Contract Law in Oregon Applicable to Agriculture Sellers and Buyers
Oregon Department of Agriculture
Brent Searle, Special Assistant to the Director
This information is provided for educational uses only; it is not intended as legal advice. If you
have legal questions, please consult your attorney.
Agriculture is a large industry in Oregon, with more than $3.4 billion worth of goods and
services purchased by farmers and nearly $5 billion worth of farm commodities sold to
wholesale or retail buyers.
The transactions between buyers and sellers are governed by contract law or other aspects
of state law. This document provides an overview of these laws for various commodities,
including payment terms, lien application, and other related information for farmers and
buyers.
There are three general scenarios in selling and buying agricultural products (outside a
grower cooperative situation):
1) a contract with specific price terms;
2) an "open price" contract (price not specified); or,
3) no written contract, “cash basis sales,” delivery made and payment made.
There may be variations on these themes, but in general, these are the traditional
approaches of exchange.
Each of these scenarios is explained below in further detail with applicable reference to state
law.
Under scenario one (contract), the parties agree in writing to a price and some specificity
as to production (all acreage, certain acreage, certain poundage, or whatever the agreement
may be). Pricing in this type of contract is usually determined before services (a crop) are
harvested, and in many instances, before a crop is planted. Quality considerations can
certainly be part of a written contract and should be specified so all parties understand how
that will be determined and affect price.
This is essentially a buyer asking a producer to raise or grow something for future delivery at
an agreed upon price. This is the clearest and least ambiguous method of transaction
between the parties.
Under the second scenario (open price contract), the following statute applies:
ORS 72.3050 Open price term (Contract with no price specified).
(1) The parties if they so intend can conclude a contract for sale even though the price is not
settled. In such a case the price is a reasonable price at the time for delivery if:
(a) Nothing is said as to price; or
(b) The price is left to be agreed by the parties and they fail to agree; or
(c) The price is to be fixed in terms of some agreed market or other standard as set or
recorded by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for the seller or buyer to fix
in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed
through fault of one party the other may at the option of the other party treat the contract as
canceled or may fix a reasonable price.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed
and it is not fixed or agreed there is no contract. In such a case the buyer must return
any goods already received or if unable so to do must pay their reasonable value at
the time of delivery and the seller must return any portion of the price paid on account.
[1961 c.726 §72.3050]
Under this second scenario, the determination of a "reasonable price" can leave a lot open to
question (or litigation). The price is to be set in "good faith" -- another term open to
interpretation. The risk with this approach is that if a price cannot be agreed (Section 4), then
the contract is void and the goods must be returned to the grower, or the buyer must pay a
"reasonable price."
Remedies for not achieving a price could be spelled out in the contract if the parties agree to
such (mediation/arbitration/etc.).
NOTE: Specificity as to production (all acreage, certain acreage, certain poundage, or
whatever the agreement) are required as part of an open price contract, even though price is
not at time of signing.
As with a firm contract, quality considerations, can certainly be part of a written contract and
should be specified so all parties understand how that will be determined and affect price.
One way to minimize the uncertainty of an open price contract is to include a reference point
for pricing in the contract that will help determine a reasonable price established in good faith.
This could be a price established through negotiations (as in the case of perennial ryegrass
or Dungeness crab), a percentage of retail price on a given day at a given market, a
reference to a complementary product/crop or regional price, or some other specific measure
that is easily validated and helps reduce the unknown elements of price discovery and
uncertainty.
The third scenario is daily market / open price delivery where no contract exists. The
default in this situation is payment by the buyer to the grower/farmer within 30 days of
product delivery. This situation doesn't speak to price, but more to payment terms (absence
of a contract) as specified in ORS 576.605.
576.705 Processors required to pay for commodities within 30 days after delivery; interest
on late payments. Notwithstanding any other provision of law:
(1) In the absence of a contract providing otherwise, any processor who purchases a
commodity from a producer shall make full payment therefore not later than the 30th day
after the day the processor takes delivery of the harvested commodity.
