United States

Department of Cooperative AgriCLtl~Ure

Agricultural Marketing Caapefatiie

service Agreements
Abstract

Cooperative Marketing Agreements: Legal

Considerations

John D. Reilly

Attorney-Adviser

Agricultural Cooperative Service

U.S. Department of Agriculture

This report focuses on the legal characteristics of cooperative marketing agreements. The basic legal principles governing marketing contracts are first reviewed. The integral

parts that make up a marketing agreement are then examined

in detail. Examples of common provisions used in marketing

agreements appear throughout the report for purposes of illustration.

Keywords: Cooperatives, marketing agreements, contracts,

transactions

ACS Research Report 106

July 1992
Preface

This report is intended to assist managers, directors, and

their professional advisers in drafting new cooperative marketing agreements as well as evaluating and updating existing

agreements already in place.

Samples from actual marketing agreements are used

throughout this report and have been edited to preserve the

anonymity of the cooperative associated with the particular

sample.

The author would like to thank those cooperatives that

voluntarily furnished marketing agreements for use in this project. I also want to acknowledge the assistance of Donald

Frederick and George Martin of the Agricultural Cooperative

Service in completing this report.
Contents

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..~.............................. iv

Introduction ......................................................................... .I

What Is a Marketing Agreement? ................................. .l

Marketing Agreements: Traditional Economic

Rationales for Their Use ....................................... .2

Putting Together a Marketing Agreement.. ....................... .3

Basic Legal Considerations .......................................... .3

General Contract Legal Principles Apply.. ............ .3

State Statutes.. ...................................................... .4

Uniform Commercial Code (UCC) ........................ .5

Agreement Format.. .............................................. .7

Contract Style.. ...................................................... .9

Type of Contract: Agency or Sales Contract.. ............. .10

Crop Agency Agreement.. ................................... .l 1

Agreement to Purchase-and-Sell.. ...................... .15

Sales Terms ................................................................ .17

Delivery ............................................................... .17

Acceptance ......................................................... .18

Determination, Allocation, and Payment of Net

Proceeds ..................................................... .21

Duration of Marketing Agreement.. ..................... .24

ii
Modification and Termination of Contract.. .................. .26

Modification of Marketing Agreement ................. .26

Termination of Marketing Agreement.. ................ .29

Assignment of Rights and Duties ................................ .32

Assignment ......................................................... .32

Third Party Creditors........................................... .36

Enforcement and Remedies ....................................... .39

State Statutes.. .................................................... .40

Liquidated Damages ........................................... .40

Specific Performance.. ........................................ .44

injunction............................................................. .45

Arbitration.. .......................................................... .46

Other Enforcement Options ................................ .47

Effect of One Member’s Breach

on Other Members’ Contracts.. ................... .48

Legal Defenses for Noncompliance.. .................. .49

Attorney Fees ..................................................... ..5 0

Emerging Issues Affecting Marketing Agreements......5 1

Food Quality/Environment .................................. .51

Labor ................................................................... .53

Conclusion ......................................................................... .54

Bibliography ...................................................................... .55

iii
Highlights

A cooperative marketing agreement is a legal document

recording the rights and duties of members and their cooperative with regard to marketing members’ production through the

cooperative.

As an enforceable instrument, marketing contracts can

provide significant economic benefits to the cooperative and

its farmer-members. They promote a degree of coordination

and help achieve operating efficiencies.

Laws governing cooperative marketing agreements are

based on traditional contract legal theories and common law

principles. In addition to common law principles, one must

also be aware of relevant sections found in State cooperative

statutes covering marketing agreements. Another legal

source, the Uniform Commercial Code (UCC), should always

be considered.

The format of marketing agreements will vary somewhat

from cooperative to cooperative. These differences are

attributable to regional customs, or practices common to a

particular commodity sector. Contract format can be influenced also by how a cooperative wants to present and accentuate its marketing agreement to the membership.

In addition to format, the style of language used in a marketing agreement should be noted. Some cooperatives intentionally keep their agreements simple to overcome potential

member antipathy toward restrictive agreements. Others find

it necessary to draft more detailed provisions due to a greater

need for market information or performance assurance from

members.

In looking over a marketing agreement, it is important to

recognize the legal relationship between the cooperative and

the member. An agreement either calls for the cooperative to

serve as agent for the member (agency contract), or requires

the cooperative to purchase the goods outright from the member (purchase-and-sell contract).

iv
A cooperative marketing agreement consists of several

essential parts. These include sections covering transaction

terms, contract modification and termination, assignment,

enforcement, and rights of third party creditors. Other sections

are added based on the special needs of the cooperative.

The transaction terms should adequately alert the member

to the conditions that govern the cooperative’s handling of the

crop. This includes requirements on proper delivery and acceptance as well as how and when a member is to be paid for the

product. The agreement’s duration is another important term.

In addition, a marketing agreement should outline suitable procedures to cover contract modification. Cancellation

and termination policies should be addressed, as well as

assignment of contract privileges or duties.

Important in any marketing agreement is that section discussing enforcement alternatives should there be a breach of

contract. The principal enforcement tools provided in marketing agreements are liquidated damages, specific performance, and injunction.

Recent developments have prompted cooperatives to

consider agreement provisions that reflect the changing forces

in agribusiness. This includes matters involving food quality

and the environment, as well as labor concerns.

Each cooperative faces unique external and internal

forces that affect its response to the marketplace. Within this

setting, a cooperative must first identify its economic objectives, then craft a marketing agreement that achieves those

objectives as efficiently as possible.

The members’ role in an effective marketing agreement

program should not be minimized. Successful marketing

cooperatives usually include a membership that is willing to

give up more of its individual control for the betterment of the

association. Members exemplify this by allowing themselves

to be subjected to a more demanding agreement to realize

greater efficiencies as a collective unit.

V
Cooperative Marketing

Agreements:

Legal Considerations

John D. Reilly

Attorney-Adviser

INTRODUCTION

What Is a Marketing Agreement?

A cooperative marketing agreement is a legal document

recording the rights and duties of members and their cooperative with regard to marketing members’ production through

the cooperative. It requires the member to market output with

the cooperative. And it obligates the cooperative to obtain the

best possible price for that output.

A cooperative marketing agreement is unique in that it is

both a contract between the member and the cooperative as

well as a pact between the member and the rest of the membership. A well-written marketing agreement should eliminate confusion as to the mutual obligations of the producer

and the cooperative. As a binding contract, the cooperative or

the member can enforce the agreement should the other party

fail to carry out agreed-upon duties.

A marketing agreement or contract should be distinguished from a membership agreement. A membership agreement encompasses participation agreements involving all

types of cooperatives. A marketing agreement is one type of

membership contract, and refers specifically to those agreements between a marketing cooperative and its members.

Despite this distinction, marketing cooperatives will sometimes use the broader term, membership agreement.

A cooperative marketing agreement also differs from a

crop or forward contract. A crop contract is a written agreement between a producer and buyer in which price is determined in advance of the time of delivery. Essentially, price is

locked in and is normally hedged against the futures market.
By contrast, a producer entering into a marketing agreement

generally will not know the price to be received until delivery

or some point thereafter.

Finally, it is important to differentiate a marketing agreement linking the farmer-member with the cooperative and a

producer contract with an investor-owned firm. Unlike an

investor-owned firm, a cooperative usually cannot dictate the

production decisions of its farmer-members.

Marketing Agreements: Traditional Economic

Rationales for Their Use

This report’s primary focus is on marketing agreements

as a legal instrument. As an enforceable document, however,

marketing contracts are capable of providing a number of significant economic benefits to the cooperative and its farmermembers.

In our free market economy, contracts serve as the primary means of achieving balance at different sectors in the agricultural market. Contract coordination can promote production of a more uniform product, as well as facilitate

production aligned with the market needs of sellers and buyers.

Marketing contracts offer a number of other specific

advantages. They serve as a catalyst for market information,

helping cooperatives organize more efficient resource combinations. An orderly program of marketing agreements promotes greater integration and less uncertainty, which reduces

transaction costs of cooperatives doing business with farmers.

Through marketing agreements, cooperatives can also

lower procurement, assembly, and delivery expenditures

because there are no soliciting costs. Processing and other

activities also cost less since volume will often be less of a

variable. With agreements in place, cooperatives can offer forward contracts with quantity, quality, and schedule guarantees to outside customers. Finally, marketing agreements,

2
especially those that require an extended commitment from

members, free a cooperative to concentrate more on long-term

objectives.

Member-patrons also gain from contract commitment. It

ensures a market for their production. Additionally, by using

marketing agreements members are, in effect, selling product

to themselves (as opposed to an outside middleman) to be

resold. The decision to contract with the cooperative transfers

the job of marketing to one with greater expertise and bargaining power. A cooperative knows about how much product it will receive and market at a given time and should on

average attain a better market price,

Cooperative marketing agreements can also give producers an advantage in securing credit, since banks recognize that

an agreement reduces risk and helps provide a market.

Marketing agreements play a constructive role in the

dealings between local cooperatives and affiliated regional or

federated cooperatives. The regional or federated cooperatives

do the actual marketing on the theory that they have greater

expertise and are more knowledgeable of market conditions.

This prevents locals from engaging in “unchecked marketing”

with the possible effect of setting prices at a lower level.’

PUTTING TOGETHER A MARKETING AGREEMENT

Basic Legal Considerations

General Contract Legal Principles Apply The laws

governing marketing agreements essentially follow traditional

‘contract legal theories and common law principles (i.e., legal

‘See Black, W. and Knutson, R., “Let’s Talk About Marketing Agreements,”

U.S. Department of Agriculture, Farmer Cooperative Service (Reprint

393 from September 1974 News for Farmer Cooperatives). Washington,

D.C. (1974).

3
principles based on decisions handed down in prior cases

based on similar fact or issue patterns).

In addition to common law principles, one must also be

aware of the provisions found in State cooperative statutes covering marketing agreements. Another legal source, the Uniform

Commercial Code WCC), should always be considered.

