Look Out for This Language in Your Farm Equipment Purchase Agreement

Watch Out for This Language in Your Farm Equipment Purchase Agreement

You’ve just finalized a deal for a new tractor at your local dealership. Although the tractor is still in production and you can’t take it home yet, you and your salesperson sign a purchase agreement.

When it’s time to pick up your new tractor, the dealer informs you that your trade-in has been reappraised at a lower value due to changes in the market. Is this allowed? (Find out below!)

Contracts, like purchase agreements, are filled with legal terms designed to protect both buyers and sellers. However, these terms can often be confusing or seem unnecessary. Successful Farming reviewed purchase agreements from major equipment manufacturers and consulted John Schwarz, a farmer and agricultural law attorney in Indiana, to interpret common clauses.

Key Considerations for Farmers Before Signing a Contract

Equipment Purchase Agreement Terms “When trade-in equipment is not delivered to the seller until the purchased equipment is delivered, the trade-in equipment may be reappraised at that time, determining its final value.”

Schwarz explains that this clause allows the dealer to reappraise your trade-in if time passes between the agreement and when the new equipment arrives. This change in value might not be due to increased wear or usage but simply due to market fluctuations or the dealer’s updated assessment.

If the timeline isn’t specified, Schwarz notes it generally comes down to what is “reasonable.” For instance, reappraising a tractor from $100,000 to $50,000 in just a few days solely based on market conditions or additional hours would be hard to justify.

Cancellation Rights “When the reappraised value is less than the original trade-in value, the buyer can cancel the agreement before the new equipment is delivered and the trade-in is transferred to the dealer.”

According to Schwarz, this means you can cancel the deal if you’re unhappy with the reappraisal, but you must act before the new equipment is delivered and the trade-in is handed over. This creates a tricky situation, as the dealer can reappraise once they have your trade-in, but at that point, you no longer have the right to cancel.

“Farmers typically continue using their trade-in equipment until the new equipment arrives. To avoid being locked into a reappraised value you’re not happy with, consider taking the trade-in to the dealership for a reappraisal before you receive the new item,” Schwarz advises.

Force Majeure (Acts of God) “The seller is excused from delays in delivery due to strikes, work stoppages, material shortages, or causes beyond their control, including acts of God.”

Schwarz suggests ensuring this clause applies to both parties. He recommends changing “seller” to “parties” and having the dealership representative initial the change.

Waiver of Notification “This clause states that the buyer waives the right to demand notice of payment or the dealer’s obligation to show diligence in collecting payments.”

Schwarz explains this clause means the buyer is waiving certain rights regarding payment notices and defenses in collection disputes. However, these rules can vary by state, and in most cases, the dealer would still need to take legal action for non-payment and repossession of equipment.

Binding on Heirs and Assigns “This agreement is binding on the parties involved and their heirs, personal representatives, successors, and assigns.”

If a farmer transfers equipment to an LLC, passes away, or transfers it to another party, the contract remains binding on the new owner, according to Schwarz.

Right to Inspection “Upon delivery, the buyer may inspect and reject the goods if they do not meet the order’s requirements. If rejected, the buyer may seek reimbursement, credit, repair, or replacement, or may correct the goods themselves and charge the costs to the seller.”

This provision aligns with the Uniform Commercial Code (UCC), which gives buyers the right to inspect goods after delivery and reject those that are unsatisfactory. “This is good because it allows for inspection after delivery,” says Schwarz. “Farmers won’t have to inspect the tractor on the assembly line; instead, they can inspect it once it arrives at their farm.”

Common Contract Clauses

Schwarz also highlighted general clauses commonly found in contracts:

No Waiver of Rights “A failure to enforce any term of the agreement doesn’t waive the right to enforce it later.”

This means that even if one party overlooks an issue (like a missed delivery date), they still retain the right to enforce other terms of the contract.

Non-Drafting Party “Each party agrees that, even though one party printed and assembled the contract, it reflects the terms agreed upon by both parties. Neither party is considered the drafter in the event of ambiguity.”

“This ensures the contract won’t be interpreted against the dealer just because they drafted it,” says Schwarz.

Governing Law and Venue “This agreement is governed by Indiana law, and any dispute will be heard in the county where the land is located.”

Schwarz stresses that farmers should pay attention to this clause. If a farmer buys equipment out of state, the contract might require disputes to be handled in that state. “You’d want the lawsuit to occur where the equipment is used, not where it was bought,” he says.

Severability Clause “If any provision is found to be invalid, the rest of the contract remains enforceable.”

This protects the agreement from being entirely voided if one clause is deemed unenforceable.

Entire Agreement “This contract represents the full agreement between the parties. Any changes must be made in writing and signed by both parties.”

Schwarz emphasizes that any verbal agreements or promises made outside the contract are not enforceable unless they’re written into the contract. He advises farmers to include all agreements in the contract and have both parties sign or initial any changes.

Notice Requirements “Any notices must be sent by certified or registered mail.”

To ensure effective communication, Schwarz suggests sending written notices, such as emails or text messages, which courts may accept as sufficient.

No Assignment Without Consent “Neither party can transfer their rights or obligations without the other’s written consent.”

“This is good for farmers,” says Schwarz. “You don’t want the dealer to transfer their obligations to someone you don’t know or trust.”

Execution in Counterparts “This agreement can be signed in separate counterparts, with each party signing its own copy.”

Schwarz notes that this allows for flexibility in signing the contract, as separate signed copies can be merged into a single agreement.

For more details, read the full article here.