(2) Any processor who fails to make payment as required by subsection (1) of this section
shall pay, in addition to the amount due, interest thereon at the rate of one percent per
month. [1971 c.531 §2]
Note that interest begins to accrue on the 31st day if payment is not made.
This section is applicable to all “commodities,” (unless otherwise specified by law; examples
follow), as defined by any distinctive type of agricultural, horticultural, viticultural, vegetable,
animal or seafood product, or any class, variety or utilization thereof, in a natural or
processed state, including bees and honey but not including timber or timber products.
The following provide specific references to different ag commodities in terms of payments or
contract language as provided forth in more detailed areas of Oregon Statutes.
Fresh Fruits and Vegetables:
585.213 Payment by wholesale produce dealer for purchases from grower.
(1) In the absence of a contract providing otherwise, any wholesale produce dealer who
purchases produce from a grower shall make full payment therefore not later than the 30th
day after the day the wholesale produce dealer takes delivery of the harvested commodity.
(2) Any wholesale produce dealer who fails to make payment as required by subsection
(1) of this section shall pay, in addition to the amount due, interest thereon at the rate of one
and one-half percent per month.
(3) In addition to any other remedies provided by law, a grower injured by a violation of
subsection (1) of this section may bring an action for damages sustained as a result of the
violation. In any such action, the prevailing party shall be allowed, in addition to costs and
disbursements, reasonable attorney fees at trial and on appeal.
Note also that Oregon law creates prohibited acts by fresh produce buyers:
585.210 Prohibited acts. No person who assumes or attempts to act as a wholesale
produce dealer or retail produce peddler without a license, and no wholesale produce dealer
handling produce upon a commission basis, shall do any of the following:
(1) Impose false charges for handling or services in connection with the account of any
grower of such produce.
(2) Fail to account promptly, correctly, fully and properly and to make settlement therefore
as provided (see above).
(3) Intentionally make any false or misleading statement or statements as to market
conditions.
(4) Make fictitious sales or be guilty of collusion to defraud the grower.
(5) (addresses consignment or commission sales, which are rare – see the statute if you
are interested in the details).
(6) Intentionally make any false statement as to the grade, condition, markings, quality or
quantity of produce shipped or packed in any manner.
Grass seed:
576.725 Definitions addressing contract terms/payments/dates:
(1) “Final payment date” means a date specified in a seed production or purchase
contract by which the wholesale seed dealer must complete payment to the seed grower or, if
a date is not specified in the contract, May 1 of the year following production and harvesting
of the grass or clover seed.
(2) “Seed delivery” means the date on which the seed grower delivers grass or clover
seed to the wholesale seed dealer pursuant to a notice from the dealer.
(3) “Seed production or purchase contract” means a written agreement that must include:
(a) The estimated date for seed delivery;
(b) The terms and estimated dates for the wholesale seed dealer to pay the seed grower;
(c) The number of acres of grass or clover seed to be grown; and
(d) The species, cultivars and quality standards of the grass or clover seed to be
produced or purchased.
576.727 Seed production or purchase contracts. (1) A seed production or purchase
contract must require the wholesale seed dealer to make payment to the seed grower within
30 days after seed delivery. Upon written mutual agreement of the seed grower and the
wholesale seed dealer, the grower may extend the period available for the dealer to make
payment.
(2) If a licensed wholesale seed dealer fails to pay a seed grower as required pursuant to
subsection (1) of this section, the grower may notify the State Department of Agriculture.
Upon notification by a grower, the department shall determine whether payment has been
made in accordance with terms of the contract. If the department determines that payment
has not been made, the department shall notify the wholesale seed dealer in writing that the
dealer has 30 days to pay the seed grower all delinquent amounts plus interest on each
delinquent amount at the rate of one percent per month simple interest from the final payment
date for that delinquent amount.
(3) A seed production or purchase contract may not vary the terms of the remedy
provided by subsection (2) of this section. A wholesale seed dealer may appeal the notice
given by the department under subsection (2) of this section as provided in ORS chapter 183.