The basic concepts of marketing agreements have

become fairly well settled since the 1920’s and 1930’s. Before

then, marketing contracts were a relatively new convention,

and farmers tended to be wary in submitting to the various

restrictions found in such agreements.2 At that time, a number

of lawsuits by farmer-members contested the basic validity of

cooperative marketing agreements. These challenges were

generally unsuccessful, which effectively validated marketing

agreements as a legitimate instrument for cooperatives.3

Today, cooperatives are established organizations, and their

members are better informed about markets and prices, as

well as the objectives of their cooperatives.

State Sfatufes State cooperative statutes typically include

some discussion on marketing agreement matters. Some of the

material is merely advisory in intent, while other particulars

require compliance. Topics appearing in a number of State

statutes include filing, contract duration, exclusive dealing,

title to product, payment, liquidated damages, injunction,

specific performance, and interference with contract.

To avoid disputes on applicable State law, a marketing

agreement should stipulate which State jurisdiction is controlling. This is particularly important if the association is incorZFor further information, see Harl, N., 14 AGRICULTURAL LAW,

Q 133.01 [Zl. New York: Matthew Bender (1984) (hereinafter Harl).

3See Washington Cranberry Growers’ Association v. Moore, 117 Wash.

430,201 P. 773 (1922); Tobacco Growers’ Co-op Association v. Jones, 185

N.C. 265, 117 S.E. 174 (1923); Harl, Q 133.03 [2].

4
porated under a State statute that differs from the State where

its headquarters is located or where it conducts business. Even

if a cooperative intends to limit its activity to a single State,

disputes involving the marketing agreement can arise from

transactions that cross State lines in any number of ways. To

avoid confusion, a marketing agreement should include a provision such as the following:

This Agreement and all facets of the cooperative

relationship between the parties shall be governed and

interpreted under the laws of the State of (name

State) applicable to agreements to be performed

therein.

Uniform Commercial Code (KC) The Uniform

Commercial Code (UCC) has been adopted by most States as

the principal legal authority with respect to sales and other

commercial transactions. Briefly, the UCC requires any

agreement involving the sale of goods of more than $500 to be

in writing. While not all of the contract has to be in writing,

the agreement must contain enough written information to

alert the parties to their obligations. For example, a written

agreement for more than $500 that does not specify the

quantity to be sold is not enforceable under the UCC. The

agreed-upon quantity, however, need not be exact, but it

should be ascertainable from the written description

provided.

Marketing agreements often require members to deliver

their entire crop production, or their total crop harvested from

specified acreage. Such quantity descriptions are sufficient for

UCC purposes.

Similarly, the UCC does not require that a contract specify a price as long as the contract identifies a way the price can

be determined.

5
A written agreement, as a rule, is binding only if it is

signed by both parties. However, if the farmer does not sign

the agreement, it still may be enforceable if the farmer is considered a “merchant.” The UCC states that a merchant is:

a person who deals in goods of the kind or otherwise

by his occupation holds himself out as having knowledge

or skill peculiar to the practices or goods involved in the

transaction or to whom such knowledge or skill may be

attributed by his employment of an agent or broker or

other intermediary who by his occupation holds himself

out as having such knowledge or skill.4

State jurisdictions differ on characterizing a farmer as a

merchant. Over the years, States traditionally precluded farmers from the UCC definition of merchant based on a

widespread policy of protecting the farmer. Recently, more

jurisdictions have adopted an approach that treats whether a

farmer is a merchant as a factual determination based on the

farmer’s professionalism, special knowledge, and experience

with the type of goods involved.5

To summarize, a marketing agreement should be in writing and signed by both parties. It needs to clearly set forth the

rights, duties, and obligations of the cooperative and the

member. In its final written form, it is presumed to represent

the entire agreement, and usually cannot be successfully dis4UCC 2-104(l).

5See generally Juergensmeyer, J & Wadley, J., AGRICULTURAL LAW,

vol. II, 9332.2, at 272-277, Boston: Little Brown and Company (1982 &

1985 Supp.); and Looney, Wilder, Brownback, & Wadley, AGRICULTURAL LAW: A LAWYER’S GUIDE TO REPRESENTING CLIENTS, ch.

9, at 298-300, Chicago: American Bar Association (1990).

%ee UCC 2-202.

6
puted by oral evidence.6 A sample contract provision illustrating these points:

Entire Agreement. This Agreement, along with

the items and particulars referred to herein as they

exist from time to time, constitute the only and entire

agreement between the parties with respect to the subject matter hereof. There are no oral or other conditions, promises, agreements, representations or

inducements in addition to or at variance with any of

the terms hereof.

Agreement Format A cooperative marketing agreement

consists of several essential parts. This includes sections on

sales and transaction conditions, modification and

termination, assignment, and enforcement. Within this general

framework, the agreement format will vary somewhat from

cooperative to cooperative. These differences are attributable

to regional customs, or practices common to a particular

commodity sector. Contract format can be influenced also by

how a cooperative wants to present and accentuate its

marketing agreement to the membership.

Some marketing agreements are quite detailed and

appear as a complete and separate legal document. In other

instances, cooperatives use a brief marketing agreement to

outline key marketing provisions, then provide more extensive interpretation in the bylaws. Some cooperatives consolidate the entire marketing agreement within the bylaws. Any

of these approaches is acceptable since the articles, bylaws,

membership agreement, and marketing agreement are generally enforced collectively.

Even when the marketing agreement and bylaws appear

as separate documents, some overlap in content is likely

because of the common subjects covered in each document.

This replication, however, can be useful if the subject is impor7
tant enough to deserve special emphasis, such as member

retain and payment procedures.

Cooperatives that market more than one commodity or

product (i.e., fruit and vegetable cooperatives) sometimes

implement a general marketing agreement, then have an additional agreement for each crop. These individual commodity

agreements supplement the general marketing agreement by

rendering more detailed conditions and requirements relative

to growing and delivering the specific crop.

Cooperatives may institute a number of rules and regulations in connection with marketing operations. This can

involve such matters as the time and manner of delivery or

grade and inspection standards. Some cooperatives choose to

leave the bulk of such rules out of the agreement, especially if

the rules are subject to frequent change.

If a cooperative does rely on a substantial body of rules

outside of the marketing agreement, then the agreement

should state that any rules or regulations adopted by the

board shall be enforceable as if part of the marketing agreement itself. A sample provision:

Each member is to be bound by marketing agreement, articles of incorporation, bylaws, and all rules,

regulations, policies and resolutions adopted or established by or under the authority of the Association’s

Board of Directors, by whatever name described, which

provide for the governance, operation, or management

of the affairs of the Association or the conduct of its

members.7

Another example involving a milk cooperative:

71n the sample provisions provided in this report, the contracting parties

will always be referred to as “the Association” and “member.” Other

common references to the parties include “cooperative,” “grower,” or

“producer.” In some agreements, these terms are always capitalized.

8
The Board of Directors shall have the power to

establish, from time to time, and to revise and amend

the same from time to time, rules and regulations,

which each member agrees to be governed by, with reference to the proper feeding, housing and handling of

herds; the manner, time and method of milking; the

proper time and manner of caring for cooling, storing

and preparing such milk for shipment; and governing

shipment and delivery.

C0f7fraCt Sty/e In addition to contract format, the drafter

also needs to consider language style. One option is to draft

an agreement that it is quite general and policy oriented, with

few explicit requirements.8 Subject areas requiring more

specific rules or regulations are left to board action. An

agreement expressed in general terms is workable if

membership is small and there is enough common selfinterest and discipline among members to preclude

enforcement problems.

A cooperative may be forced to adopt an agreement with

few requirements due to an aversion by members to be legally

bound. In such situations, a cooperative uses a marketing

agreement that requires little from members other than agreeing to supply their product to the cooperative.

While some cooperatives deliberately keep their agreements simple, others find it necessary to go into much greater

detail in drafting their contract provisions. For cooperatives in

the latter category, receiving specific assurances of performance from members is vital. There also could be a greater

need for market information, which a properly designed marketing agreement can help elicit.

*Generally, courts reject challenges of contract vagueness by members on

the basis that the board of directors has broad discretionary authority.

See Harl, 5 133.02 [4].

9
Marketing agreements recite the obligations required of

the member. Many marketing agreements, however, fail to

specify the cooperative’s reciprocal duties owed the member.

In the long run, it is in the cooperative’s best interests to make

its commitments clearly known in the agreement. By doing so,

the cooperative provides the committed member with a better

appreciation of its services.

Type of Contract: Agency or Sales Contract

With marketing agreements, it is important to understand the legal relationship that exists between cooperative

and member. An agreement either calls for the cooperative to

act as agent (agency contract), or requires the cooperative to

purchase the goods outright from the member (purchase-andsell contract).

In contracts where the cooperative acts as agent, title

passes to the cooperative when the crop is delivered. If the

marketing agreement calls for the member to sell his or her

crop to the association, however, title passes to the cooperative (except in cases of recorded liens) at delivery unless some

other time is specified in the contract.

Over the years, cooperatives used agency contracts if

there was a need to preserve the identity of each member’s

crop and the time between delivery and sale was relatively

short. A purchase-and-sell contract would be implemented if

members’ production was to be pooled, or processed into

value-added items, or if considerable time was likely to elapse

between delivery and sale.

Traditional distinctions between agency and purchaseand-sell contracts have become somewhat blurred over time.9

gSee Harl, 5133.02 [21 for general discussion on agency/sales distinction.

See also Mueller, W. and Tinley, J., Membership Marketing Contracts of

Agricultural Cooperatives in California, at 17-19, California Agricultural

Experiment Station, Bulletin 760, University of California, Division of

Agricultural Sciences (1958) (hereinafter Mueller and Tinley).

10
Today, marketing agreements often embody elements of both

agency and sale transactions. For example, a marketing contract that expressly creates an agency relationship may also

empower the cooperative to commingle the member’s goods.

