Contract Milking Agreement

21 February 2014

by Mary-Jane Thomas, partner

In my practice I deal with many disputes that arise out of contract milking type arrangements. I am horrified how many badly drafted contracts there are out there. These are some of the things people need to be aware of.

Make sure that the details in your contract actually record what you agreed to and that it covers everything that needs to be covered. Using an old agreement that you had with someone else as a basis for your new agreement might seem like a good idea (and a cost saving) at the time but if you get it wrong it could really cost you.

The Agreement

In the dairy environment because there are so many factors that go into a successful operation (good staff, efficient plant, good infrastructure, appropriate levels of nutrition, animal health and so on) there are many matters that need to be set out and agreed to. You need to have a comprehensive agreement. If things go wrong it is always easier to work through problems if the agreement clearly sets out expectations and responsibilities and how disputes will be resolved if and when they arise.

Contractors

For goodness sake do not sign an agreement that allows the owner to terminate for no reason giving for example, a month's notice. If you sign an agreement for a year but it has a clause that allows either party to terminate giving one month's notice for no reason this is exactly what can happen. Do not sign any agreement before you get advice on it.

Owners - out clause

Make sure that the contract allows you to rid yourselves of a contractor that is so bad that they need to go. Whilst I believe no contractor should ever sign an agreement that allows the owner to terminate prior to the end of the contract period for no reason every agreement should have an "out clause" for the land owner if things are going awry. You need to have agreements that allow you to terminate a contract early in certain circumstances. Similarly contractors need agreements that have teeth so you can get out of an agreement earlier if the land owner is not doing what they are required to under the arrangement.

Owners - legal relationship

Also make sure the legal relationship you are setting up is one of contractor and land owner and not employee / employer. It is all very well having someone draft up an agreement that says that the relationship is one of contractor etc but that in itself will not determine the true situation if it is challenged. What can occur is you can have a contract that allows you to terminate without reason, for example, then when you do this the "contractor" turns around and says in fact I was not a contractor I was an employee. Then you end up faced with an unjustified dismissal claim and claims for holiday pay, sick pay etc.

No one wants to spend money on advisers that they could have banked – spending money at the front end of a relationship to get proper advice and a proper agreement means that you reduce the chance of having to pay people to argue about what the agreement you drafted up one night off the internet means.