A handshake between farmers used to be enough to seal a deal. Both sides knew what was expected if anything happened.
Over time, written contracts between farmers became normal, just to make sure everyone knew what was expected.
Now a simple contract might not be enough.
Business specialists are recommending that farmers include an indemnity clause in their contracts.
Indemnity clauses, which clearly point out who is responsible if something goes wrong, aren’t needed for every contract, said Tracy Hanson, a lawyer with Duncan and Craig in Calgary.
Read Also
Short rapeseed crop may put China in a bind
Industry thinks China’s rapeseed crop is way smaller than the official government estimate. The country’s canola imports will also be down, so there will be a lot of unmet demand.
However, they are a good idea, especially in the growing custom agriculture business.
If a farmer rents his land to a neighbor who digs a hole that someone falls into, an indemnity clause in the rental agreement would make it clear the neighbor is responsible for any damages to the person in the hole.
If a custom feedlot operator fed greenfeed that was high in nitrates to cattle and the cattle died, an indemnity clause in the contract between the custom feeder and the feed supplier would stipulate that the feed must be of good quality and that the supplier would be responsible for the losses.
“More and more people are looking at contracts and putting them in writing,” Hanson said.
“Our society is getting more sophisticated and tend to look to contracts… more than they did in my grandfather’s day.”
Hanson recommends looking at the contract to see if the situation lends itself to an indemnity clause.
In some contracts, indemnity clauses are standard features. Oil and gas leases contain indemnity clauses that hold the oil or gas company responsible for any long-term damages to the land.
Faye Engler, executive director of the Cosway Group, which is fighting the establishment of the Trans-Canada Trail on former railway land, said her members won’t accept any trail near farm property without an indemnity clause that protects them from accidents on the trail.
Graham Gilchrist, a farm business management specialist with Alberta Agriculture, said indemnity clauses cover the things that are often forgotten about with a handshake.
