Legislative
Critical Contract Provisions for Christmas Tree Growers (This is an article that was published and placed on the website)
The Christmas tree industry has experienced its share of tough times over the years, but the past few years have been especially hard for many growers. Christmas trees are a unique product. It takes six or more years to grow a mature tree for sale to the public. During that time the farmer goes to great time and expense to grow a tree that can be marketed to a consumer that can be very particular. There are many different types of risks that prevent a successful harvest. Most farmers go to great lengths to insure that they have a great looking tree to market and sell.
It is curious then when after going to great lengths to grow a great looking Christmas tree to see farmers turn around and sell their trees to a person or entity that may not ultimately pay the farmer for their crop. Why? There are many different reasons. Many farmers trust that they will be paid for their good quality product. Others may not understand the legal risk that may exist. Whatever the reasons for a farmer's failure to document a transaction, farmers should know that with a little time and effort they can substantially reduce their risk and exposure to not getting paid for the fruits of their labor.
There are two types of contracts - oral and written. Oral agreements are enforceable contracts even though the terms and conditions may not be specifically set forth in writing between the parties. In many cases these agreements can end with a hand shake between the parties. In other cases, the oral contract can occur during a telephone conversation.
The written contract is more formal and usually includes specific terms and conditions. However, there are cases of written contracts being written on napkins and matchbooks during a breakfast, lunch or dinner. These simple written contracts can be enforced between the parties. A written agreement is generally easier to prove in a court of law than an oral agreement because there is written documentation setting forth at least some of the terms and conditions of the agreement between the parties. Oral agreements can be difficult to prove and a person's credibility will be an issue in the case.
In addition to the common law (historical cases and decisions by judges), most states (including Washington and Oregon) have adopted statutes commonly referred to as the Uniform Commercial Code ("UCC"). Many people do not know that the UCC provides "gap filling" provisions. This means that to the extent your agreement is silent on a particular term or condition, the UCC will provide that term or condition. This term or condition may not have been contemplated between the parties at the time of their original contract, but the term or condition may spring into existence because of the UCC. It is possible to limit these surprise provisions by having an agreement that addresses the critical terms and conditions of an agreement between the parties. This means that a written agreement will override UCC specific provision.
What are the critical terms and conditions that should be included in a contract for the sale of Christmas trees? Please remember that each farmer may have unique issues that need to be addressed in any contract, so it is important to consult with your own attorney for what might be important in your situation. At the very least, you should consider the following terms and conditions.
The contract should specify the number of trees being sold, the species and quality (quality classification #1 or #2). If more than one species is included in the contract, it should be clearly stated. If different sizes of trees are to be shipped, then the numbers of each size should be specifically stated as well as the purchase price for each size and type of tree. Sizing can become an issue in some cases, so you might consider a contract term that allows for a variance in the number and sizes of a particular type of tree.
Shipping and arrival dates should be specified. Variances in the dates can also be specified because you never know when Mother Nature may strike and prevent a timely delivery of trees. You should specify who is responsible for the expense of any carrier or broker. FOB destination generally means that the farmer/shipper is to bear the cost and responsibility for delivering the Christmas trees to the buyer's facilities or destination. FOB farm (or the farmer's place of business) means that the buyer will bear the expense and risk of shipping the Christmas trees from the farmer's place of business.
Obviously, the farmer wants to be paid for his/her trees and the contract should specify the payment terms. Is there a deposit? Is the deposit refundable or not? What is the due date for any payment and will any unpaid balances accrue interest? These terms may seem basic, but it is surprising how often these terms are not included in a contract.
You should consider provisions that provide a duty for the buyer to inspect the Christmas trees when they arrive at the destination. Include provisions that require the buyer to provide written notice of any complaints within 72 hours of receiving the Christmas trees or such other length of time you determine to be appropriate. This gives the farmer the opportunity to address any issues and if necessary, make any corrections or conduct any independent inspections of the trees to determine if they meet contract terms and conditions. In past difficult markets, it was common for buyers who may not have sold all of their trees to complain about the quality of trees. Therefore, provisions that waive these types of delayed assertions after a certain period of time are important.
The UCC imposes certain warranties upon the seller of goods. It is important to address these warranties and limit the warranties to the extent possible. In these disclaimer provisions you can contractually agree that the trees are true to name only and waive expressed or implied warranties. These warranties include a warranty of merchantability and fitness for a particular purpose. It is recommended that you consider stating that there is no implied warranty of merchantability and no reliance on a seller's judgment. Make sure that the buyer knows that they are buying the trees AS IS.
When you are showing your Christmas trees to buyers it is important to make sure that they understand that a particular field that you may show them is only a sample of trees that might be delivered to them. If a buyer wants a particular field of trees and you represent to the buyer that you will deliver that field to the buyer, you better make sure that you do so.
Most farmers sell their trees to wholesalers for ultimate resale to the consumers. In these cases, confirm that the contract is between "merchants" and for commercial purposes only. If you are a farmer who is selling directly to the consumer, then there may be different UCC provisions that may apply to your sale to a particular customer.
