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Agriculture Blog
Opinions and insights from our Agriculture team
In difficult years we are asked about the options available to farmers who cannot fulfil the deliveries they have agreed in forward grain contracts. Below we take a look at the provisions of the Agricultural Industries Confederation Ltd (AIC) 1/16 home grown grain and pulses contract, used widely in the industry. A copy of the contract is available here.
The force majeure clause is not the only part of the AIC contract that comes into play when yields on the farm crash due to adverse weather. The whole agreement needs to be read to see how everything fits together and what courses of action may be open to producers.
Features of the AIC home grown grain/pulses first producer contracts (AIC 1/16)
Force majeure clause
The force majeure clause in the AIC 1/16 contract is narrow, and not inclusive: the events listed are not examples of force majeure, they are the grounds on which a notice can be served and deliveries delayed or cancelled without penalty. The grounds do include any “Act of God”. The key question is whether the prolonged hot, dry weather we have experienced this year falls into the definition of “Act of God”. Our view is that it does not, whereas a single, severe and exceptional incident affecting crops may do, depending on the kind of incident and its extent.
Even if your reliance on force majeure is accepted by your buyer, the AIC clause only serves – initially – to delay your performance by up to 60 days, giving you time to source from elsewhere to meet your delivery commitment. The failure of your own crop due to an Act of God may not be accepted by your buyer as sufficient grounds. They will argue that you can/could have source(d) crops from elsewhere in the UK, particularly if they have been able to find alternative suppliers.
The best course of action in almost all circumstances is to contact your buyer as soon as you know there is a problem and see what scope there is for agreement.
If you would like advice in relation to grain or other agricultural supply contracts please contact Sarah Whitehurst (01775 842508) or Julie Robinson (01480 587460) in the first instance.
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