WINNIPEG – In times of change, people tend to hope for the best and try not to think about potential negative effects.
But Mona Brown, a lawyer and farmer near Carman, Man., believes you must anticipate negative changes to avoid ending up “in a situation where you have no bargaining power and where you are forced to make decisions under great stress.”
Speaking to the Manitoba Farm Women’s Conference held here recently, Brown said farming is a high-risk business. “Potentials for lawsuits abound around the farmyard.”
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When it comes to contracts, Brown said verbal agreements cause the most legal problems. She told the audience to follow the three golden rules of signing contracts:
- Put it in writing.
- Be specific on every detail, and make sure you read the fine print.
- Contracts are binding, so get legal advice before signing important ones.
Third-party liability suggested
Farmers are also at great risk for being sued, Brown said, because they work with dangerous chemicals and equipment. For example, if a farmer sprays when it’s too windy, or if cattle wander into the neighbor’s field, the farmer can be held liable. She suggested farmers take out third-party liability insurance.
Incorporating the farm is another way to get shelter from potential lawsuits, but she reminded the audience farmers are liable for the actions of their partners.
Brown also warned those who serve as volunteer directors or officers in organizations. It is becoming more common for volunteers to be sued for the actions of their board. Before agreeing to help, Brown said people should make sure the organization has director’s liability insurance.
Provide little security
Brown gave the farm women tips on protecting the farm from creditors. She said when getting loans from a bank, supplier or equipment dealer, farmers should try to negotiate as little security as possible.
“Your banker … will usually want everything you have as security, including the kitchen sink.”
Brown said farmers with excellent credit ratings and high equity relative to debt may be able to negotiate certain items out of the security, such as the family home and home quarter, inheritances, RRSPs and NISA accounts.
People sometimes put some assets in other persons’ names to protect them from creditors, but Brown said farmers can’t do it to defeat creditors.
“The time to take the action is before you enter into a new venture or take on a new debt, not at the time you’re in financial difficulty.”
Brown said she is amazed at how many clients sign securities at banks without first taking them to a lawyer, “and later, not be able to tell me what they signed at all.”
More and more, banks are asking parents to sign personal guarantees for children who are buying land or starting a business. Brown said parents should be wary of doing this, since banks aren’t obligated to foreclose on the childrens’ land or exhaust the childrens’ assets before looking to the parents.
“If you have a bank account with money in it, that’s the easiest thing for them to take. They’re going to take that first as soon as there’s default.”
