Written agreements can protect farmers and harvesters

Stuart Sorenson only does custom work for farmers who sign his written contract. And he's never short of work.

Sorenson, who runs O & S Harvesting, LLC, with two partners near Bonduel, WI, says written agreements make it clear just what his company will and won't be liable for.

More custom operators - and their farmer-customers - should follow his lead, says Joe Stellato, Shawano County, WI, crops and soils agent.

"A farmer won't hire somebody to build a barn or put a new roof on a building without a contract," says Stellato. Why should it be different when hiring customer harvesters, he asks?

Some growers, however, refuse to sign contracts, even though the agreements give them as much "insurance" as it gives harvesters, Stellato adds.

"Without a contract, the farmer who is hiring the service is putting himself at risk. If there's a problem and the custom harvester doesn't come through - doesn't show up, for example - a farmer has no recourse."

Custom harvesters who make verbal agreements with farmers who then don't pay their bills have little recourse. "Verbal contracts may not be legal and binding, especially in Wisconsin, where goods and services for any amounts over $500 have to be in writing to be enforceable in court," says Stellato. He suggests that harvesters check for similar statutes in their states.

"Anytime you have something in writing, it's better than nothing in writing at all," adds Mike Wetter, Farm Credit Services senior financial services officer, DePere, WI. "The problem with a verbal contract is that two different parties can interpret it two different ways. A written contract is hard to interpret any differently than what it's written as."

Try as he may to prevent non-payment, Sorenson still has customers who won't pay. Of his $2 million/year business, he's carrying farmers' debt loads totaling $150,000 from last year's harvest season. Although it won't always prevent deadbeats, a written contract is part of his payment protection plan.

"I'm fairly confident we'll win every case that we're involved in because of the way our contract is constructed," he says. The few court cases he's dealing with farmers on now have to do with the weather, which is one of the most important points in his contract.

"We don't want to be liable for weather because that's beyond our control. If we have delays in harvesting due to weather, we're not liable," he says the written agreement states.

The contract also clearly states that customers will be responsible for any and all rock damage incurred during harvest.

"We usually run into problems when the neighbor down the road has 20 acres of hay to sell to the farmer. Then we go down there and we run into stones.

"We haven't had any problem with them paying stone damage, but most of that has been $100 or $50. On some farms we don't have any damage. We had a case last year, however, where a stone through our chopper caused $13,000 worth of damage." The farmer is disputing the matter, Sorenson says.

As part of that policy, growers are to pay for damaged guards and sections. "We could go to some farms and not have any guards or sections break and then go to the next farm and break 10 or 12. At $13 apiece for guards, it adds up pretty fast."

Sorenson's contract is a straightforward one. It states that growers can expect:

1) Alfalfa harvested on a 28-day rotation, plus or minus two days;

2) Corn silage harvested at the grower's desired moisture level, plus or minus five points; and

3) The attempt to maintain the same crew for every crop on the client's farm.

"These goals will be met providing weather does not (cause a) delay in providing service," the contract states.

It also covers a payment plan option, rates for harvesting and other services and how many truckers per chopper he will provide. Rock damage liability is also explained.

Sorenson's one-year contract can be ongoing, he explains. "That means that if I don't want to go back to that farmer next year I have to let him know in writing within a certain amount of time. And if he doesn't want me back, he has to notify me, also.

"Once we have a contract signed, we don't have to have him resign it as long as we're continuing to do the harvesting."

Although Sorenson is getting signatures from his clients, he really doesn't need them to sign the paper to have his contracts accepted, he says.

"Let's say you go into a store and write a bad check and get charged $20 for it. You didn't sign a contract saying you would accept that policy. But because that is a policy, it is an enforceable policy." It's the same with his contracts, says Sorenson.

That part of the contract reads: "Be advised that if you do not return the fully executed contract to us, we will assume that you have read and understand the terms and unless you contact us otherwise, in writing, you agree to be bound by the terms and conditions of the Custom Harvesting Contract regardless of your execution."

"Because that's our company policy, it can be enforced," he says.

If you're taking on a new customer and don't know much about him, a written contract is almost a necessity, adds loan officer Wetter. But not every business deal needs one, he says.

"It all goes back to the character of the people you're doing business with. If you've done business with a neighbor and you know he's good as gold, there's probably no need for a written contract."