Top tips on contracts for cereal sellers
When selling grain, it is important to have a contract that lays out the terms and conditions. The tips on this page will help you avoid the most common problems associated with grain sales contracts.
Agreeing the contract terms and conditions
It is essential to know what contract is being used and that it is based on clear terms. Before signing the contract, negotiate, establish and accept all terms.
A well-prepared contract will cover all aspects associated with the delivery of the goods. In theory, everything is negotiable. However, bear in mind that the price obtained often reflects the level of risk accepted.
Grain buyers are obliged to make available the terms and conditions on which the contract is made. The AIC No. 1 Contract sets out the rights and obligations of grain buyers and sellers.
As a minimum, consider the following:
- The price, the calculation method and payment terms (how and when)
- Any special terms and conditions – such as the potential financial/rejection penalties (if required specifications/volumes are not met)
- Agreeing discount scales (fallbacks)
- Adding a clause to cover delivery point exclusions (e.g. to limit the distance travelled)
- Setting a clear delivery period, with potential provisions for extension or setting dates when grain cannot be moved
- Potential weighbridge charges – it is the seller’s responsibility to pay for weighing of unweighed goods (costs can vary according to load size)
- Any potential replacement costs you may need to meet, especially when selling pre-harvest
Agree all discount scales (fallbacks) during the contract stage. This will help avoid unplanned haulage charges associated with rejection or redirection. When grain quantity and quality is known, it also helps sellers plan deliveries to various receivers. Fallbacks may apply to moisture content, specific weight, Hagberg falling number, screening, and protein and nitrogen content. Ask:
- What is the specification/range (maximum and minimum) for the contract price?
- What happens if the grain misses the requirements?
- Is there potential for a premium to be paid?
Establish what feedback will be passed back after delivery (what, when and how) on both accepted and ‘problem’ loads. Ask to be notified of any claims before a load is tipped, particularly if there is no fallback provision. However, there may be a cost for delaying the vehicle. Ensure that sellers and buyers have exchanged contact details, so any problem can be addressed swiftly.
Keep a copy of the signed terms
Ensure you receive the written confirmation of the contract promptly. Check that all of the terms are as agreed. If not, tell the buyer immediately – your silence may be taken as acceptance. Obtain an amended confirmation before parting with any goods.
Delivering a contract
Understanding the quality and condition of grain is crucial. Accurate sampling at each stage of the grain chain is required to develop that understanding. This, alongside good grain storage, should help to reduce waste and minimise charges, claims and rejections. Retain samples until payment has been received.
Always visually inspect the vehicle prior to loading and double-check each load. Get a receipt as a record of the nature of the goods loaded, including the approximate weight, the vehicle registration and trailer number, the name of the haulage company, the date and time, and the contract number. In addition, the document should be clearly named and signed by the driver. Many of these elements are included on the combinable crops (grain) passport, an essential part of grain assurance systems in the UK to track the movement of goods.
Handling claims and rejections
A notification of any claim/rejection should be made as soon as possible. Written confirmation should be posted within two business days of the goods arriving at their UK destination. If not, the buyer will not have complied with the terms of the contract and you will not have to accept them – unless the contract terms include agreement on a sliding scale of price (fallbacks) against quality on delivery.
If a claim/rejection is notified, sellers can dispute it. Sellers have the right to request that a sealed sample is sent for independent testing by an agreed analyst. It is also recommended that the contract gives you the right to be represented when the sample is taken. If the claim/rejection is upheld, the costs of independent sampling and analysis are met by the seller.