Farmers in flood devastated areas of northern NSW and southern Queensland who have entered into forward contracts to sell summer crops need to review their agreements immediately to ensure they don’t miss out on the benefits of any ‘wash out’ or force majeure provisions in their contracts.
Contract wash out provisions relate to a crop being destroyed by a flood while force majeure provisions deal with other ‘act of god’ events, such as a road being washed away that make it impossible for farmers to deliver crops to a silo.
David Aitken, the Gunnedah-based head of Slater and Gordon’s Regional and Rural Practice, said it is common practice for farmers to forward sell their crops ahead of harvest.
“But, in a year like this, many farmers won’t have a crop to deliver to the agent or won’t be able to deliver it because of roads and bridges being destroyed,” Mr Aitken said.
“These farmers may now be in the unfortunate position of owing a lot of money to agents for failing to deliver on their ‘forward sell’ contracts.
“The one bright side of this problem is that, if their contracts have favourable ‘wash out’ or force majeure provisions, which act as a type of insurance, then farmers may not have to cover the shortfall between what they forward sold their crop for and what they can deliver.”
Mr Aitken warned that the time limits for farmers to exercise rights under wash out or force majeure can be very tight and that the exact nature of how these conditions work can vary from agreement to agreement.
“It is important farmers review their contracts and seek legal advice to establish the nature of the ‘washout’ and force majeure provisions and ensure they make a claim within the time frame set out in the contract,” he said.