If a cooperative commingles, it is effectively taking full possession and making it impossible to return the same goods

that the member delivered. Also in agency situations, it is

quite common to include a provision that the member is no

longer liable for losses after delivery of the crop. In essence,

risk of loss has passed to the cooperative even though title

might still technically rest with the member.

Similarly, in so-called purchase-and-sell contracts, the

member will often not be paid in full immediately upon crop

delivery, but will be paid at a later time based on an averaging

of sales by the total membership.

Despite the potential ambiguities in the agency/sale

characterization, it is still good form to entitle an agreement as

one of agency if that is your intent (i.e., “Crop Agency

Agreement”), or purchase-and-sell (i.e., “Agreement to

Purchase-and-Sell”), as opposed to simply calling it a

“Marketing Agreement.“lO

Crop Agency Agreement

Four issues should be addressed in drafting a contract

provision that establishes an agency relationship between the

member and the cooperative.

First, the member (principal) must appoint the cooperative as agent. If a member’s entire production is to be marketlOThe intention of the parties as expressed in the contract or bylaws usually (but not always) prevails in determining whether the relationship

between member and cooperative is either principal and agent or seller

and purchaser. For general discussion, see Harl, Q 133.02 [2], at 133-23-25;

and Hulbert & Neely, Legul Phases ofFnrmer Cooperatives, U.S. Department

of Agriculture, Farmer Cooperative Service, Information 100, at 168.

Washington, D.C. (5th ed. 1976) (hereinafter Legal Phases).

11
ed through the one cooperative, the contract should say also

that the cooperative is to be the “sole” or “exclusive” agent, or

some other words to that effect. An example:

Each member hereby appoints the Association as

the sole and exclusive agent of member.

Second, the cooperative should require assurances that

the member has full title to the goods being transferred to the

cooperative. If any outstanding liens are on the member’s

crop, the member must notify the cooperative in writing. (The

subject of liens will be discussed later). A provision illustrating this point might state:

_’ Each member warrants that the title to the goods

covered herein shall be good and the transfer rightful,

that the goods shall be delivered free from any claim of

any third party, security interest, or other lien of which

the Association has not been informed by direct written

communication from member prior to delivery each

season.

Third, the contract should declare that after transfer to

the cooperative, the member can no longer exercise any control over the crop delivered. An example:

No member by virtue of being the owner of or

having furnished any products, shall exercise any control over the Association in regard to either handling or

marketing said products or the conduct of the business

of the Association other than as may be expressly provided in these bylaws or in any agreement with the

Association.

Fourth, an agency agreement should describe the extent

of control an agent can exercise over a member’s goods. Such

12
an explanation is necessary since an agent derives all authority from the principal. The following examples show an agent’s

powers can be quite extensive:

Agency authorizes, empowers, instructs, and

directs the Association to receive, process, handle, pack,

ship, and sell such products and by-products thereof in

such form or forms as the Association shall determine.

All matters pertaining to the handling and marketing of products shall be transacted solely in the name

of the Association, or in the name of any agent or agency to or through which said products may be consigned

or shipped for marketing or ultimately marketed.

Note the important right in the following example on the

power of the cooperative to borrow money, using the member’s goods as collateral:

All handling of the products of members produced

under agreement with the Association shall upon delivery to the Association be under the full and exclusive

control of the Association and its agents and representatives. The Association shall have the full and unqualified right to take title to such products and process,

sell, mortgage, pledge or otherwise encumber, dispose

of or transfer them and to sue on, enforce and compromise any rights or claims arising out of any transaction

involving such products.

Fifth, due to the extensive authority it can exercise over a

member’s goods, a cooperative often releases a member from

any potential liability after delivery of the goods to the cooperative. This is possible even though the member may still

technically hold title. For example, a marketing agreement

will include a provision similar to the following:

13
No member of the Association shall be liable

under any rules of agency on account of any contract or

contracts made by the Association in carrying on its

business of marketing.

To summarize, the following is a sample agency provision that incorporates the five key elements:

Each member appoints the Association as the sole

and exclusive agent of member for the purpose of marketing the products that member is obligated to deliver

to the Association; and for such purpose authorizes,

empowers, instructs and directs the Association to

receive, process, handle, pack, ship and sell such products and by-products thereof in such form or forms

(whether processed, manufactured or otherwise) as the

Association shall determine. The Association shall have

full power and authority to sell and transfer title to

such products at such time or times, and in such markets and for such amounts as the Association shall

deem best, and by and through such agent or agencies

as the Association may select or provide. The

Association may make such rules or regulations

respecting the delivery of products by the members as

the Association, in its discretion, shall determine.

No member by virtue of being the owner of, or

having furnished any products, shall exercise any control over the Association in regard to either handling or

marketing said products, or the conduct of the business

of the Association. In all of such matters the

Association may in good faith, use its own discretion

and judgment, free from any direction from the member furnishing the products. No member shall be

directly liable under any rules of agency on account of

any contract, or contracts, made by the Association in

carrying on its business or in marketing products.
Agreement to Purchase-and-Sell If a marketing contract

calls for the member’s crop to be purchased by the

cooperative, the cooperative not only takes possession, but

also assumes title. Several conditions should be included in

marketing agreements that involve purchase-and-sell

situations.

Like a crop agency agreement, an agreement to purchaseand-sell should contain language whereby the member warrants having the legal authority to deliver full title to the

goods. If the member does not have full title (due to an outstanding lien, e.g.), that fact must be communicated in writing

to the cooperative.

Second, an agreement to purchase-and-sell should affirm

the cooperative’s right of complete control over the goods

once in its possession. Such language may seem superfluous.

Yet cooperatives frequently insert such a declaration. An

example:

No member shall have any rights or shall exercise

any control by virtue of having furnished any products,

other than as may be expressly provided in this

Agreement or bylaws of the Association.

Another example:

The Association shall have the full and unqualified right to take title to such products and process,

sell, mortgage, pledge or otherwise encumber, dispose

of or transfer them and to sue on, enforce and compromise any rights or claims arising out of any transaction

involving such products.

Third, an agreement to purchase-and-sell needs to be

abundantly clear as to when risk of loss in the goods passes

from member to cooperative. Generally, risk of loss stays with

the member until the cooperative takes delivery and title.

15
However, this is not always the case. Contracts may be drafted to pass title to the association before delivery of the crop.”

Following are some examples where title is passed at

some point other than actual delivery of the goods:

Title to said milk and dairy products shall vest in

the Association when produced.

Another example:

Full legal title shall pass and vest in the

Association contemporaneously with the harvest of

fvroduct) .

In the following sample provision, title could pass at one

of several points of delivery:

Each member shall harvest and deliver fvroduct) eiher to the Association’s warehouse, a warehouse approved by the Association, or some other

warehouse suitable under the customs and conditions

then prevalent in the trade. Ownership and title to

deposited in and delivered to the (product)

Association shall pass to the Association at the time

such product is deposited in the warehouse. Ownership

and title to fvroduct) deposited in other warehouses shall pass to the Association, when such

fvroduct) is loaded for member’s account on

carriage provided by the Association, or when a warehouse receipt or a storage receipt evidencing such

fvroduct) is received by the Association. All

risk of loss regarding such product shall be upon mem-

“If the marketing contract is to pass title to the goods prior to their

delivery to the association, the contract should read so as to make plain

that it is a contract of sale rather than a contract to sell. See Legal Phases,

at 183.

16
ber until such time as ownership and title pass to the

Association.

Sales Terms

The sales or trade terms that appear in a marketing

agreement should adequately alert the member to the conditions that govern the cooperative’s handling of that member’s

crop. This includes requirements on proper delivery and

acceptance as well as how and when a member is to be paid

for the product delivered. Contract duration also needs to be

addressed.

Delivery A contract provision covering delivery terms

outlines the member’s responsibilities in transferring the crop

to the cooperative. Critical variables in delivery situations are

when, where, and how much. A marketing contract, instead of

specifying when or where delivery is to be made, often states

that the member deliver the product at a time and place to be

designated by the cooperative at some future date. A sample

provision on delivery might read:

All shall be delivered by mem- (product)

ber at member’s expense at the earliest reasonable time

after harvesting, or at such time as called for by the

Association, to the Association’s principal place of business or to one of the Association’s authorized buying

locations as prescribed by the Association. The

Association will use its best efforts to locate buying locations within a reasonable distance from member’s farm.

The other key variable in delivery situations, quantity, is

usually expressed in one of three forms: full production,

defined volume, or set acreage.

Full production is the most common mode in having

members deliver their product. A marketing agreement with a

17
full production provision requires a member to convey his or

her entire crop, harvest, or production to the cooperative. An

example:

Each member agrees to deliver to the Association

all milk so produced and not used for home consumption.

Another means is to require a member to deliver a

defined amount or minimum quantity of product. Using milk

again as an example:

The every-other-day pickup shall be no less than

1,000 pounds minimum.

A third method of specifying the quantity to be delivered

is to state that only production from designated acreage be

delivered to the cooperative. The applicable cropland or

acreage is usually described in the appendix to the marketing

agreement. A number of cooperatives handling fruits, nuts,

vegetables, and other specialty crops employ this method. An

example:

During the term of this Agreement, each member

agrees to deliver to the Association one hundred percent (100%) of his or her annual crop of (vroduct)

produced by the member upon the land described in

Appendix A to this Agreement.

Acceptance The terms dictating acceptance by the

cooperative generally focus on two areas: the quantity and

quality of goods to be delivered. Other conditions may be

necessary to assure orderly marketing. In the following

sample provision, a cooperative includes several qualifiers as

part of its acceptance:

18
The Association shall have the right, at its election, either (a) to reject any grain tendered or delivery

that is in a non-marketable condition or (bl bring such

grain into marketable condition at the expense of member.

In the example that follows, certain inspection and grading standards must be met before the cooperative accepts:

Inspection and Grading. Prior to acceptance by the

Association, all shall be inspected (product)

and graded by USDA in accordance with USDA standard rules and regulations.

All purchases and/or marketings of (uroductl

received by the Association from members shall be

based upon USDA grade, and each member agrees to

accept the grading established by USDA.