Subsection (2) of this section does not prevent a seed grower from filing a notice of lien
against a wholesale seed dealer.
(4) If a wholesale seed dealer fails to make payment as required by a notice given by the
department under subsection (2) of this section, the department shall suspend the license of
the dealer until the dealer demonstrates to the satisfaction of the department that the dealer
is current on all payments due to seed growers.
(5) A wholesale seed dealer who fails to make payment as required by a notice given by
the department under subsection (2) of this section is considered to have authorized the seed
grower to sell any seed from the contract that is still in the possession of the grower and to
use the variety as provided under the federal Plant Variety Protection Act, 7 U.S.C. 2541(b),
subject to a right of first refusal by the owner of a protected variety. This subsection does not
prevent a wholesale seed dealer from giving consent to the seed grower by other means and
does not supersede the terms of a consent given by other means.
Meat Animals:
603.200 Payment by processors to producers;
“Meat animal” means any vertebrate animal, except fish and aquatic mammals, not otherwise
prohibited by law for sale for human consumption. Notwithstanding any other provision of law:
(1) In the absence of a contract or other agreement providing otherwise, any processor
who purchases meat animals from the producers thereof shall make full payment therefore
not later than the second business day after the day the processor takes delivery of any such
meat animal.
(2) In the absence of a contract or other agreement providing otherwise, any meat seller
who purchases meat or meat products from the processor thereof shall make full payment
therefore not later than the seventh business day after the day the meat seller takes delivery
of any such meat or meat product.
(3) Any person who fails to make payment as required by subsections (1) and (2) of this
section shall pay, in addition to the amount due, interest thereon at the rate of one percent
per month.
Finally, the following information describes Oregon lien law in the event a buyer files for
bankruptcy or goes out of business. In most cases, growers have an automatic lien
attachment for varying periods of time depending on the commodity produced. If a grower
desires to extend a lien, the grower must file an extension with the Secretary of State.
Buyers cannot include any clauses in contracts that ask or require a grower to waive a lien.
The only exception is if the grower is a member of an agricultural cooperative to whom the
product is sold.
GRAIN PRODUCER’S LIEN: Automatic lien attachment for 180 days.
87.750 Definitions, unless the context otherwise requires:
(1) “Agricultural producer” means a person that engages in or has engaged in the
business of growing or producing grain for market or for delivery or transfer to others owning
or holding title to the grain. “Agricultural producer” includes a landowner, producer, landlord,
tenant, sharecropper or other person who participates in the growing of grain and receives a
share of the grain.
(2) “Grain” means wheat, seed corn, corn used for animal feed, oats, barley, rye,
flaxseed, certified alfalfa seed, agricultural seed as defined in ORS 633.511 (1), vegetable
seed as defined in ORS 633.511, the seed of any cereal grain, soybeans, grain sorghum, dry
beans and dry peas and any other grain for which standards are established or followed by
the State Department of Agriculture.
(3) “Inventory” means all grain purchased or received from agricultural producers,
whether in bulk lots or in blended or packaged form. “Inventory” does not include the
equipment or supplies of the person holding or owning the grain…
87.755 Grain producer’s lien; date lien attaches; priority. (1) An agricultural producer
that delivers or transfers grain for consideration has a lien on the inventory of the purchaser
and proceeds received by the purchaser from the selling of the inventory.
(2) The lien created by subsection (1) of this section attaches to the inventory and
proceeds on the date physical possession of the grain is delivered or transferred by the
agricultural producer to the purchaser or an agent of the purchaser. If grain is delivered or
transferred by an agricultural producer to a person other than the purchaser for cleaning or
storage, the lien attaches when the grain is physically delivered or transferred to the
purchaser or an agent of the purchaser for agreed consideration.
