Tucked into the federal rail legislation implemented last year was a requirement that’s supposed to hold grain buyers accountable for delivery dates in contracts with farmers. As of August 1, 2014, licensed grain companies in Western Canada that don’t accept grain during the timeframe defined in a contract are required to pay some sort of penalty to the producer.
Some farmers are now finding themselves in situations where they’re entitled to a penalty payment, and wondering how to collect this compensation.
As Cheryl Mayer of the Canadian Canola Growers Association explains in the video below, the penalty clause in a contract can take many forms, including a lump sum payment or an amount paid on a per-day or per-month basis. The timeframe for when the penalty kicks in can also vary widely between companies and contracts.
“The onus is really on the farmer to negotiate what works for them,” she points out. “It’s up to the buyer and farmer to negotiate.” (continued below)
Mayer notes she has reviewed contracts with penalty clauses ranging from a single $10 payment to daily storage rates and interest. With at least one contract, payments start right after the typical 30 day delivery period, while in others, the compensation only begins after the “extended delivery period.”
“Those delivery period extensions go from another 30 days to 180 days,” she says. “The way the grain commission is interpreting that requirement is that the provision does not have to kick in until after the extended delivery period.”
If a producer and a grain buyer disagree on the interpretation of the penalty clause in a contract, the Canadian Grain Commission can serve as an arbitrator.
More information on unaccepted deliveries can also be found here on the CGC website.