Cooperatives, particularly those involved in perishable

crops, will sometimes draft acceptance terms that give the

cooperative the option to increase or limit the amount of product it can receive from a member. For example, a cooperative

might be faced with an unusually large surplus of product in a

given season. If the crop is perishable, or if the cooperative

lacks storage capacity, a cooperative might reduce the quantity of product it will accept from each member. The following

sample provision gives a cooperative this option:

The Association maintains the right to refuse certain quantities from members in times of surplus.

Whenever the Board of Directors determines that the

Association will incur a loss because of an industrywide surplus in any of the products marketed by the

Association, the Board of Directors may decide it is in

the best interests of the Association’s membership as a

whole to reduce the amount of any one or more of such

19
surplus products to be marketed by the Association.

The Association shall have the right, upon reasonable

notice to member, to reduce the amount of such raw

products that member shall be entitled to deliver, in

accordance with a formula adopted by the Board of

Directors. The formula shall fairly and proportionately

reduce the amount of such raw products delivered by

all members to the Association.

A somewhat briefer version:

The Association may reduce or eliminate the right

and obligation to market products if the Board of

Directors determines that for reasons beyond the

Association’s control, the Association cannot market

the committed quantity of products on satisfactory

terms. Any such reduction shall be applied pro rata to

all members subject to marketing agreement.

Note that in each of these examples, any changes in the

quantity accepted are borne equitably by the membership.

To safeguard against impending supply shortages, some

marketing agreements give the cooperative the choice to

accept a greater amount of production than originally agreed

to by each member. An example:

Whenever the Board of Directors determines that

it would be in the best interests of the membership as a

whole to increase the amount of any of the products

marketed by the Association, the Association may,

upon reasonable notice to member, increase the amount

of such raw products that member shall be entitled to

deliver to Association. This action shall be in accordance with a formula adopted by the Board of Directors

that fairly and proportionately increases the amount of

such raw products delivered by all members to the

20
Association. Member shall have the right to elect

whether to deliver member’s increased entitlement.

Notice that in the above provision involving a supply

shortage, the member could also sell any surplus outside the

cooperative.

Determination, Allocation, and Payment of Net Proceeds

The marketing agreement should address in some measure the

allocation of net proceeds earned from the sales of members’

products. The payment process should also be explained in

the bylaws.

Most cooperatives use one of two methods in paying

members for products sold: (1) the gross margin method, or

(2) the pooling method.

Gross Margin. Here, the association pays the member the

going market price for the product less deductions for operating expenses at the time of delivery or shortly thereafter. Any

margin remaining at the end of the fiscal year is returned to

producers as a patronage refund. Following is a sample provision:

Payment to Member. The Association shall market

member’s (xoduct) and member shall accept

as payment for member’s (vroduct) a price

based on the current market price in the area for

(Dm8uct) of like grade and quality.

The Association shall pay the amount due member, less deductions authorized in this Agreement, not

more than days after delivery of (vroduct) to

the Association or the Association’s designated buying

location.

Pooling. A second payment method involves the use of

pooling procedures. Pooling is essentially an averaging process with respect to the prices and expenses of products mar21
keted by a cooperative. A member delivers his or her crop to

the cooperative without knowing what the final price will be.

The cooperative will often provide partial payment (i.e., an

advance) shortly after delivery. Final settlement is then made

at the end of the season based on the average of prices for

product of like grade and quality.

Some cooperatives take title to the goods pooled, though

it is possible to pool receipts without taking title to products

sold. For example, an association may combine the produce

from several individual producers according to grade and

quality and then sell all of the same kind as a single lot. In this

arrangement, all proceeds above expenses are then returned to

these producers on the basis of patronage. A sample agreement provision on pooling:

Payment to Member. The Association may at any

time pool any or all of member with (product)

any other (vroduct) of a similar kind and

grade. Member shall receive, for (vroduct)

pooled, a unit price equal to the average net unit price

obtained for the pooled (vroduct) less deductions authorized in this Agreement.

The Association shall make an advance payment

to member of percent of the current market price in the

area for (vroduct) of like grade and quality

not more than days after delivery of (vroduct)

to the Association or Association’s prescribed buying

location.

The following example illustrates the amount of detail

some cooperatives provide in explaining how payments are

calculated and allocated:

Determination, Allocation and Payment of Net

Proceeds. (a) Net proceeds shall be determined by the

Board of Directors by deducting from the gross pro22
ceeds cash advance payments to members, the costs of

receiving, processing, manufacturing, handling, storing, transporting, advertising, and all other expenses of

marketing. Expenses shall include, but not be limited

to, all costs of administration, reasonable allowances

for depreciation and bad debts, interest, and losses (to

the extent hereinafter provided). The Association may

also retain amounts from such net proceeds for reserves

or revolving funds created as hereinafter provided. If,

at the end of the fiscal year of the Association, the sum

of the costs and expenses to be deducted from gross

proceeds shall prove to be in excess of the gross proceeds, the difference shall, upon demand therefor be

paid by members to the Association in proportion to

the value of products delivered to the Association by

each member during such fiscal year.

(bl The net proceeds of the Association from business done with or for its members shall be determined

by the Board of Directors within eight and one-half (8

l/21 months after the close of each fiscal year and shall

be allocated among members according to the quantity

or value or both of products delivered by each member

in such fiscal year. The Association shall be obligated

to pay the net proceeds in cash or qualified or nonqualified written notices of allocation not later than eight

and one-half (8 l/2) months after the close of each fiscal

year.

(cl The Association may pool the products of members in one or more pools pursuant to a pooling plan or

plans to be prescribed by the Board of Directors. Any

such plan shall specify the conditions of eligibility of

products, the methods of operation, and all rules and

regulations in connection therewith. Such pools shall

open and close at such time as the Board of Directors

may prescribe and the time for closing may be

advanced or extended. Net proceeds from any such pool

23
may be separately distributed in conformity with the

provisions of this section.

Some of these more detailed provisions might just as well

be placed in the bylaws as in the marketing agreement.

One final point on payment procedures. If a cooperative

is in the practice of providing advance payments to members,

it should include a stipulation in the marketing agreement that

the cooperative will be entitled to recover any overadvances

the cooperative might make to the member. An example:

Member agrees to fully and completely indemnify

the Association against further payment that exceeds

the amount of member advances as hereinabove provided for in the Agreement.

Some provisions give the cooperative the expressed power

to recoup overadvances by canceling retained equities of the

members or setting up accounts receivable to be settled with

patronage refunds payable to members in subsequent years.

Duration of Marketing Agreement Cooperative marketing

agreements usually handle the contract duration issue in one

of several ways. Some cooperatives require a member to sign

an agreement that remains in force for a specified time period.

Other cooperatives may require new members to sign up for a

longer duration, such as 3 years, with contract extensions

thereafter for 1 year.

Some marketing agreements will not specify a duration

period. The contract continues from year to year unless canceled by either party on or before a designated date.

From the cooperative’s perspective, choosing the optimal

length of time for a marketing agreement to remain in force is

subject to a variety of considerations. One factor is the investment needs of the cooperative. A cooperative would likely

require longer member commitment if the commodity marketed demands substantial capital investment.

24
Another factor is how long the cooperative has been an

established, successful business. A new cooperative may need

a longer commitment from members to ensure its viability

during the difficult start-up period.

The competitive pressures from other cooperatives or

processors in that market can also influence contract duration.

Producers generally prefer shorter commitments. Cooperative

leaders must ask themselves whether other cooperatives within the region or within the industry impose marketing contracts on members. If so, what duration do they require?

Finally, cooperatives should be aware of any legal time

limits as expressed in their State cooperative statute.

Hopefully, once a cooperative has developed a track

record, there will be other bonds between the cooperative and

the member that make it less essential for the cooperative to

use agreements with extended duration periods.

While committing members under long-term agreements

has its advantages, some cooperative experts have questioned

whether they are necessarily more effective. Mueller and

Tinley note:

One-year marketing contracts are as effective in preventing such nonperformance as are longer contracts.

Growers generally are unable to know at the time of

signing their annual contracts whether or not supply is

going to be abnormally short. Even if the grower anticipated a short supply, he might not be sure that he would

be singled out by competitors for special price treatment.

Consequently, he would probably sign a contract with his

cooperative if past experience proved that it usually paid

growers average market prices or better. This type of

threat to member loyalty can usually be met as well by

annual contracts as by longer-term ones.l*

‘2Mueller and Tinley, at 23.

25
There is also the possibility that long-term contracts

without competent resource planning may leave the cooperative in a more vulnerable position. Schrader notes:

Longer term contracts may increase uncertainty

rather than reduce it. When there are enough users and

suppliers the mistakes or unknowns offset each other to

at least some degree. What appears to be a tightly coordinated system may require more excess capacity than the

spot price coordinated system.13

So there are certain tradeoffs in committing members to

protracted contracts. Obviously, long-term member investment and commitment are crucial for many cooperatives to

compete in an industrialized agricultural economy. However,

in dedicating an organization to increased investment and

business activity, the need for accurate planning becomes

more critical as larger amounts of resources are put to use.

Modification and Termination of Contract

Modification of Marketing Agreement The association may

need to modify the terms of its marketing agreement from

time to time. A sample contract provision covering

modification:

This instrument contains the entire agreement of

the parties. No modification hereof shall be valid

except in writing and executed with the same formalities as this Agreement.

If the proposed modification is substantive and affects a

sizable portion of the membership, some cooperatives require

formal member ratification. A sample provision:

%chrader, L., “Potential Coordinating Functions of Farmer

Cooperatives: Discussion,” Farmer Cooperatives for the Future, 62-63, at 63.

Purdue University, Department of Agricultural Economics (1985).

26
The Association reserves the right to alter any provisions of this Agreement provided any such alteration

is first approved at any regular or special meeting at

which a quorum is registered as being present or represented by mail vote, by a majority of the shareholders

so present or represented by mail vote, where the notice

of such meeting contains a statement of the proposed

alteration.