… (6) The lien created by subsection (1) of this section is discharged with regard to inventory
that is sold by the purchaser or an agent of the purchaser to a third party. Notwithstanding a
discharge with regard to inventory sold to a third party, an agricultural producer continues to
hold a lien on the proceeds from the sale to a third party and on all remaining inventory of the
purchaser.
(7) An agreement by an agricultural producer purporting to waive the right to file notice …
of a lien created by subsection (1) of this section is void as contrary to public policy. An
agricultural producer may waive the right to file notice under ORS 87.762 if the purchaser is
an association of which the agricultural producer is a member (cooperative).
87.762 duration of lien; (1) A lien created under ORS 87.755 expires no later than the
end of the 180th day after the date the lien attaches, unless the agricultural producer extends
the lien by filing a notice of lien as provided in this section. If the agricultural producer extends
the lien, the lien expires no later than 18 months after the date the lien attaches.
(2) At any time prior to expiration of the initial lien period, an agricultural producer may
extend a lien created under ORS 87.755 by filing a notice of lien with the Secretary of State.
…
AGRICULTURAL PRODUCE LIEN: Automatic lien attachment for 45 days.
87.700 Definitions…unless the context otherwise requires:
(1) “Agricultural produce” means horticultural products, viticultural products, fruit, berries,
vegetables, hops, mint oil, hazelnuts or other nuts, dairy products, bee products, vermiculture
products, hay or straw baled and prepared for market, meat animals and Christmas trees as
defined in ORS 571.505.
(2) “Agricultural producer” means a person that engages in or has engaged in the
business of growing or producing agricultural produce for market or for delivery or transfer to
others owning or holding title to the produce. “Agricultural producer” includes a landowner,
producer, landlord, tenant, sharecropper or other person who participates in the growing of
agricultural produce and receives a share of the produce.
(3) “Meat animal” has the meaning for that term provided in ORS 603.010.
(4) “Person” means individual, corporation, partnership, association, joint stock company,
trust, limited liability company, limited liability partnership, cooperative, government entity,
unincorporated organization or other business entity.
(5) “Purchaser” does not include a cooperative organized and operating under ORS
chapter 62, including a foreign cooperative authorized to do business in this state under ORS
chapter 60, if the agricultural producer is a member of the cooperative.
(6) “Security interest” has the meaning given that term in ORS 71.2010 (37).
87.705 Agricultural produce lien; date lien attaches. (1) An agricultural producer that
delivers or transfers agricultural produce for consideration to a purchaser has a lien for the
contract price of that produce, or for the reasonable value of the produce if there is no
contract price. The lien created by this section attaches to all agricultural produce, whether in
a raw or processed condition, delivered or transferred to the purchaser by any agricultural
producer and to all other inventory of the purchaser. The lien also attaches to proceeds
received by the purchaser from the sale by the purchaser to a third party of any raw or
processed agricultural produce. If the agricultural produce that an agricultural producer
delivers to the purchaser consists of meat animals, the lien also attaches to all accounts
receivable by the purchaser from the sale of any agricultural produce to a third party. The lien
on the agricultural produce, inventory, proceeds or accounts receivable attaches on the date
physical possession of the agricultural produce is delivered or transferred by the agricultural
producer to the purchaser or an agent of the purchaser.
(2) An agricultural producer that claims a lien under subsection (1) of this section need
not file any notice in order to perfect the lien. The agricultural producer must file a notice of
lien as provided in ORS 87.710 to extend the lien beyond the normal expiration date.…
(4) An agreement by an agricultural producer purporting to waive the right to file notice
under ORS 87.710 of a lien created by this section is void as contrary to public policy.
87.710 duration of lien; contents of notice:
(1) A lien created under ORS 87.705 expires no later than the end of the 45th day after the
date that the final payment to the agricultural producer is originally due, unless the producer
extends the lien as provided in subsection (2) of this section. If the agricultural producer
extends the lien, the lien expires no later than the 225th day after the date that the final
payment to the producer is originally due.
