Grand Rapids, MI | Mike inIdaho - 9/6/2009 22:18
You will also be very wise to draw up a contract for the dairy to sign. If things do go bad, you need some documentation for the legal process it will take for you to get your money. If they go bankrupt, you will be at the top of the list with a contract. Without a contract, you will be an unsecured creditor at the bottom.
You would also be wise to file a lien with your States Sec. of State. Usually this can be done online. The bank should file this for you if they give you a letter of credit.
OK, a couple corrections here. First I 100% agree to get a contract. I would also have them sign a "delivery reciept" of some kind showing that the product was recieved in good condition, etc. This will back up your payables claim, so at least they cannot claim they didn't recieve the proper amount you billed, or it was poor quality, etc.
You will NOT, however, automatically be at the top of the list with a contract. It depends on your state laws, etc. I would also agree that it might be wise to file a lien, but this requires that the producer gives you a lien on the feed. With liens it is first come first serve, meaning that if someone else has already "perfected" their lien ahead of you, you only get what is leftover after they get paid. There may be some states that have exceptions to this for ag products, etc. but it certainly is not universal. I would assume that if there is a lien filed ahead of you for feed, etc that you will be behind that lienholder unless they sign a lien waiver for your benefit.
One different thought is that you may think about maintaining ownership of the silage and having them pay you for it as it is used. You would have to rent the facilities from them and have a strong contract, but at least you could shut them off if they stopped paying you and perhaps only lose a month's use of feed. Or you could have them always pay you for the month ahead, and if they stop paying give them legal notice they cannot take feed from the file and put a fence etc around the pile. This strategy works much better if you actually have other customers close by that you could sell the feed to.
Bottom line is that a couple hundred dollars spent on an attorney may be $$ well spent.
Edited by lorenk 9/8/2009 21:14
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Dairy wants to chop my corn