If a cooperative anticipates the need to modify its marketing agreement on a frequent basis, it may be wise to isolate

those provisions subject to frequent change and make them

part of a separate set of rules and regulations to be approved

periodically by the board of directors. Such rules can then be

given the same force as the marketing agreement by inserting

a provision:

Each member is to be bound by the marketing

agreement, articles of incorporation, bylaws, and all

rules, regulations, policies and resolutions adopted or

established by or under the authority of the

Association’s Board of Directors, by whatever name

described, which provide for the governance, operation

or management of the affairs of the Association or the

conduct of its members, all as each may exist from time

to time whether by revision, adoption, amendment or

other action.

Rules or other policies that supplement the marketing

agreement will be upheld by courts so long as their issuance is

based on the board’s best judgment without evidence of

fraud, bad faith, or negligence.14

Instead of modification, a cooperative might need to

institute a new marketing agreement altogether. However,

%See Hanson v. Ontario Milk Producers Cooperative, 294 N.Y.S. 2d

(1968).

27
what happens to existing agreements still in force?

Customarily, a cooperative can enter into new contracts with

members different in form from the existing contract. At the

same time, however, the cooperative should extend to members under the old agreement the opportunity to switch over

to the new agreement. If the association eventually wants to

bring all agreements back to uniformity, it can do so during

the next period for terminating existing agreements.

Several illustrations on the points just covered:

This Agreement is one of a series of agreements

generally similar in terms between the Association and

its members. It is mutually agreed that the cancellation

of any agreement or agreements in this series shall not

operate to invalidate this Agreement. The Association

may enter into agreements with other members different in terms from those contained herein without invalidating this Agreement provided that any member, at

his or her request, may sign an agreement containing

terms used by the Association in future agreements

with other members.

Another example:

The Association may enter into agreements with

other members of the Association differing in terms

from those contained herein, but consistent with the

Association’s bylaws, without invalidating this

Agreement. On request, member may sign such an

agreement as a substitute for this Agreement.

Whenever a member enters into a new marketing agreement with the cooperative, it is good practice to insert a provision similar to the following:

28
This Agreement supersedes and cancels any prior

agreement entered into between the parties thereto.

It is also a good idea to declare that any modification to

the bylaws effectively amends the marketing agreement. A

sample provision:

The bylaws shall constitute a part of this

Agreement and any amendment duly made to said

bylaws shall automatically modify this Agreement to

take effect as of the date of the bylaw amendment.

Similarly:

The bylaws, as presently amended, and any future

amendments to the bylaws, shall constitute a part of

this Agreement and are hereby incorporated herein by

reference. Any duly adopted future amendment to the

bylaws shall constitute an amendment to, and modification of, this Agreement.

Termination of Market&g Agreement Termination of the

agreement usually transpires in one of several ways. The

member or the cooperative may give proper and timely notice

to terminate as defined in the agreement. Another basis for

termination is breach of the agreement by either party.

In discussing contract termination or cancellation, it is

important not to confuse termination of membership with termination of a marketing agreement. In some cases, one’s

membership in a cooperative may continue despite termination of the marketing contract.

Cooperatives differ on how to handle a breach of contract. In certain instances, a cooperative will take no action at

all. Other associations will terminate a member’s agreement

without notice. Still others will provide the member with a

29
hearing before the board of directors or some related committee. At the hearing, the member has the opportunity to present

his or her case. The hearing committee then decides whether

to terminate the agreement.

An agreement provision covering termination of a member’s marketing contract should include several points.

First, the marketing agreement should state that the

member and cooperative are not released from any indebtedness or other obligations still outstanding at the time the

agreement is canceled or terminated. An example:

The cancellation of this Agreement by either party

shall not (1) affect any uncompleted sales or transactions between the parties hereto, (2) release either party

from any indebtedness unpaid thereafter occurring

under this Agreement, (3) relieve member from obligation to sell to the Association any product acquired or

produced by him or her during the preceding season, or

(4) relieve the Association from selling any product

produced during that season.

Second, termination of one member’s agreement in no

way alters the duties of other members under contract. A sample provision:

No action taken by the Board of Directors against

one member in terminating or modifying terms of this

Agreement shall operate to release or discharge in

whole or in part in any manner whatsoever the obligations of any member under any other agreement.

Third, it is important to state that the member whose

contract has been terminated does not possess any property

rights in the cooperative itself. This does not diminish, however, the member’s right to equity invested in the cooperative.

Some State cooperative statutes provide specific requirements

30
on how and when a terminated member is to be repaid.

Otherwise, a terminated member’s equity does not have to be

paid back immediately, but should be returned at the same

rate as paid to members still in the cooperative. An example

provision on this point might read:

Each member is received into membership upon

the express agreement on the part of member to that

effect; and upon the express conditions that the value

of the property rights and interests of each member in

the general property of the Association (prior to dissolution) is nothing. In the event of termination of membership prior to dissolution, irrespective of how terminated, such member shall not be entitled to anything as

or for the value of such property rights and interests.

However, this has no effect on member’s rights to

receive his or her share of assets, allocations, etc., in

accordance with provisions of bylaws and articles, i.e.,

on the same basis, at the same time, and in the same

manner, as members whose memberships have not terminated.

Another example:

Member upon termination shall be entitled to no

compensation for any interest in the Association and

shall forfeit all rights in the property of the

Association. Such event, however, shall not limit or

impair the obligations or liabilities of the Association

or member to complete all transactions commenced

prior to such event, or the rights of member under any

allocation certificate or any other evidence of indebtedness or any credit to his or her account on the books of

the Association.

31
Assignment of Rights and Duties

Assignment In discussing the concept of assignment, it is

useful to first consider the different circumstances in which

this situation can arise in a cooperative setting. For instance, it

could mean assigning one’s membership in a cooperative. Or

it might involve assigning one’s duties under a marketing

agreement to another party. Or a member may take out a

mortgage with a creditor. In return, the creditor is to receive

any cooperative payments owed to member. This last situation

typifies lien situations involving third party creditors.

Many cooperatives do not permit one’s membership or

duties under a marketing contract to be assigned under any

circumstances. Other cooperatives will allow the duties of a

marketing contract to be delegated to designated individuals,

particularly in cases after the death of a member. Getting consent of the board of directors is usually a prerequisite to any

assignment. Some examples illustrating the different cooperative approaches to assignment:

The rights and duties set forth in this Agreement

are personal to each member. Neither this Agreement

nor the relationship established hereby may be sold,

assigned, transferred, encumbered, made subject to a

security device, or otherwise disposed of in any manner

whatsoever by any member.

No member may assign or transfer any right, title

or interest arising out of this contract or to any property, for the purpose of avoiding this Agreement. This

shall not prevent, however, any member from selling or

transferring property in good faith for valuable consideration.

32
This Agreement and the rights and obligations

thereunder shall not be transferred or assigned without

the prior written consent of the Association.

This Agreement, and the rights and obligations

hereunder shall not be transferred or assigned, whether

voluntarily or by operation of law, without the prior

written consent of the Association. In the event that all

or any part of the land described in the Appendix

attached hereto or, if not described therein, any land

where the products which are subject to this Agreement

are grown, shall be sold, leased or otherwise transferred, this Agreement shall nevertheless remain in full

force and effect and member shall remain obligated

hereunder unless and until the Association consents in

writing to a transfer or a termination of this Agreement.

In the following examples, assignment is permitted

under certain circumstances following the death or legal incapacity of the member.

This contract is not assignable; but upon death of

member the contract will be binding upon the decedent’s estate, personal representative, and heirs as to,

and only as to, any planting of a contract product in

being at the time of death.

Transfer of Membership. No membership, nor any

membership right, shall be assigned, transferred, alienated, or encumbered, either voluntarily or involuntarily, or by operation of law or otherwise, without the consent of the Board of Directors, to a person not qualified

to be a member of the Association. However, in the

event of the death or legal incapacity of a member, the

33
membership shall be deemed transferred to the personal representative of such member, and the personal representative shall continue to be bound by the deceased

or incapacitated member’s obligations, including the

obligation of member to deliver agricultural products

to the Association. The personal representative shall be

entitled to represent the estate or incapacitated member

as a member upon representation in writing, filed with

the Association, of such proof of his or her capacity as

the Association may require.

Transfer of Membership. Subject to the proviso

hereinafter set forth, no certificate of membership may

be assigned, voluntarily or involuntarily, or by operation of law, and any purported or attempted assignment, transfer, alienation or encumbrance of either a

certificate of membership or any purported rights

reflected thereby shall be wholly void and confer no

rights upon the purported assignee, transferee or

claimant.

Provided, however, that in case of the death of a

member who is a natural person, the membership of

the deceased shall pass by operation of law, notwithstanding the foregoing provisions of this section, to the

person or persons lawfully entitled thereto. Such transfer will be effective when it shall appear that said person or persons is or are eligible to membership in the

Association and shall have concurrently with said

transfer assumed, agreed to perform, and discharge

each and all the undertakings, agreements, burdens and

liabilities of the deceased to the Association at the time

of the death of said member, pertaining to or arising

out of said membership or otherwise. Membership in

the Association shall entitle the executor or administrator of any deceased member to continue deliveries

34
under the provisions of the bylaws for and during the

current year in which said death may occur and irrespective of the transfer of the membership by death of

the deceased.

Sometimes the cooperative, and not the member, seeks to

assign rights and responsibilities relative to the marketing

agreement. This could be due to a cooperative merger or consolidation with another cooperative association.

Consequently, some cooperatives include in either its bylaws

or the marketing agreement a provision on the enforceability

of the marketing agreement should the cooperative become

affiliated with another association. An example:

Successors in Interest. This Agreement shall be

binding upon and be for the benefit of the parties and

the successors, assigns, heirs, executors, and administrators of member, as well as any association, trust, corporation, firm or organization with or into which the

Association may be consolidated or merged, or to

which all or substantially all of its assets may be sold

or transferred.

