Ag Law

1
Ag Law

• Chapter 11

2
Choosing Council

• Ignorance of the law is no excuse
• Attorneys fees are cheaper than a court trial
• Compromise is usually cheaper than a trial
• Attorneys vary in their competency
• Choose council that you can trust
• An attorney that knows his/her limits

3
Written Versus Oral Agreement

• In most cases, a producers handshake is good
  enough to close a deal
• Get agreements in writing to avoid confusion
  later
• What if one dies? Or is unsatisfied?

4
What is a Contract?

• Legally enforceable arrangement or agreement
  between two or more parties
• Expressed Contract parties state the terms of
  the contract orally or in writing
• Inferred Contract the actions or conduct of the
  parties indicate an intention to contract

5
Elements of a Contract

• Two or more legal parties
• must have legal capacity to act
• mentally competent
• legal age
• Offer and Acceptance
• evidence that all parties intend to be bound by
  agreement
• offer or proposal and accepted by other party

6
Elements of a Contract

• Sufficient Consideration
• promise of each party to fulfill contract
• money, goods, or a promise
• Must not offend public policy or morals
• contracts are not enforceable if unlawful or
  immoral

7
Statute of Frauds

• Certain agreements must be in writing
• Commission for sale of real estate
• Contracts for more than one year
• Promise to be responsible for debt, default, or
  misdoing by another person
• Agreements upon consideration of marriage
• not agreement to marry

8
Statute of Frauds

• Promise of an executor to pay debts for deceased
  out of own pocket
• Contracts for sale of goods over a certain value
• Land leases

9
Breach of Contract

• Failure to comply with the terms of a contract
• In the event of a breach, injured party may
• Request completion or payment
• Be entitled to specific performance of the
  contract
• Agree in advance to the amount of damages
• Request the contract be canceled

10
Risk of Nonpayment

• Get your payment when you deliver
• Checks are not cash you dont get your money
  until the check clears the buyers bank and is
  deposited in your account
• Float buyers use your money interest free
• A buyer may use a distant bank, thus take a long
  time for the check to clear
• Demand checks drawn on local banks, cash, or a
  certified check

11
Forward Contract

• You are obligated to deliver the kind, quality,
  and amount of commodity within the time
  specified, buyer obligated to pay you the agreed
  price
• If the buyer declares bankruptcy, you may have to
  deliver the commodity, but only receive partial
  payment
• Bankruptcy court requires all bills to be paid in
  full to the bankrupt firm, then pays its debts
  at partial value

12
Storing Crops

• Get a warehouse receipt
• can be used for collateral for loans
• May possibly be sold

13
Safeguarding your crop or livestock

• Deal only with licensed warehouseman, brokers or
  dealers
• Dont be deceived by the size of a company
• Investigate the financial condition of the buyer
  before forward contracting
• Demand a scale ticket marked sold or storage
• Demand payment immediately drawn on a local band
• Be on the lookout for financial instability

14
Leases and Leasing

• Cash Lease
• Share Lease
• Manager Operator or Partnership, sometimes called
  Profit Sharing

15
Cash Lease

• Set a fixed price per acre etc.
• Good type of lease for
• small farm
• landlord lives a long ways away
• tenant has
• Landlord may prefer Cash Lease because
• guaranteed income
• less supervision by landlord

16
Cash Lease

• Man not be preferred by landlord because
• generally lower income
• landlord has less control of the land
• may be difficult to collect lease if crop fails
• Tenants may prefer Case lease because
• more profit if crops are successful
• may expand business and lower fixed costs

17
Livestock Share Lease

• Landlords like Livestock Share Lease because
• they retain an active interest in management
• it encourages more efficient use of resources
• it generally makes more returns than other leases
• Benefits to tenants
• less risk
• gain experience from the guidance of successful
  owner
• landlord is more willing to make improvements
• requires less tenants capital

18
Crop Share Lease

• Most common crop lease in U.S.
• Benefits to Landlord
• more opportunity for supervision
• more opportunity for maximum income
• Benefits to Tenant
• less financial risk
• landlord more likely to improve productivity

19
Manager Operator Lease

• Landowner and tenant specify in advance who will
  furnish what (labor, , mgmt)
• Landowner usually provides all capital
• Manager provides all the labor, shares in the
  returns by a fixed percentage (35-40)
• Popular lease with family operations

20
Manager Operator Lease

• Suggestions for Manager Operator Lease
• Separate living quarters for each
• Good records
• Farm business large enough to support all
• Ability to get along with each other
• Revision of the agreement from time to time

21
Leasing Machinery

• Financial Lease
• Use for one season, can return it then
• Usually an option to buy at end of lease
• Operator must
• make annual payments
• make repairs
• do the maintenance
• provide shelter for the machine

22
Leasing Machinery

• Operating Lease
• More than one year
• Not responsible for repairs, other than neglect

23
Insurance

• Insurance policy pays a professional risk taker
  to assume financial burden in case of the
  unexpected.
• Protects you financially from loss due to fire,
  flood, tornado, lawsuits
• Meets obligation to others who might suffer
  injury or loss because of something you did
• Makes it possible for you to take risks that you
  otherwise wouldnt

