Sharemilking agreements – know what you’re getting yourself into

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It’s that time of year when farm-owners and sharemilkers are assessing where they are at and deciding where they want to be and doing next season. 

Without looking at things with a negative perspective, it is worthwhile both the farm-owner and the sharemilker knowing what they are getting into before signing up to the agreement. 

Most cases of disputes between farm-owners and sharemilkers do not normally arise out of just one difference of opinion. Rather they develop from an accumulation of issues where different perspectives about how things are to be done or one parties expectations being different to the others. These often either amount in a full blown dispute with claims and counter claims or both parties agree to disagree and terminate the contract at the end of the current season. Either way its destructive to the business of both parties. It is far better to get it right from the start.

While sharemilkers do not legally have to have written sharemilking agreements, it is strongly recommended all farm-owners and sharemilkers have a written agreement. It is also recommended that both parties get independent advice before signing a sharemilking agreement. There are a number of areas that may seem obvious but if the agreement is silent on the points then it leaves the scope open for dispute later in the day.  For example:

  • Sharemilking agreements usually create a licence, rather than a lease, to allow the milker to use the land. From the farm-owner’s point of view, it is important to ensure that the agreement generally creates a licence. If the agreement creates a lease, this will give the milker the right of exclusive possession of the land. Then the farm-owner may have difficulty obtaining regular access to the land.
  • Sharemilking agreements create personal rights and duties between the milker and the farm-owner. As a result it is not possible for one of them to dispose of their rights under the sharemilking agreement automatically. This means that if the farm-owner wishes to sell the farm, the sharemilking agreement will need to state that is possible.
  • Sharemilkers are NOT general staff. Having a sharemilking agreement means that the milker is an independent contractor running their own business rather than an employee. Therefore the Employment Relations Act 2000 will not apply. 

Normally the sharemilking agreement will provide for a dispute to be determined by arbitration – the need for this can be reduced by the taking of advice early in negotiations and understanding the implications/expectations of the agreement before signing.

Finally a word of caution about the casual use of standard agreements. There are a number of matters that commonly arise in sharemilking arrangements that are not dealt with, either adequately or at all, in standard or precedent based agreements, for example the key aspects of the condition of the farm, production targets, the minimum amount of supplemental feed and warranties for the milker regarding animal health status, farm regulatory compliance and financier access to cows under the stock security on the milker’s finance. Disputes may be able to be avoided if advice as to the preparation, negotiation and implementation of such clauses is discussed with your lawyer.