Other examples:

This contract shall bind the heirs, executors,

administrators, successors, assigns or grantees of the

respective parties hereto; provided, however, that the

same may not be assigned by the Association except to

a non-profit, cooperative association organized and

existing under the laws of the State of (name of State).

or a corporation or organization of a cooperative nature

that may be authorized by law.

35
Successor Association. Each member hereby agrees

that this contract shall not only be binding with the

Association but with any association similar in nature

that may succeed the Association or that may be formed

in its place and stead, of which member may become a

member and to which this contract may be duly

assigned in writing. Any association to which this contract may be assigned shall be cooperative in character

and conform to the laws of the State of (name of State)

relative to the organization and operation of cooperative organizations.

Third Party Creditors While cooperatives are generally

reluctant in allowing members to assign their membership

rights or contract duties, they recognize the needs of farmers

to obtain crop financing. Consequently, associations usually

have procedures in place for making payments to third party

creditors in situations where the member has mortgaged a

crop, and thereby created a valid lien in favor of a third party

that is potentially superior to the rights and interests of the

cooperative.

In anticipating dealings with outside lienholders, a cooperative should include several items in its marketing agreement to protect the interests of the cooperative and the membership.

As discussed earlier, a cooperative should require assurances from the member that he or she has good title and that

the crop is free and clear of all liens and encumbrances. If this

is not the case, the member must notify the cooperative in

writing of any liens on the crop prior to delivery. Some examples:

Each member confirms that all (vroduct)

will at the time of delivery be free and clear of all liens

36
and encumbrances except those to which the

Association has given specific written consent.

Each member warrants that the title to the items

covered hereunder each year shall be good and the

transfer rightful, that the same shall be delivered free

from any claim of any third party, security interest or

other lien of which the Association has not been

informed by direct written communication from member prior to delivery each season.

Second, a provision on liens should state that any cooperative payments to the lienholder cannot exceed the amount

currently owed by the cooperative to the member. In effect,

the lienholder stands in the place of the member until the lienholder’s interest is satisfied. Some sample provisions covering

payment to lienholders:

Nothing in this Agreement shall be construed to

preclude member from obtaining production financing

by placing a lien on member’s growing crop. Such lien,

however, is to be subject to the right of the Association

to handle the crop covered hereby according to the

terms of this Agreement. In such event, lienholder shall

stand in the place of member as such lienholder’s interest appears and until such interest is satisfied.

Another example:

Liens. Member shall notify the Association of any

lien on any (uroduct) covered by this

Agreement. Member shall obtain permission from the

lienholder for the Association to market such

(uroduct) and to retain any deductions from

the payments to producer authorized hereunder and

37
under the articles of incorporation and bylaws of the

Association. After any such deductions, member authorizes the Association to apply the balance of the sale

proceeds, or so much thereof as necessary, for payment

of the lien.

Third, a cooperative should declare its right to be indemnified by the member in those situations where the cooperative pays the member, and is then forced to make similar payment to an outside lienholder due to a superior claim to that

same payment. The following provision includes discussion

on the cooperative’s right to indemnification:

Each member signing this Agreement warrants

that he or she has full legal authority to deliver the

commodity. Each member agrees to notify the

Association of any and all ownership interest in liens

against commodity delivered hereunder at or before

time of delivery and of the respective interest of each

interested party therein.

The Association hereby assumes and agrees to pay

any lien indebtedness of member relating to the delivered commodity that has been duly perfected and of

which the Association has actual knowledge. However,

the Association’s liability with respect thereto shall not,

in any event, exceed the amount of member’s proportionate part of the net proceeds of commodity delivered

under the Agreement.

In the event that any advances are made to member and it later develops that a third party has an interest in a lien on said commodities delivered hereunder,

member agrees to fully indemnify the Association

against further payment that exceeds the amount of

member advances as hereinabove provided for in the

Agreement. Such indemnity to the Association includes
but is not necessarily limited to travel expenses, court

costs, bonds, and attorney fees.

Enforcement and Remedies

A key section in any marketing agreement involves the

enforcement alternatives available to a cooperative when a

member violates the agreement. Marketing contracts generally

do not discuss the remedies available to members or the conditions under which members may seek damages should the

cooperative breach the marketing agreement.15

In the enforcement area, two competing interests need to

be recognized. In one sense, a cooperative wants a choice of

enforcement options at its disposal, yet at the same time

desires simple and direct enforcement policies. In drafting sections on enforcement and available relief, a cooperative

should envision those situations where possible conflicts with

members will predominate.

A cooperative must also resolve what measures it is willing to take in enforcing its agreements with members. A cooperative may choose to treat a contract breach as grounds for

termination of membership, or seek monetary damages,

demand specific performance from the member to carry out

the agreement, or seek to enjoin the member from delivering

the crop elsewhere. A cooperative can always disregard a

member’s breach; but it then must consider the impact on the

other members. The cooperative and its members ultimately

ISDespite the lack of discussion of member remedies in marketing agreements, members do have all the usual remedies under contract and related law to draw from in bringing a legal action against their cooperative.

Some of the more common forms of relief sought by cooperative members include damages, rescission of the marketing contract, termination

of membership, injunction, specific performance, and an accounting. See

Harl, 5133.04 [3] for further discussion and case examples.

39
benefit from an enforcement policy that is applied an a consistent manner.

State Statutes State cooperative statutes, as a rule, authorize

cooperatives to include certain enforcement measures as part

of their marketing agreements. Remedies often cited by these

statutes include liquidated damages, specific performance,

and injunction.

State statutes merely authorize a cooperative to pursue

these remedies. For example, a State cooperative statute that

gives a cooperative the right to seek an injunction, does not

relieve a cooperative from satisfying the actual procedural

requirements for meeting an injunction (filing a verified complaint, etc.1 like any other litigant.

It should be emphasized that cooperatives can pursue

any other remedies available to them under the law; they are

not restricted to those mentioned in State cooperative statutes.

Liquidated Damages Most cooperative statutes cite

liquidated damages as a proper remedy for inclusion in the

marketing contract. Liquidated damages are a sum agreed to

by the parties at the time of contracting, and represent a

measure of damages in case of contract breach. Liquidated

damages are computed from a formula expressed in the

marketing agreement. The formula usually appears in one of

the following ways:

(1) a percentage of the market value (example: 20 percent

of the gross sales price of such commodity sold in violation of

the agreement);

(2) a fixed sum per unit of produce (example: $1.00 per

hundredweight of milk sold in violation of the agreement);

40
(3) a fixed dollar amount plus a fixed sum per unit of

produce (example: $1,000 plus $0.05 per pound of product

withheld);

(4) a percent of the market value or a fixed sum,

whichever is greater; or

(5) an amount equal to the value of the commissions lost

by the cooperative.

An injured party looks to liquidated damages when it is

difficult or impractical to calculate the actual damages suffered. Liquidated damages must be reasonable and not disproportionate to the injury likely to be suffered by the cooperative.16

Marketing agreements with a liquidated damages clause

usually include an explanation of the underlying rationale for

seeking this remedy over others. A sample provision for liquidated damages:

Each member agrees that if at any time while this

Agreement is in force, he or she neglects or refuses to

deliver hereby contracted for to (product)

such person or persons, and at such price or prices as

may be designated by the Association, then in that

event, member will pay to the Association a sum of

money equal to percent of the gross sale price of all

(nroduct) that member sells in violation of

‘6”Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of

loss, and the inconvenience or nonfeasibility of otherwise obtaining an

adequate remedy. A term fixing unreasonably large liquidated damages

is void as a penalty.” UCC 2-718 (1).
this Agreement. Such payments shall not be construed

as a penalty or forfeiture, but as liquidated damages.

It is expressly understood by each member that the

Association and its members collectively will suffer

damage difficult to ascertain by reason of such neglect

or refusal inasmuch as this Agreement establishes an

exclusive agency for the purchase and sale of personal

property under special circumstances, and inasmuch as

this Agreement is one of a series, dependent for its true

value on the compliance by each and all of the contracting parties with each and all of such Agreements, and

that an important element of the damages arising from

default by member would be interference with the

accomplishments of the purpose of the Association in

respect to the Association handling and marketing of

such products.

.

Another example:

Inasmuch as the remedy at law would be inadequate and it would be impracticable and extremely difficult to determine the actual damage resulting to the

Association should member fail to deliver the products

c/vered hereby, regardless of the cause of such failure,

member hereby agrees to pay to the Association sum of

$ per (auantitv) for all products delivered or

disposed of, by or for the member, other than in accordance with the terms of this Agreement.

Once breach of contract is proven, then liquidated damages can be assessed directly by the association without

recourse to the courts (unlike such other remedies as specific

performance or injunction). A cooperative should, however,

provide itself with several collection options should a member

fail to pay assessed damages. One example:

42
Any sums owed by member to the Association as

liquidated damages or otherwise may be deducted from

the amounts payable to the producer.

A more comprehensive approach:

In addition to the Association’s right to liquidated

damages as set forth herein, in the event of member’s

breach of this contract, the Association shall have no

obligation to make further payment, shall have the

right to withhold such payment, of any and all crop

proceeds, appropriations and member’s equity allocations as the payment of such become due. The

Association shall have and is hereby given a prior lien

upon such amounts otherwise payable to secure the

payment of liquidated damages as herein set forth. The

Association may at any time set off against crop proceeds, appropriations, and member’s equity allocations

such liquidated damages, for which the Association is

given a lien, and such liquidated damages shall be

deemed canceled and satisfied to the extent of such

crop proceeds, appropriations, and member’s equity

allocations.

Two final points on drafting a liquidated damages clause

for a marketing agreement. A cooperative should assert its

right to bring successive actions for each failure or breach. A

cooperative should also declare its prerogative to pursue, in

addition to liquidated damages, all other remedies available

under the law. Such remedies shall be deemed cumulative and

not exclusive.*7 An example covering this point:

In addition to the foregoing right to recover liquidated damages, the Association shall have all other

17See UCC 2-719 (1) (b). When the agreement states that a particular remedy is to be exclusive, this means it is the sole remedy.

