26th August 2022
With one of the driest summers on record, and drought restrictions in place across much of the UK, we look at the implications for farmers worried about meeting supply contracts with their customers.
Farmers in the UK have long had to adapt to changes in weather conditions with increasing environmental challenges and global warming on the agenda for some years.
But the reality of climate change may well have hit home a little earlier than anticipated with the extreme heat and lack of rain we’ve experienced this summer.
With many places now in official drought, farmers are facing issues with livestock and depleted winter stocks, water abstraction and ruined or reduced yields.
So, what happens if you can’t deliver produce in line with your supply contracts?
First things first, it is always advisable to contact your customer to let them know your situation and where appropriate seek legal advice.
What does your contract say?
If you have a written contract then it may contain different clauses to cover events deemed to be outside the control of either party.
This is commonly known as ‘force majeure’ and can appear in contracts as a catch-all clause freeing both parties from obligation if an extraordinary event occurs preventing one or both parties from fulfilling their agreement.
However, and for farmers, this is an important point, often force majeure clauses in agricultural supply contracts contain a specific list of events, that will allow either of the parties to delay fulfilling the contract or terminating it altogether.
So, is extreme weather covered in the list? If it’s not, then it’s likely that force majeure does not apply and leaving little in the way of wiggle room with your contract.
Or Act of God?
Just to complicate matters, some contracts refer to an ‘Act of God’ as being a force majeure event. It is extremely difficult to predict how a court might consider an event and how severe it has to be to be deemed an Act of God. It is usually reserved for events so extraordinary that no-one could have
predicted it or reasonably taken measures to safeguard against it. In this day and age with climate so high on the agenda are events such as flooding and drought so extraordinary?
In this situation the burden of proof lies with person trying to invoke the clause to prove that a force majeure event has occurred.
So, what happens next?
Some force majeure clauses allow a contract to be suspended for a specific period of time or until the event has ceased to be a problem. But you would still need to fulfil the contract – and by whichever means you can – even if you have to purchase an equivalent supply from elsewhere to sell on to your customer.
If there is no get out clause or it’s not covered and you can’t source the supply elsewhere then you may be in breach of that contract. This could end up with you being sued.
Sometimes ‘frustration’ can come into play where no force majeure clause exists and a contract is deemed ‘frustrated’ because of the unforeseen event preventing fulfilment. But this can be difficult to prove.
The best advice for farmers has to be to check your contracts carefully and seek legal advice quickly if you have any concerns.
The Thrings Agriculture team is one of the largest and most experienced teams of agricultural lawyers in the UK and is also a legal panel member for the NFU in the South East. Find out more here or contact Russell Reeves, Head of Agricultural Litigation.