24
Common Kinds of Insurance

• Life Insurance protect against loss in the event
  of death
• Accident and Health Insurance medical costs,
  loss if income due to illness or accident
• Property Insurance if property is damaged,
  destroyed, or stolen
• Liability Insurance protects against lawsuits if
  you cause personal injury damage

25
Points to remember when buying insurance

• Insure against losses that may lead to financial
  disaster
• Insure irreplaceable items first
• Dont insure anything you cant easily replace
  yourself
• Adequate coverage, homes appreciate
• Buy insurance that provides coverage for
  situations which are likely to occur

26
Legal Liabilities of Farmers and Ranchers
27
What is Negligence?

• The omission by an individual to do something
  which a responsible person would do under
  similar circumstances
• Failure to use reasonable care under the
  circumstances

28
Duties towards your neighbor

• You must keep your buildings etc in good repair
• If you do something on your land, and it affects
  your neighbor negatively, you are responsible
• ex dig a hole, causes neighbors land to cave in
• building blows onto their land

29
Duties toward people on the land

• Invitees
• Licensees
• Trespassers

30
Invitees

• A person on your farm with your consent and for
  your benefit, or your mutual benefit
• ex someone comes onto your land to buy produce,
  or a hunter who pays a fee to hunt
• ex a salesman who has your permission to deliver
  his product, postman, contractors
• You have a duty to warn invitees of known hidden
  dangers
• You have a duty to inspect your property for
  hidden dangers

31
Licensees

• Someone who comes onto your land solely for their
  own pleasure, benefit or convenience
• The visitor is tolerated rather than invited
• ex hunters, guests
• Your duty is to warn of hidden dangers
• You have no obligation to make the land safe, or
  make inspection

32
Trespassers

• Someone who is not invited nor desired on your
  land
• You are only responsible for personal injury if
  you intentionally inflict them
• You may use reasonable force to remove
  trespassers
• May not use deadly force except for self-defense

33
Implied Consent

• If you see a trespasser on your land, and you do
  not ask them to leave
• They are then not trespassing

34
Doctrine of Attractive Nuisance

• If you negligently keep an object or condition on
  your land that is attractive and dangerous to
  children, you will be liable if a child is
  injured
• Landowner must know that children trespass where
  the object or condition is located
• Ex machinery, buildings, refrigerators
• Usually doesnt apply to natural conditions
  (lakes etc.)

35
No Trespassing signs

• Doesnt pertain to people who
• cant read and understand the sign
• feel that the sign doesnt apply to them
• cant see the sign

36
Liabilities of Employees

• If you direct and control a persons tasks, that
  person is an employee
• The employer is liable for the actions of all
  employees

37
Laws for Agricultural Labor

• Fair Labor Standards Act min wage, max hours,
  child labor
• Migrant Seasonal Ag. Worker Protection Act
  guidelines for seasonal labor
• Immigration Reform Control Act penalties for
  employing illegal aliens
• Occupational Safety Health Act (OSHA) provide
  safety in the workplace by eliminating hazards

38
Employers Responsibilities

• Train employees thoroughly
• Provide a safe place to work
• Provide reasonably safe tools, machinery
• Warn instruct employee of dangers which they
  could not reasonably expect to discover
• Provide competent fellow employees
• Make reasonable rules for conduct

39
Agents

• An agent has the authority to either transact
  business or manage the affairs of the employer
• Employer has less control over an agent
• Ex hired farm manager
• Employer is responsible for agents acts while
  the agent is doing your work

40
Independent Contractor

• A person or organization performing a job without
  control from the employer
• Employer only determines results
• Ex custom harvester, crop duster, well driller

41
Independent Contractor

• In general, the employer is not responsible for
  the negligent acts of an independent contractor
  except
• negligence in hiring a competent contractor
• furnishing a contractor with faulty plans
• interfering with a contractor
• hiring to perform a dangerous task

42
Legal aspects of fencing

• Inside Fences no stipulations
• Boundary Fences some state laws require
  landowners to enclose their own land with a fence
  tight enough and strong enough to turn livestock
• Responsibility for Division Fences People who
  build fences between their property. Each
  usually pays half
• Check State Laws

43
Common Laws Regarding Livestock

• A livestock owner who maintains good fences, is
  not liable for damage caused by livestock. The
  owner must not be aware the animals are in the
  habit of breaking out, and must make an immediate
  attempt to retake them when they do break out
• when animals break through a division fence, and
  fence is not good, animal owner may not be
  responsible

44
Common Laws Regarding Livestock

• an owner of a trespassing animal may be held
  liable if
• animals are in the habit of breaking out,
  regardless of fence condition
• the owner's fences are defective or insufficient
• negligence such as leaving the gate open causes
  the trespass
• animals that are driven along a road get out of
  control and enter adjoining fields, even though
  the road is not fenced

45
Summary of Fence Laws

• if a producer is negligent in maintaining their
  fences, liable
• if a producer keeps fences in good repair, but
  animals are in habit of breaking out, liable
• if producer doesn't make a reasonable effort to
  get animals back in, liable