43
remedies now or hereafter available at law, including,

but not limited to, the right to obtain an injunction for

enforcement of this contract. Such remedies shall be

deemed cumulative and not exclusive, it being agreed

by each member obligated to deliver under all circumstances.

SpeCiric Performance Given today’s complexities in

agricultural marketing, cooperatives increasingly must make

earlier supply commitments to outside traders and processors.

If members fail to deliver their crop as required, this could

mean lost business to the cooperative in dollar amounts that

exceed any recoveries of liquidated damages. For such reasons,

liquidated damages may not always be an adequate remedy to

pursue against members who fail to deliver their crop.

Assume a grower-member possesses the crop subject to

the marketing agreement, but withholds delivery to the cooperative. Assume further that this contributes to the cooperative’s failure in meeting a supply commitment. Instead of

damages, the cooperative might consider the remedy of specific performance. If granted this relief, the grower-member

would be required by court order to deliver the crop to the

cooperative.

Specific performance is an equitable remedy,ls in which

one is compelled by court order to carry out their contractual

obligation. Specific performance is available even if the agreement contains a liquidated damages clause. This remedy is

especially useful for cooperatives that require member delivery on an ongoing basis, such as dairy associations.

Normally, if the personal property involved in the contract can be easily purchased on the open market, a court will

not order specific performance in lieu of damages from the

*%pecific performance and injunction are “equitable” remedies.

Generally, one is not entitled to a decree for specific performance, an

injunction, or other equitable relief where the remedy at law (e.g., monetary damages) provides adequate recovery for the injury suffered.

44
breaching party. Marketing cooperatives are unique, however,

since they are subject to various legal restrictions as to how

much business they can conduct with nonmembers or nonproducers. Given these constraints, a court may order specific

performance by a member even if the commodity is available

elsewhere on the open market.

I@.~f~flon Like specific performance, an injunction is an

equitable remedy issued through court order. An injunction is

an order to do or to refrain from doing some specified act,

usually because of a threatened or actual harm to personal or

property interests. For example, a cooperative might seek an

injunction to prevent a member under contract from selling

production to a third person. If issued, the terms of an

injunction order cannot be broader than the obligation

described in the member’s contract.19

While most State cooperative statutes authorize a cooperative to seek an injunction, certain procedural prerequisites

must also be satisfied before a court will grant a temporary

restraining order, a preliminary injunction, or a full injunction

order. A milk cooperative was once denied a preliminary

injunction based on its failure to show that it was suffering

irreparable harm as required under Federal procedural law.20

In seeking injunction relief, it is crucial to anticipate the

possible problem and be prepared to go to court in a

moment’s notice, since success in court often hinges on filing

the petition in a timely and convincing fashion.21

19Legal Phases, at 256.

*%ee Southern Milk Sales, Inc. v. Martin, 924 F. 2d 98 (6th Cir. 1991).

21See Frederick, D., “Prompt Legal Action Protects Marketing

Agreement,” Farmer Cooperatives, U.S. Department of Agriculture,

Agricultural Cooperative Service, vol. 51, no. 4, p. 23. Washington, D.C.

(July 1984).

45
AfbitMion Only a few cooperatives expressly provide the

remedy of arbitration in their marketing agreement. Quite

possibly, more cooperatives practice some form of arbitration

with their members, but have not formalized it in their

marketing agreement.

There are a number of reasons why arbitration can be an .

appropriate option for settling disputes. The procedure can be

as formal or informal as the cooperative and membership

choose. Arbitration can reduce legal costs by avoiding court.

Disputes may be settled more expeditiously. There is also the

potential of improving goodwill among the membership if the

arbitration procedure develops a track record of fairness.

Some examples of arbitration procedures used by cooperatives:

Settlement of Disputes. All claims, disputes and

other matters in question between the Association and

member, which cannot be settled through normal channels, shall be submitted to the Board of Directors or a

committee from the Board. The Association and member agree that a good faith effort will be made to arbitrate such dispute prior to the initiation of legal action.

If a member disagrees with the Association’s decision as to grade, quality, color or other standards, either

party may request that the issue be settled by a major-ity vote of three (31 arbitrators. Each arbitrator shall be a

member delivering to the Association. One (1) arbitrator shall be selected by each party and the third by the

two (21 so selected. Any expenses of arbitration shall be

shared equally by the Association and member.

Should any disagreement arise as to performance

of or the rights of the parties under this Agreement,
then either member or the Association may request the

Arbitration Committee as established by the Board of

Directors to rule on the disagreement. The ruling of the

Arbitration Committee shall be final, except that any

party may request that the decision be reviewed by the

Board of Directors.

The Association and member shall be obligated to

submit to arbitration under the Commercial Arbitration

Rules of the American Arbitration Association any controversy, claim or dispute arising out or relating to the

following subjects: (3 this Agreement, including, without limitation, the negotiation, execution, validity,

interpretation or breach hereof, (ii) grading or rejection

of any of member’s products by the Association, (iii)

failure or refusal to accept any of member’s products

that are bought, or contracted to be bought from member by the Association or (iv) the price of any of member’s products that are bought or contracted to be

bought from member by the Association. Any arbitration demand shall be filed, and the arbitration hearing

shall be conducted, at the offices of the American

Arbitration Association.

Other Enforcement Options

Contract Damages. Cooperatives often do not seek contract (actual) damages from members because of the availability of liquidated damages. In some situations, however, a cooperative might seek actual contract damages, especially if they

can be computed with relative certainty, and would exceed

amounts recovered as liquidated damages. Actual damages

may be preferable also because the injury suffered is not of the

type covered by the liquidated damages clause.

Right to Enter Member’s Property. Some cooperatives

include in their marketing agreement the power to enter a

47
member’s property to inspect the crop subject to the contract.

In addition, a cooperative (especially those dealing with perishable commodities) may give itself the additional right to

enter the member’s premises and harvest the crop subject to

the marketing agreement, if the member fails or refuses to do

so. The following example gives the cooperative the right to

harvest a member’s crop:

Obligation to Care for and Harvest Crops. Each

member shall use all reasonable diligence in caring for

his or her land and all crops grown or to be grown

thereon. If a member fails or refuses to properly harvest

said crops, the Association may enter upon said lands,

care for said crops, and harvest the same, and the cost

thereof shall be assessed against member and shall be a

charge to his or her account. There shall be no obligation on the part of the Association to perform any or all

of the above enumerated conditions, and the failure to

do so shall in no way be construed as failing in its

duties.

Effect of One Member’s Breach on Other Members’

Contracts Cooperatives should strive to enforce agreements

with members in a manner that is thorough, consistent, and

fair. However, for a number of reasons, cooperatives will

sometimes not take action against a noncomplying member.

To protect itself in cases where members are allowed to

breach their agreement without penalty, a marketing agreement should declare that the cooperative’s lack of action

against a breaching member does not alter the obligations of

other members under agreement. An example:

No release or discharge of any member’s marketing obligation nor failure of the Association to enforce

such obligation shall in any way affect the obligation of
any other member to deliver products in conformity

with these bylaws or the marketing agreement.

Note in the example that follows, a member’s breach has

been waived this one time. However, the member is still subject to the terms of the agreement for the remainder of the

agreement:

Waiver of the breach of any term hereof shall not

be deemed to be a waiver of any other or subsequent

breach of the same or any other term or of any liability

for any subsequent breach.

It is important to distinguish a cooperative not pursuing a

breaching party in a particular instance from the legal concept

of “release.” There have been cases ruling that releasing the

contractual duty of some members frees the other members as

well unless the cooperative derives some benefit by releasing a

particular member or members from their contract.22

Legal Defenses for Noncompliance Marketing agreements

as a rule do not specify the possible defenses a cooperative or

member might assert as a legal excuse for not complying with

a contract. This does not suggest that traditional defenses

associated with contract law are not available to cooperatives

and members. Defenses for failing to fulfill one’s duties under

a contract may be based on fraud, duress, failure by the other

party to meet certain conditions precedent, etc. These defenses

are subject to waiver if not raised within a reasonable time

period.

One available contract defense that does appear in marketing agreements is impossibility of performance. This concept covers situations such as fires, floods, or other similar

disasters (i.e., acts of God). Some sample provisions on impossibility of performance:

22See Legal Phases, at 202-203; and Harl, Q 133.03 [3] [b].

49
Impossibility of Performance. In the event performance of this Agreement is prevented or delayed by act

of God, war, civil insurrection, fire, flood, storm, strike,

lockout, or by law, regulation or order of Federal, State

or local authority or by any other cause beyond the control of either party, then such performance, to the extent

it is so prevented or delayed, shall be excused.

Impossibility of Performance. The Association

shall not be obligated to receive, process, or otherwise

handle the products of its members in the event that

the Association is prevented from doing so by strikes,

lockouts, labor disturbances of any kind, riots, insurrection, war, fire, shortage of any supply, earthquake,

acts of governmental authority, breakdown of facilities,

or any cause whatsoever that is beyond the

Association’s control.

Excuse of Performance. In the event that the performance of this Agreement by either the Association

or member is prevented or delayed by act of God, war,

civil insurrection, fire, flood, storm, strike, lockout,

failure of machinery, equipment or material, or by law,

regulation or order of Federal, State, or local authorities, or by any other cause beyond the control of the

Association or member, as the case may be, the performance of such party under this Agreement shall be

excused to the extent it is so prevented or delayed.

Attorney F-S Some marketing agreements include a

provision for the payment of attorney fees to the cooperative

should the association have to engage in any type of legal

action against a member. An example:

If the Association brings any action against member by reason of a breach or threatened breach of this

Agreement and prevails, member shall pay to the

50
Association all court costs, costs for bonds, travel

expenses and other expenses arising out of or caused by

the litigation, including reasonable attorney’s fees

expended or incurred by the Association in such proceedings. All such costs and expenses shall be included

in the judgment.

Emerging Issues Affecting Marketing Agreements

As discussed earlier, the content of marketing agreements has not changed dramatically over the years. However,

recent developments have prompted cooperatives to consider

agreement provisions that reflect some of the changing forces

in agribusiness. This includes matters involving food quality

and the environment, as well as labor concerns.

