Current grain market conditions have upset the contracting apple cart. Some farmers have found themselves over contracted and unable to deliver the volume contracted. Others have second thoughts about delivering at previously agreed to prices that are below current levels. Some merchandisers face large margin calls on grain hedged on behalf of their farmer suppliers. Others are squeezed between previously contracted purchase and sale prices and reduced margins resulting from the tight supply and strong demand.
Lawsuits are starting to appear, so it's more important than ever to proceed cautiously.
Failure to perform on the contract can be costly and can result in legal action. Before entering into any contract, it's crucial to understand exactly what is required of all parties. Fixed-price contracts normally specify quantity, quality, price, and delivery requirements. Price-later contracts dontt spedfy the transactions price, but usually include other requirements. In the event of a crop failure, if the farmer is not considered to be a merchant, the UCC Section 2-615 may provide some justification for nonperformance due to the crop failure.