Introduced Version






HOUSE BILL No. 1975

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 15-7-10.

Synopsis: Agricultural marketing and production contracts. Regulates agricultural marketing and production contracts. Requires agricultural marketing and production contracts to: (1) be in writing or be an electronic transaction; (2) be executed in good faith with full disclosure of all relevant information; (3) provide for resolution of complaints through alternative dispute resolution; and (4) provide that Indiana law governs and controls the contract and that venue for any actions concerning the contract must lie in a county in Indiana where at least one party resides. Specifies certain issues that must be addressed in agricultural marketing and production contracts.

Effective: July 1, 2001.





Friend




    January 17, 2001, read first time and referred to Committee on Agriculture, Natural Resources and Rural Development.







Introduced

First Regular Session 112th General Assembly (2001)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
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HOUSE BILL No. 1975



    A BILL FOR AN ACT to amend the Indiana Code concerning agriculture and animals.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 15-7-10; (01)IN1975.1.1. -->     SECTION 1. IC 15-7-10 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]:
     Chapter 10. Agricultural Marketing and Production Contracts
    Sec. 1. As used in this chapter, "agricultural commodity" means livestock or grain produced primarily for sale, consumption, propagation, or other use by man or animals.
    Sec. 2. As used in this chapter, "good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
    Sec. 3. As used in this chapter, "grain" has the meaning set forth in IC 26-3-7-2 (11).
    Sec. 4. As used in this chapter, "ledger account" means a maintained record of contract values versus market values.
    Sec. 5. As used in this chapter, "livestock" has the meaning set forth in IC 4-4-3.2-1 (b).
    Sec. 6. As used in this chapter, "marketing contract" means a

contract between a producer and a processor regarding the purchase by the processor of the producer's agricultural commodity.
    Sec. 7. As used in this chapter, "person" means an individual, a firm, a limited liability company, a corporation, a partnership, or an unincorporated association.
    Sec. 8. As used in this chapter, "processor" means a person engaged in the receiving, grading, packing, canning, freezing, drying, or other methods of preparation for market of an agricultural commodity produced in Indiana.
    Sec. 9. As used in this chapter, "producer" means a person engaged in Indiana in the business of producing for market or receiving income from any agricultural commodity in commercial quantities.
    Sec. 10. As used in this chapter, "production contract" means a contract between:
        (1) a producer and a processor regarding the producer's production of the processor's agricultural commodity; or
        (2) two (2) producers regarding the production by one (1) producer of the other producer's agricultural commodity.
    Sec. 11. A marketing or production contract must meet the following conditions:
        (1) Be:
            (A) in writing; or
            (B) an electronic transaction, if the parties have agreed to conduct transactions electronically and the information is:
                (i) provided, sent, or delivered, as the case may be, in an electronic record; and
                (ii) capable of retention by the recipient at the time the information is received.
        (2) Be executed in good faith, with full disclosure of all relevant information by each party.
        (3) Provide for resolution of disputes regarding the contract through alternative dispute resolution with the costs of the alternative dispute resolution paid equally by each party.
        (4) Provide that:
            (A) Indiana law governs and controls the contract; and
            (B) venue for any actions concerning the contract must lie in a county in Indiana where at least one (1) party resides.
        (5) Include terms addressing the following issues:
            (A) Transportation and delivery, including:
                (i) payment of transportation costs;


                (ii) delivery;
                (iii) method of transportation;
                (iv) risk of loss during transportation; and
                (v) transportation to a location other than the location agreed upon.

             (B) Resolution of:
                (i) delivery of quantity other than quantity agreed upon; and
                (ii) delivery of quality other than quality agreed upon;
            if quantity and quality of the end product are specified in the contract.
            (C) Payment, including:
                (i) basis of payment;
                (ii) payment method;
                (iii) payment schedule;
                (iv) effect of change in market price on contract price, if any;
                (v) penalty for late payment;
                (vi) assignability of payments;
                (vii) whether payment may be made copayable to producer's lender; and
                (viii) if the paying party is a subsidiary company, the responsibility for payment of the paying party's parent company.
            (D) Termination of the contract, including:
                (i) conditions under which each party may terminate the contract, including determination of whether those conditions are met;
                (ii) notice required for termination;
                (iii) opportunity to cure breach before termination; and
                (iv) the rights of each party after termination of the contract, including payment for work done before termination and the producer's ability to buy the commodity.
            (E) Effect of acts of God on contract.
            (F) Renewal of contract, including:
                (i) conditions under which each party may renew the contract, including determination of whether those conditions are met; and
                (ii) notice required for renewal.
            (G) Legal relationship of parties under the contract.
            (H) Other persons whose approval of the contract is