(2) An agricultural producer may extend a lien created under ORS 87.705 by filing a
notice of lien with the Secretary of State. The agricultural producer may file the notice only
during the period after the date that payment for the agricultural produce is originally due and
no later than the 45th day after the date that the final payment for the produce is due. …
AGRICULTURAL SERVICES LIEN: No automatic attachment; must file within 75 days of
services performed/harvest; 6 month duration.
The following lien applies to services performed on farms for farmers, or by farmers for
others, including proprietary seed production contracts (grass seed, for example).
87.226 Agricultural services lien. (1) A person who performs labor, supplies materials
or provides services on farmland, range, ranch, orchard or in that person’s place of business
to aid the growing or harvesting of crops or the raising of animals has a lien upon the crops or
animals for the reasonable or agreed charges for labor, materials or services. The lien upon
crops or animals created by this section also attaches to the proceeds of the crops or animals
and to the unborn progeny of the animals that are in utero on the date a notice of claim of lien
is filed.
(2) If the lien claimed under subsection (1) of this section is for stud or artificial
insemination services, the lien attaches only to the female animal to which the male animal is
let or which is artificially inseminated, and the offspring.
(3) The lien on crops and the proceeds thereof attaches on the date a person performs
labor, delivers materials or provides services to aid the growing or harvesting of crops. The
lien on animals and the proceeds thereof attaches on the date a person performs labor,
delivers materials or provides services to aid the raising of animals, or in the case of unborn
progeny, attaches on the date the claim of lien is filed.
(4) As used in this section:
(a) “Growing and harvesting” includes tilling, sowing, planting, cultivating, irrigating,
pruning, thinning, fertilizing, spraying, dusting, cutting, harvesting, reaping, threshing,
gathering, transporting, securing or otherwise performing or furnishing labor, service or
materials to aid the production of any agricultural crop.
(b) “Materials” includes seed, fertilizer, pesticide, petroleum products and other products
used in agricultural practice to aid the growing or harvesting of crops, and any mixtures or
preparation for feeding animals, any of the constituent nutrients of an animal ration and any
other food for animals.
(c) “Performs labor or provides services” includes personal labor and the use of
machinery, equipment or animals rendered by the lien claimant or by the agent of the lien
claimant, employee or subcontractor.
(d) “Raising animals” includes feeding, herding, pasturing, shoeing, artificially
inseminating, providing male animals for the breeding of female animals, caring for and
managing animals kept or raised for use or profit.
87.242 Filing notice of claim of lien; contents of notice; effect of failure to file
notice. (1) … A person claiming a lien created by ORS 87.226 shall file a written notice of
claim of lien with the Secretary of State not later than 75 days after the close of the furnishing
of the labor, services or materials. …
87.256 Limitation on extent of liens. Persons claiming liens created by ORS 87.216 to
87.232 are only entitled to liens for labor, services or materials performed or furnished during
the six months immediately preceding the filing of the notice of claim under ORS 87.242.
87.266 Duration of liens. (1) Except as provided in subsection (2) of this section, if either
a suit to foreclose or a proceeding under ORS 87.272 to 87.306 to foreclose a lien created by
ORS 87.216 to 87.232 is not commenced in an appropriate court within six months after the
notice of claim of lien is filed under ORS 87.242, or if extended payment is provided and the
terms thereof are stated in the notice of claim of lien, then within six months after the
expiration of the extended payment, the lien shall cease to exist. A lien shall not be continued
in force for a longer time than two years from the time the claim for lien is filed under ORS
87.242 by an agreement to extend payment.
In sum, growers and agricultural wholesale buyers need to be aware of transactional contract
or payment requirements set out in law that were created to ensure a fair and equitable
exchange of goods and payments. The parties need to understand these terms, include them
in contracts, or in the absence of a contract, be aware of payment dates to growers.
With respect to liens, growers and buyers need to be aware of the protections in law that
ensure growers are not left without some recourse after they have invested in, produced, and
delivered a commodity to a buyer for which they aren’t paid due to a bankruptcy, foreclosure
or other business failure.