New Texas Law Requires Changes to Purchase Contracts
2017 JUL 11 – A NEW TEXAS LAW WILL APPLY TO ALL TEXAS COTTON PURCHASE CONTRACTS WITH PRODUCERS SIGNED ON OR AFTER SEPT 1, 2017
A copy of HB 338 is attached. We are told this version was adopted by the legislature and signed by the Governor. Despite requests via the Senator from Lubbock and a search on line, the final signed copy is not yet available. However, we are told this bill was not amended in the Senate or on the floor and that it is the final version of the law. When a signed copy is available we will verify that information. Please consult your counsel concerning changes to your purchase contracts that will be needed.
Here are the highlights of HB338, and some comments:
HB 338 says that a contract to buy an agricultural product from a producer “must clearly and conspicuously state on its face” whether it is an acreage contract or a quantity contract.
- Under Texas law, “The conspicuous requirement mandates ‘that something must appear on the face of the [contract] to attract the attention of a reasonable person when he looks at it’.” See Ling & Co. v. Trinity Sav. & Loan Ass’n, 482 S.W.2d 841, 843 (Tex.1972).
- HB338 does not say what the penalty will be if the contract does not comply, but one can be sure that a producer wishing to sell at a different price than the contract price will assert that a contract which does not comply is unenforceable.
- If your acreage contract contains, as some do, a fixation provision that provides that that when a producer fixes the price he guarantees delivery of the number of bales fixed, we suggest that that such a contract requires special attention in drafting to make the change from an acreage contract to a quantity contract comply with the requirements of HB338.
- HB338 says that a purchaser may not sue a producer for breach of an acreage contract “unless the producer knowingly fails to deliver all of an agricultural product grown on specified land as provided in the contract.”
- We believe the requirement of proof of “knowing” failure to deliver is an invitation to unscrupulous producers to shift the origin of cotton to their advantage, and then, if caught, assert that there was merely a clerical or other mistake. We suggest you and your attorney consider including tightened crop progress reporting requirements.