Limit your liability so that your damages can never exceed the amount of the contract price. The UCC allows for incidental and consequential damages, including lost profits. For protection, a farmer should specify that these types of damages are waived.
If there is a dispute between the parties, your contract can provide where the dispute will be heard. The venue for any dispute should be in the county and state where you are doing business. It is, after all, where the trees are generally grown. Identify any terms of default (including payment) and the remedies that you can pursue against a buyer for any default that may occur.
The contract can also provide for the award of any attorney fees. These provisions can be a two-edge sword even if you specify that the other party is not able to recover his/her attorney fees. Many states specify that one-sided attorney fee provisions are not allowed and that both sides can recover their attorney fees. Attorney fees are generally awarded to the "prevailing party" in a dispute. If you do not win, you might be responsible for paying all or a portion of the prevailing party's attorney fees.
Please remember that farmers may need to include unique terms and conditions in their agreements. Please consult with your attorney to determine what might be necessary for your agreement. In addition, please consider the following "common sense" suggestions as you go forward.
Before you sell or sign any contract, know your buyer. We live in the information age and you will be surprised what you will find when you "Google" a person or business (try it on yourself). Ask for references and then call the references if you do not know the reputation of your buyer. You can go one step further and ask for credit reports.
To the extent possible, get a deposit up front. Better yet, get the full purchase price paid in full before delivery. This is particularly true for any trees that may be going out of country. In difficult "buyer" markets it can be hard to request a deposit. We find that growers who have great quality trees and customer service have a better opportunity to receive deposits for their trees. Again, the more you know about the buyer will help you determine how important your deposit request may be.
Use your common sense and do what you say you will do. If you contract to sell #1, noble fir trees that are five to six feet, then deliver that type of tree.
When mistakes or problems occur, deal with them immediately. Make sure that you listen and specifically identify the issue. If necessary, repeat it back to the party with the complaint. Take good notes and, if necessary, write a confirming letter. If the issue is your error or mistake, then take the necessary steps to resolve the issue in a professional manner. If the issue is the responsibility of the buyer, do not be afraid to stand up for your own rights, but do so in a professional manner.
In litigation the court interprets the terms and conditions of a contract in light of the facts of the case. Even the best of contracts may be interpreted in an unexpected manner. This is particularly true in cases where the "facts" may be faulty.
Litigation can be difficult and expensive. When the court decides a case, a third party is making a decision based upon his/her judgment. Alternatively, you should try to negotiate a resolution to any contractual problem that may exist. Mediation can be a good option in some cases to resolve disputes. The great thing about negotiations and mediation is that you participate in the ultimate decision.
The key issue to remember is that you spend a great deal of time and effort to grow your Christmas trees. When it comes time to sell your trees, take the time and effort to protect your investment and have a good written contract with a qualified buyer that you have researched or know by reputation. If you do take the time and make the effort, you increase significantly the likelihood that you will have a good holiday celebration of your own.
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Liability Insurance Information
One of the benefits of PNWCTA membership…the best rates for Retail Lot Liability Insurance
INSURANCE COVERAGE: As a seller of Christmas trees, you need a specialized liability policy to protect your premises and products sold. The Christmas Tree Liability Insurance Program includes insurance for the following:
- Tree Farms, including Choose & Cut: This includes coverage for the acreage upon which your trees are grown and sold. Premium is based on the number of acres. Choose & Cut Farms are subject to equipment use exclusions.
- Retail Lots: This includes the Christmas tree lots you operate. Premium is based on the number of lots with premium discounts for multiple lots.
WHAT TYPE OF COVERAGE DO YOU GET FOR YOUR MONEY?
LIABILITY LIMITS AVAILABLE: There are four limits of General Liability from which you may choose: $300,000; $500,000; $1,000,000; or $2,000,000 each occurrence & aggregate limits. Higher limits are available upon request.
POLICY TERM: The coverage is on an annual policy term effective 9-01-2019 to 9-01-2020. Applications received after the effective date, are bound the day accepted.
DEDUCTIBLE: $500.00 per occurrence. The deductible applies to all loss adjustment expenses.
- General Liability provides premises and operations insurance for claims arising from the operations of your Retail Lot, Choose & Cut or Tree Farm.
- Products Liability provides insurance for claims arising from the sale of your product.
- Personal and Advertising Injury Liability protects you against claims involving libel, slander and invasion of privacy.
- Broad Form Property Damage Liability
- Pesticide or Herbicide Liability provides insurance for claims arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of Pesticides or Herbicides at or from your premises. This coverage carries $100,000 or $200,000 Limits of Liability and a $1,000 Deductible.
Insurance program administered by:
Keelson Partners
707 SW Washington, Suite 625
Portland, Oregon 97205
503-226-1422 • FAX: 503-226-2488
Application - Liability (Link to Application)
Keelson Partners offers association members, that become members in the Christmas Tree Liability Purchasing Group, a competitive and affordable liability insurance program available through Great Northern Insurance Company a member of the Chubb Group of Insurance Companies, rated "Superior A++" by "A.M. Best" (Rating Guide for Insurance Companies). The Christmas Tree Liability Insurance Program is available in all states.