required, if any.
            (I) Assignability of contract rights and responsibilities.
            (J) Effect on contract of bankruptcy of either party.
            (K) Effect on contract of change in ownership of either party.
            (L) Duration of offer.
    Sec. 12. In addition to the terms required to be addressed under section 11(5) of this chapter, a marketing contract must include terms addressing the following issues:
        (1) Whether the processor has the right of first refusal on any additional commodities of the producer available for delivery beyond those provided for in the contract.
        (2) If the contract includes a ledger account system:
            (A) ownership of account funds;
            (B) treatment of ledger account as a current liability, long term liability, or contingent liability;
            (C) determination of the value of the ledger;
            (D) maximum level of ledger account, if any, and effect on price level after maximum is reached;
            (E) interest charged or accrued on ledger balance, including rate;
            (F) whether ledger account is callable;
            (G) disposition of ledger account balance at expiration of contract;
            (H) disposition of the ledger account if production ceases;
            (I) disposition of the ledger account if processing ceases; and
            (J) whether the ledger account is secured by assets of the party holding the balance of the account or unsecured.
    Sec. 13. In addition to the terms required to be addressed under sections 11(5) and 12 of this chapter, a marketing contract for livestock must include terms addressing the following issues:
        (1) How the livestock will be handled before slaughter, weighing, and grading; and
        (2) Delivery of livestock to plants other than a plant provided for in the contract, including:
            (A) notice required; and
            (B) payment of additional costs, including shrinkage and transportation.
    Sec. 14. In addition to the terms required to be addressed under section 11(5) of this chapter, a production contract must include terms addressing the following issues:


        (1) If the contract includes production incentive payments:
            (A) conditions required to receive incentive payments;
            (B) calculation of incentive payments; and
            (C) timing of incentive payments.
        (2) Whether the party that owns the agricultural commodity has already granted a lien against the commodity to a lender or a person other than the producer who is producing the commodity.
        (3) If the contract requires the producer that is producing the commodity to construct a building, make improvements to an existing building, or purchase new equipment:
            (A) exclusivity of use;
            (B) timing of construction, improvement, or purchase, including any penalty for noncompliance;
            (C) payment for construction, improvement, or purchase;
            (D) depreciation;
            (E) ownership;
            (F) specifications for construction or improvement, including responsibility for defects;
            (G) payment for future modernization or upgrade; and
            (H) obtaining necessary permits and approval for construction or improvement, including payment of fees and effect of nonapproval.
        (4) Miscellaneous facility issues, including:
            (A) payment of maintenance and repairs;
            (B) insurance on structures used under contract;
            (C) water source, including payment; and
            (D) security measures, including payment.
        (5) Access to facility.
        (6) Labor and record keeping, including:
            (A) provision of labor and management;
            (B) any special skills or training required, including payment of costs for training; and
            (C) records required to be kept.
        (7) Insurance and other costs, including:
            (A) payment of liability and casualty insurance on the agricultural commodity;
            (B) coverage amounts required;
            (C) payment of insurance for employees, including worker's compensation;
            (D) payment of general liability insurance;
            (E) payment of utilities;
            (F) responsibility for weed control; and
            (G) responsibility for roadway construction and maintenance.
    Sec. 15. In addition to the terms required to be addressed under sections 11(5) and 14 of this chapter, a production contract for livestock must include terms addressing the following issues:
        (1) Minimum guaranteed occupancy, if any.
        (2) Feed, including:
            (A) provision of feed;
            (B) assurance of feed quality;
            (C) determination of feed rations and changes in rations;
            (D) compensation for reduced feed efficiency due to delayed marketing, if any;
            (E) pricing of feed grown or raised by the producer who is producing the commodity; and
            (F) feed storage, drying, processing, and transportation or other handling.
        (3) Health of livestock more than ten (10) days of age, including:
            (A) inspection of livestock upon delivery to the producer that is producing the commodity, including whether either party may choose a veterinarian to conduct the inspection;
            (B) producer's right to reject livestock;
            (C) responsibility for compliance with governmental animal health regulations;
            (D) risk of loss due to sickness or environmental factors, including extreme weather conditions, while livestock are at the producer's facility;
            (E) health care of animals; and
            (F) cleaning and disinfecting facilities between turns of livestock.
        (4) Manure, including:
            (A) responsibility for manure management, including compliance with governmental regulations;
            (B) responsibility to respond to complaints, lawsuits, or other alleged violations of law regarding manure;
            (C) liability for damages, penalties, or legal expenses resulting from complaints, lawsuits, other alleged violations of law, or enforcement actions;
            (D) responsibility for compliance with regulations that take effect after the contract begins;
            (E) ownership; and
            (F) application or other disposal.

        (5) Labor and record keeping, including the establishment and enforcement of husbandry practices.
        (6) Insurance and other costs, including:
            (A) responsibility for removal and disposal of dead animals; and
            (B) responsibility for dust control.