example 230-250t.
Damages payable due to the grower’s failure to deliver, will be based on the actual quantity set out in the contract and will not take account of the permitted tolerances.
It is important to maintain dialogue with the grain trader. Although it is unlikely buyers will adjust a contract’s terms once it has been signed, growers should still raise queries.
It may be that in some years the tolerances of the contract can be eased, so it is worth maintaining amicable dialogue.
But disputes can occur. Most contracts have an arbitration procedure set out in their terms. The important thing to note here is that the arbitration procedure has a time limit. After a set date there will be no recourse at all.
Growers will have more power in a dispute over quality if grains samples are taken for each load. Keep these organised and noted. It will always help to put a case if well-kept records are maintained.
Do not rely on force majeure. Bad weather will probably not count. To activate this clause the event has to be extreme like a flood hitting the grain store.
Even so the contract will still be binding – often only allowing extra time to fulfill the requirements.