Food Quality/Environment Food quality and related

environmental concerns are starting to be addressed in some

marketing agreements, particularly by those cooperatives that

handle or process crops treated with chemicals. Particular

attention has been directed toward pesticide residues, which

are regulated under both the Federal Insecticide, Fungicide,

and Rodenticide Act (FIFRAP3 and the Federal Food, Drug,

and Cosmetic Act (FFDCA).24

*JThe Federal Insecticide, Fungicide, and Rodenticide Act (FIFRAl regulates residues by forbidding the use of a pesticide in a manner inconsistent with its label, and by denying registration to pesticides found to

cause unreasonable adverse effects to man or the environment. 7 U.S.C.

§ 301 et seq. (1988).

24The Federal Food, Drug, and Cosmetic Act (FFDCA) prohibits the distribution of agricultural commodities that contain levels of pesticides

beyond federally determined maximum tolerance levels. Both acts are

interrelated as the Environmental Protection Agency will not register a

pesticide for use under FIFRA until maximum residue levels have been

established under FFDCA. 21 U.S.C. 5 301 et seq. (1988).

51
Following are sample provisions appearing in current

marketing agreements that attempt to delegate or at least forewarn the member of the responsibilities implicit in some of

the Federal and State environmental laws. Note that some of

these provisions set stricter standards than required by law:

No milk sold, shipped, consigned or delivered by

member to or on the order of the Association, during

the period in which this Agreement is effective, will be

adulterated or misbranded within the meaning of the

Federal Food, Drug, and Cosmetic Act of June 25,1938,

as amended, or within the meaning of any State food

and drug law, the adulteration and misbranding provision of which are identical with or substantially the

same as found in said Act. Such milk will not bear or

contain any penicillin, pesticide chemical, antibiotics,

chemotherapeutic drugs or other food additive that is

unsafe within the meaning of Section 408 or Section 409

of said Act, and such milk will not be such article as

may not, under the provisions of Section 408 or 409 of

said Act, be introduced into interstate commerce.

However, member does not guarantee against such

milk becoming adulterated or misbranded within the

meaning of said Act or Acts, after shipment by reason

of causes beyond member’s control.

Member warrants that no product to be delivered

has been, or will be treated with, and when delivered to

the Association will be free of, any and all “economic

poisons” as defined in the Federal Insecticide,

Fungicide, and Rodenticide Act, or any other deleterious substances prohibited or regulated under any

Federal, State, or local law other than those that, under

applicable law and canning industry practice, are permissible for treatment of such products.

At least 72 hours prior to delivery of the crop, each

52
member shall furnish the Association with a complete

and accurate written statement of all pesticide treatments of the crop to be received. Should member breach

any of these provisions, in addition to other remedies,

the Association may refuse to accept delivery of any portion or all of the affected crop. In such event, the

Association shall have no obligation to pay for said crop.

Each member represents and warrants that as of

the time of delivery, all shall have (product)

been grown and delivered in compliance with all

Federal and State laws and regulations, including

among other, the Federal Food, Drug, and Cosmetic Act,

the Federal Insecticide, Fungicide and Rodenticide Act,

as well as the Rules and Procedures of the Association,

and shall be suitable for sale in interstate commerce.

Member will not be entitled to compensation if not in

compliance with these requirements.

In addition, the Association provides an important

corollary: each member shall follow practices, rules and

regulations that protect the environment. If, in the

judgment of the Board of Directors of the Association,

an unreasonable action or inaction by member has

resulted in a failure to protect the environment, member shall be considered to have committed a material

breach of this Agreement.

Labor Some cooperatives have included provisions in their

marketing agreement or bylaws that attempt to protect the

cooperative and the member from potential liability arising

from labor practices carried on by the other party An

example:

Anything contained in these bylaws or any

ment between the Association and its members

agree53
notwithstanding, the Association shall have no control

whatsoever over the labor relations policies or conduct

or direction of its individual members. Likewise, the

individual members of the Association shall have no

control whatsoever over the labor relations policies or

the direction of labor relations of the Association and

its employees.

CONCLUSION

Obviously, no single strategy or format is appropriate for

every cooperative using a marketing agreement. Each cooperative faces unique external (market) and internal (organizational) influences that shape its response to the competitive

marketplace.

A cooperative must first identify its economic objectives,

and from that point craft a marketing agreement in legal terms

that facilitates achieving those economic objectives as efficiently as possible. This is easier said than done, since economic expedience can sometimes clash with legal prudence.

The members’ role in an effective marketing agreement

program should not be minimized. Successful marketing

cooperatives usually include a membership that is willing to

give up more of its individual control for the betterment of the

association. Members exemplify this by subjecting themselves

to more demanding agreements in order to realize greater efficiencies as a collective unit.

.

54
Anderson, B., “Understanding Cooperative Marketing

Strategies,” American Cooperation 1988,165-174. Washington,

D.C.: American Institute of Cooperation (M. Bidlack ed. 1988).

Baarda, J., State Incorporation Statutes for Farmer

Cooperatives, U.S. Department of Agriculture, Agricultural

Cooperative Service, Cooperative Information Report 30.

Washington, D.C. (1982).

Black, W., “Marketing Agreements,” Agricultural

Cooperatives and the Public Interest, Proceedings of the North

Central Region Committee 127, Monograph 4,227 - 235.

University of Wisconsin - Madison, College of Agricultural

and Life Sciences (1978).

Black, W. and Knutson, R., Let’s Talk About Marketing

Agreements, U.S. Department of Agriculture, Farmer

Cooperative Service (Reprint 393 from September 1974 Nezus

for Farmer Cooperatives). Washington, D.C. (1974).

Centner, T., “Cooperatives Bound By Contract Law,” The

Cooperative Accountant, vol. 39, no. 2,90-98. Springfield, VA:

National Society of Accountants (Summer 1986).

Cobia, D., “Special Topics for Marketing Cooperatives,”

COOPERATIVES IN AGRICULTURE, ch. 12, at 202-207.

Englewood Cliffs, NJ: Prentice-Hall (D. Cobia ed. 1989).

Evans, F. & Stokdyk, E., THE LAW OF AGRICULTURAL

CO-OPERATIVE MARKETING, ch. 4. New York: The Lawyers

Co-Operative Publishing Company (1937).

Frederick, D., “Prompt Legal Action Protects Marketing

Agreement,” Farmer Cooperatives, U.S. Department of

Agriculture, Agricultural Cooperative Service, vol. 51, no. 4,

23. Washington, D.C. (July 1984).

55
Frederick, D., Sample Legal Documents for Cooperatives,

U.S. Department of Agriculture, Agricultural Cooperative

Service, Cooperative Information Report 40. Washington, D.C.

(1990).

Harl, N., 14 AGRICULTURAL LAW, ch. 133. New York:

Matthew Bender (1984).

Hulbert & Neely, Legal Phases of Farmer Cooperatives, U.S.

Department of Agriculture, Farmer Cooperative Service,

Information 100. Washington, D.C. (5th ed. 1976).

Juergensmeyer, J. & Wadley, J, AGRICULTURAL LAW,

vol. II, ch. 32 - 33. Boston: Little Brown and Company (1982 &

1985 Supp.).

Konynenburg, F., “Co-ops Must Enforce Marketing

Agreements To Protect Interests of Grower Members,” The

Cooperative Accountant, vol. 42, no. 1,28-30. Springfield, VA:

National Society of Accountants (Winter 1989).

Looney, Wilder, Brownback, & Wadley, AGRICULTURAL

LAW: A LAWYERS GUIDE TO REPRESENTING CLIENTS,

ch. 9. Chicago, IL: American Bar Association (1990).

Mueller, W. and Tinley, J., Membership Marketing Contracts

of Agricultural Cooperatives in California, California Agricultural

Experiment Station, Bulletin 760. University of California,

Division of Agricultural Sciences (1958).

Schrader, L., “Potential Coordinating Functions Of

Farmer Cooperatives: Discussion,” Farmer Cooperatives for the

Future, 62-63 (workshop, Nov. 4-6,1985, St. Louis, MO.).

Purdue University, Department of Agricultural Economics (L.

Schrader & W. Dobson editors, 1985).
Sexton, R., “Current Issues in Cooperative Marketing:

The California Perspective,” University of California, Davis,

Department of Agricultural Economics. This paper was presented at the Graduate Institute for Cooperative Leadership,

University of Missouri - Columbia, June 11,1991).

Shaffer, J., “Thinking About Farmers’ Cooperatives,

Contracts, and Economic Coordination,” Cooperative Theory:

New Approaches, U.S. Department of Agriculture, Agricultural

Cooperative Service, Service Report l&87-107. Washington,

D.C. (1987).

Staatz, J., Farmer Cooperative Theory: Recent Developments,

U.S. Department of Agriculture, Agricultural Cooperative

Service, Research Report 84. Washington, D.C. (1989).

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Cooperative Service, Positioning Farmer Cooperatives for the

Future, A Report to Congress, Miscellaneous Report.

Washington, D.C. (1987).

57
U.S. Department of Agriculture

Agricultural Cooperative Service

P.O. Box 96576

Washington, D.C. 20090-6576

Agricultural Cooperative Service (ACS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and Federal

and State agencies to improve organization, leadership, and

operation of cooperatives and to give guidance to further

development.

The agency (1 ) helps farmers and other rural residents develop

cooperatives to obtain supplies and services at lower cost and

to get better prices for products they sell; (2) advises rural

residents on developing existing resources through cooperative

action to enhance rural living; (3) helps cooperatives improve

services and operating efficiency; (4) informs members,

directors, employees, and the public on how cooperatives work

and benefit their members and their communities; and (5)

encourages international cooperative programs.

ACS publishes research and educational materials and issues

Farmer Cooperatives magazine. All programs and activities are

conducted on a nondiscriminatory basis, without regard to race,

creed, color, sex, age, mariial status, handicap, or national origin.