46
Handling strays (not dogs or cats)

• landowners or local law may confine and care for
  strays
• a reasonable attempt must be made to locate owner
• finder is entitled to make reasonable use of
  strays (milk cow)
• owner must pay for feed etc
• if owner does not claim animal
• becomes property of finder, or
• sold at public auction, money goes into county
  funds

47
People injured by animals

• People injured by animals owner may be liable
  for injuries if
• owner negligently allows or causes them to commit
  the injury
• owner is aware that it is a vicious animal, and
  animal inflicts injury upon someone not acting
  negligently
• Animal Diseases check state laws

48
Brands, Pollution, Chemicals

• Brands must have brand inspection to sell
  livestock or transport out of state
• Livestock Pollution Laws registration of farm
  with sanitation department may be required
• Agricultural Chemical Laws must have permit to
  work with restricted use chemicals

49
What is a Riparian area?

• Area along a stream bank
• owner of a stream bank may dam a stream as long
  as they do not
• violate water right laws
• interfere with use of water by downstream owners
• divert the course of the stream
• reduce the amount of water unreasonably
• cause water to back up on the land of those above
  him

50
What is surface water?

• Runoff from snow melt or rain
• Damming surface water at own risk
• Check water right laws

51
Irrigation

• A riparian owner is entitled to reasonable use of
  water for irrigation
• You can get the right to take water by contract,
  license or by long continuous use of water
• Generally, only riparian water can be used to
  water land along that stream
• Livestock come first.
• Can form irrigation districts
• Permits required
• Water must be kept under control

52
Domestic use of water

• household purposes
• livestock
• irrigation less than two acres

53
What is Estate Planning?

• Preparing for financial security during
  retirement, the fair consideration of heirs, and
  the provisions for continuing the business
• Wills, taxes, insurance, property, and trusts and
  carries out a person's wishes for the disposition
  of property at death

54
Factors to consider in estate planning

• What are the objectives? (bills, college, taxes)
• Part of estate to provide for spouse
• Plans that will work regardless of who dies first
• Provisions that should be made in case the
  surviving spouse should remarry
• Retain an attorney for annual checkups

55
What are the types of Property?

• Real property - land and permanent improvements
• Personal property - tangible products (can see or
  touch), livestock, machinery, and intangible
  products (can't see or touch), bank accounts,
  contracts, royalties

56
What is a Deed?

• Documents that show what real property is owned,
  who owns it, and what method of ownership they
  have.

57
Kinds of Deeds used in conveying land ownership

• Warranty Deed the seller owns property free and
  clear of legal claims such as liens and mortgages
  except those claims specifically mentioned in the
  deed
• the seller has the right to transfer the property
• the buyer will have quiet and peaceable
  possession
• the seller will defend the title if anyone
  lawfully challenges its legality

58
Quit Claim Deed

• the seller is only conveying the seller's rights
  in the property
• seller does not promise he owns anything
• used to clear titles to property. All who have
  even a remote interest in the property give up
  their interest by signing a quit claim deed to
  one person

59
Transferring Legal Ownership of Property

• Laws of descent
• Contracts (required to sell land)
• Gifts
• Combined sale and gift
• Wills
• Co-ownership

60
Wills

• a Will is a legal statement of a persons wishes
  concerning the disposal of property after death
• a will must first be proven official and admitted
  to the courts. Because of this, those wishes
  should be carried out by a friend or relative
  (Executor)
• wills have no force until the maker dies
• must control only property owned by the maker of
  the will
• they do not become effective immediately upon the
  death of the maker

61
Reasons for having wills

• distribute assets as you wish
• reduce costs and time of settling the estate
• can name your own executor
• can name a guardian for minor children
• can establish trust funds (the money or property
  is left to an institution or person who
  administers the property or money in accordance
  with the will)
• family can avoid internal conflict among its
  members

62
Consequences of dying without a will

• state laws of descent decide
• court appointed administrator
• court appointed guardian
• cost more to settle estate

63
What are estate taxes?

• taxes on property transferred upon death

64
Retirement planning

• should have several sources of income
• Savings
• Employer sponsored pension plans
• Annuity yearly payment from an investment sum
• Trusts an owner transfers title to a trustee for
  the benefit of beneficiaries
• Life Insurance Investment type, may receive an
  annuity, lump sum, or loan

65
Retirement planning

• Tax Sheltered retirement plans
• Individual Retirement Accounts (IRA)
• Keogh Plan by self-employed
• Simplified Employee Pension Plan (SEP)
  established by an employer to make annual
  payments to an IRA
• Qualified Retirement Plan (QRP) by a
  corporation for employees

66
Retirement planning

• Social Security don't count on it
• Rental or lease farm property
• Sale of the farm
• US Savings Bonds
• Commercial Stocks and Bonds
• US Treasury Bills

67
Retirement planning

• Nonfarm investments
• Certificates of Deposit
• School Bonds
• Municipal Bonds

68
Chapter Summary

• Remember when in doubt, consult a qualified
  attorney