There are all kinds of reasons to use a written contract when selling hay. One stands out for Washington hay grower Drex Gauntt.
“Having a contract sets a tone for a business relationship,” says Gauntt, who spoke at this year’s Mid-America Alfalfa Expo, sponsored by the Nebraska Alfalfa Marketing Association. “It gives sellers and buyers a good starting point for having a conversation about what each of them expects when they agree to do business with each other.”
Buyers benefit in other ways as well. “With a contract, they have the assurance that they’re with a seller who is detail-oriented, conscientious and not afraid to commit to specifics. Buyers can also have input as to the content of the contract. Done right, contracts are a win-win proposition.”
Gauntt and his father, Chep, farm 2,000 acres under irrigation near Kennewick, WA. In a typical year, roughly 50-60% of their acreage is devoted to hay crops – mostly alfalfa and timothy, but some teff grass as well. Dairies, hay export firms and local beef-feeder operations are their primary markets.
When he hears other growers talking about not bothering with contracts, Gauntt is surprised.
“If people can function doing business with a handshake, I guess that’s their prerogative,” says the past president of the Washington State Hay Growers Association.
“But I don’t understand it as a businessman. When you buy anything these days, whether it’s a new tractor, a hay baler or a new pickup truck, everybody you deal with wants to put the agreement in writing. Why wouldn’t you do the same thing when you sell hay?
“I think sometimes (growers) are afraid customers will interpret asking them to sign a contract as a signal you don’t trust them. That’s not it at all. Having a contract is the prudent thing to do. We’ve never had someone not buy hay from us because we asked them to sign a contract.”
Contracts can be structured in all kinds of ways. Gauntt notes that the hay export firms his family does business with typically furnish contracts. “They’re usually several pages long and go into a lot of detail on things like reasons for terminating the contract, penalties for not delivering a product meeting their quality standards or delivering the hay by a certain time. Often, there’s a section stating what jurisdiction will be used to address any disputes that arise.”
Detail can be valuable, but not necessary in many instances, he believes.
“As a seller, there are only a few things you’re trying to protect with a contract. All you need is something that says this person agreed to purchase this product on this date, that the product will be moved by this time and that it will paid for by this time.
“And a contract doesn’t have to be formal or fancy, full of big words and legalese or even typed. You can write up a legally binding contract on a piece of paper from a notebook. A simple contract makes both parties more comfortable.”
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The contract the Gauntts use is only a page long. “My dad drew it up years ago, then had an attorney look at it to make sure there wasn’t anything unnecessary in there or anything missing. It’s a very simple document, but it’s all we need.”
Along with specifying the amount of hay (total bales, estimated tons) and price per ton, the contract spells out whether seller or buyer is responsible for carrying insurance on it and how long the insurance will be in effect. It includes a payment schedule, details on where hay will be weighed, when hauling will begin and end as well as a description of it (cutting, bale type and maximum weed content).
A remarks line is at the bottom of the contract. “We’ll use that section to clarify anything that came up in our discussions with the buyer about the details of the contract.
“The important thing is to take the baby steps and start using a contract that covers a few basics. Once you get used to doing that for awhile, you can decide whether you need to adjust the document you’re using to cover any additional details.”
Download a pdf of the contract.
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