By Rachel Armstrong and A. Bryan Enders
For many farmers, winter certainly does bring the white stuff. But it isn’t snow. It’s paper. While shoveling through a blizzard of sales records, receipts, and orders, farmers might find themselves either smiling or cringing as they take stock. Perhaps a favorite customer significantly increased their purchases or the CSA survey delivered glowing reviews. On the other hand, maybe a single high-maintenance buyer drove down efficiency.
What can a farmer do about sales that aren’t being worth the time spent on them? Tinkering with the pricing structure, product mix, or delivery route is one way to try and lose the time-wasters. However, the sales agreement presents an often-neglected opportunity in the search for high-quality buyers.
A well-written sales agreement can be a very powerful tool because it sets the stage for a positive relationship. Many people might reflexively assume that a sales agreement implies fine print and deception. But, that is not necessarily true. A sales agreement is an opportunity for clear communication. We don’t need to leave the farm to see the value of that! How many relationships do you know that might have been salvaged if the two people involved had simply clearly expressed their needs? It’s the same way with a purchasing relationship. Think back to that high maintenance buyer. If he knew exactly what you needed, might he have provided it?
Whether you write your own sales agreements or use the one provided by your buyer, take a moment this winter to look over the terms. Are you happy with the advance notice your buyer gives you? Is your buyer consistently dropping below your minimum order? Do buyers make unexpected changes or inconsistent demands? These are all issues you may be able to resolve with your own sales agreement or by modifying your buyer’s.
A sales agreement is a legal document, (and this article will get to that) but the legal aspects of a sales agreement are not necessarily the best place for an individual farmer to begin when developing one. Most farmers never want to see the inside of a courtroom, so let’s start with the things farmers do want to achieve.
Your first step in developing a sales agreement is to outline your minimum standards for a financially viable sale. Minimum volumes and order deadlines are important elements, as is a clear refund policy. Next, outline the actions that will protect your product’s value and increase your customer’s happiness. For example, when and where does delivery occur and how should the customer handle the product to preserve its value? If the list of needs is supplemented with the traditional sales receipt terms (date, quantity, price), that signed sales agreement is a permanent record that both farmer and buyer can consult.
Many farmers work with large buyers that supply their own written agreement. In thiscase, a farmer shouldn’t hesitate to cross out the terms to which they object and write in better terms. If a buyer does not respond, those handwritten terms may control the sale. If a buyer does object, however, you might need to negotiate. The conflict-adverse farmer should not fear a negotiation—think of it as a mutual discussion of shared needs. After all, the buyer wants a successful sale as well.
Using written sales agreements that contain price, quantity, refund, and product handling information is a basic task, but a surprising number of farmers simply are not doing it. For example, the authors’ survey of CSA farmers across Illinois and Wisconsin found that only 24% of CSA farmers use a written agreement with their members or shareholders. Many CSA farmers are wary of using a formal written agreement because Community Supported Agriculture (CSA) is based on trust between farmer and eater.
A written CSA member/sales agreement can foster the trust that is characteristic of CSA, and of local food sales as a whole. Many farmers are looking for a greater commitment from their buyer. A written agreement is a polite and welcoming way to acknowledge what buyer and seller are trying to build–a healthier and more accountable food system. Farmers may find that their CSA customers actually trust them more after reading a thoughtful and thorough CSA membership agreement.
Written sales agreements may be essential to grow the market for local and organic products. Sue Kirby and her husband, Mike, are beginning CSA farmers near Chicago. Sue found that a written agreement was essential for her farm. “Many of our customers are brand new to CSA. We needed a written agreement just so we can explain how it works and what the customer is getting.”
Of course, fostering trust and increasing sales is not the only purpose of a written sales agreement. This document protects the farm if a dispute does go to court. In many states, a sales agreement totaling $500 or more will not be enforceable unless the other party signed it. Farmers should always hold onto a copy of the agreement with the other party’s signature, just in case.
Remember that only the terms actually contained in that agreement are enforceable. If the parties had an unwritten understanding, it will not necessarily ride in on the coattails of the contract. Write everything down. If a written agreement is impractical at the time, send a letter to the other party outlining the deal as soon as possible. That written confirmation may work just as well. Also, if you and the other party agree to any changes, write those down, too.
Written sales agreements can be a powerful tool to build a trustworthy and profitable sales relationship. A little time spent on sales agreement this winter is an investment for years to come. For more details on the special aspects of a CSA member agreement specifically, read our Model CSA Member Agreement and Guide at www.farmcommons.org.
Disclaimer: This article does not provide legal advice or establish an attorney-client relationship between the reader and author. Important information may be excluded in the interest of space or clarity. Always consult an attorney regarding your specific situation.
Rachel Armstrong is the Executive Director of Farm Commons, a nonprofit legal organization dedicated to farmers. Bryan Endres is an Associate Professor of Agricultural Law at the University of Illinois at Urbana Champaign.