Force majeure

[wd9]

Has anyone attempted to include force majeure in any production contracts with any buyers? Has there been any willingness to accept them? Any experience whatsoever would be helpful.

For those not knowing what FM is, here from Wikipedia: http://en.wikipedia.org/wiki/Force_majeure

[TOM4CWB]

WD9

Including "act of God" clause in actual pricing... in IP Canola can be extracted... with patience, fair negotiation, and marketers who are astute and have disciplined risk management systems in place. Basis Risk is much more easily negotiated... with any REASONABLE marketer...

The CWB system is NOT reasonable... and expensive on a bad basis in the first place. The CWB's system is the most expensive, least flexible, least competitive offer out there. I assume they don't care.

[parsley]

Standard in all custom contracts. We do them all the time. I pulled one FYI:

"IN the case of a crop failure for any reason, I will notify zzzz within 5 days of the incident and I will not have to deliver lentil/zzz production if crop failure verification is supplied to zzzzzz."

Write it in your contract. You might want 2 day or 6 days. etc. Both parties initial any changes.

Write up the contract YOU need. Do it in simple language. If the buyer doesn't like it, the worst thing that can happen is you look for another buyer.

The very worst thing for a buyer is if the farmer signs the contract and breaks it for ANY REASON HE CAN MUSTER, including dotted i's and t's.

The obligation of both the farmer and the buyer is to HONOR WHAT HE HAS SIGNED.

Maybe a PUBLIC published list of dishonored agreement consentees would solve this problem. It would save court costs for everyone. Publication would deter aborting.

2007 CONTRACT DISHONOREES

The CWB would be at the top of the 2007 list, would they not?

Parsley

[wd9]

I thought there was an organization working on a standard boilerplate contract for purchase that had a balance between buyer and seller rights. I can't remember who it was though, anyone?

[charliep]

The closest thing I would know of is the Clearing project the Western Barley Growers are working on. A key element is standardized contracts where both buyer and seller are subject to the same terms. No force majeure but an equality of rights and a process for resolution of problems (eg. not taking grain delivery when specified in the contract).

[JohnKenneth]

i read in teh 'new' mb co-operator this week that a company is offering an act of god on flax this year, at $8.50/bu yet. anyone know who that is?

i'm also trying hard to find one on peas for 07. will accept $20/t below non-Act-of-God clause price.

that cwb act of god clause is a piece of s**t. it's only a 50-50 to begin with so you have to have a major disaster to see any benefit. plus, there is no allowance for downgrading i.e. you're totally committed even if you end up with a 3 or 4 that's worth $80/t more in the non-board market.

considering how easy it is to transfer fpcs to other growers if you can't fill them, there is totally no benefit.

[TOM4CWB]

WD9;

An organisation that has a contract, arbitration, and administration to oversee these instruments of grain trade was/is the Canadian Special Crops Association (CSCA).
http://www.specialcrops.mb.ca/index.shtml

CSCA has now been incorporated into Pulse Canada administration... as of the spring of 2006 they work out of the same office and are managed by Gordon Bacon. The link "Generic Producer's Contracts" at CSCA takes us to:

http://www.saskpulse.com/selling/index.php?page=99

This site has Deferred Delivery, Production, and Standard Conditions Contracts in pdf formats.

Hope this helps.

[wd9]

Thanks for posting that Tom4CWB.

[kamichel]

Terragrains has the act of God clauses in their contracts (the ethanol plant at Bell Plain). I may be wrong but I believe CWB malt contracts have act of god clauses in them also to some extent.
Johnkenneth I had the same issue as you about signing the fixed price contracts. If one had 3 or feed then one would likely take a loss so the contract had lots of risk. Price goes up and the buyout is the difference in price, price goes down the CWB pockets the cash into the contingency fund , lose lose for producer. Grain qualitly goes down and take a loss compared to offboard.

[kamichel]

Johnkenneth are you sure??? 20 dollars per ton is 54 cents per bushel on peas. Are you sure you are willing to go that far just to get force majour?