In order to achieve better scale and at the same time take and share some of the risks associated with agriculture, there are more and more farmers taking on share farming projects. It's extremely sensible to formalise these arrangements using contracts to cover legal issues.
Here are some of the legal issues to formalise in a contract.
Specifying the parties involved
While it may seem obvious at first, specifying the parties involved can help clarify which parties are involved. This can be particularly relevant if a business partner undergoes a divorce or death in the family that unravels some of the business dealings or impacts with the projects, and it's unclear if the project was undertaken by an individual, company or a family trust.
Identify relative shares of capital and labour contribution
In many case there may be a different share of capital and labour contributed on each side, with less financial partners contributing more of the labour necessary to keep the project going. Formalising what share of capital and what share of labour each partner will contribute and what portions of the final share each partner will prevent confusions and frustration later in the project.
It can also be wise in this section to formalise what happens if either party cannot make good their side of the agreement, due to financial constraints or injury. You may like to discuss in this section an insurance policy, which covers the business in the event of injury, illness or other unexpected events.
Formalise financing arrangements
If one or both parties is financing part of the project through an agribusiness line of credit, as is extremely common for farmers, specifying what financing arrangements are being used and any covenants or reporting criteria for the financing can also be formalised in the contract so that both parties are aware of any restrictions.
Roll back provisions
At any point one or the other partners may need to exit the share farming arrangement. Having provisions built in for each party to leave the arrangement, sell their share of the project and regain access to any assets like land that you have been using can help simplify any arrangements if people need to leave.
If you are looking to enter into a share farming agreement and would like some advice on the legal issues that are involved in share farming contract you should contact a law firm such as Holloway Jenkins Lawyers.Share