I routinely receive emails from our Western Growers’ members asking me to review different retail and wholesale vendor supplier and indemnification agreements. Generally, these agreements contain requirements on shippers that you should closely scrutinize and amend (if possible) before signing on the dotted line. I have listed below some of the more critical issues contained in most of these agreements. It is always a prudent business practice to have legal counsel review these agreements before signing.
- Always carefully review the payment terms. Make sure the terms are within the scope of the PACA payment timelines. The payment terms may NOT extend beyond 30 days after receipt of product at contract destination. In addition, if you agree to special terms beyond 10 days, remember your invoice must reflect the exact terms outlined in the agreement.
- Review the indemnification clause. You should only be responsible for provable damages or injuries that you the shipper are confirmed to have caused. You should also not be responsible for damages or injuries caused by the buyer or any other third party.
- Acts of God/ Force Majeure. Make sure that any agreement includes protection not only for the buyer, but also as the shipper, you want protection in the event you are unable to supply product.
- The mode of invoicing i.e. EDI or mailed by USPS. Make sure that PACA Trust language is allowed to be included.
- Disputes and Arbitration and governing law. I usually always recommend The Perishable Agricultural Commodities Act (PACA) or The Fruit and Vegetable Dispute Resolution Corporation (DRC) as the venues where disputes should be handled. I would never recommend having written into the agreement commercial arbitration, or the jurisdictions of the State where the buyer is located.
- Insurance Requirement demands and certificates of insurance. This clause of the agreement needs to be discussed and reviewed with your commercial lines insurance broker.
These are just a few of the aspects of a supply agreement I would definitely focus on. There are many other clauses contained in these types of agreements that must also be closely scrutinized. This is why I always advise our members, before signing, have these agreements reviewed by legal counsel.
If you need recommendations for attorneys who specialize in these matters, please contact me directly at TommyO@wga.com or 949-885-2269.
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