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Farming, Contracts, and Protecting Your Assets

Farming, Contracts, and Protecting Your Assets

How “handshake” and oral agreements can leave you vulnerable

Chances are, at some point in your life you’ve heard the expression, “My word is my bond.” This phrase is deeply embedded in our culture and traces its roots all the way to the Book of Matthew, but pops up everywhere from hip-hop songs to television shows and national political conventions. You probably have a sense of what it means colloquially, but if you find yourself part of a verbal agreement that has higher stakes for you personally than humming along with the radio might, you need to understand what it means legally.

This is an issue of particular importance for farm owners who have entered into “handshake” or oral agreements with their tenants. While an oral agreement may seem like a relatively simple and straightforward way to do business, and while for many farmers it’s the way business has always been done, there are steps you need to take to protect yourself and your interests if you’re going to be a part of one.

Put something in writing.

Just because the original negotiation and terms were verbal doesn’t mean you can’t create any written record of it. And you can do this without compromising the flexibility or integrity of your original oral agreement. A written record is particularly important as it relates to one key feature of any lease: how long it lasts. Indiana law states that a tenant must receive, in writing and via certified mail, three months’ advance notice of the end of their lease. If you already have a written record of when the lease was meant to begin and end, this notice is easier to deliver. If you don’t have a written record of the start and end date of your lease, or if the verbal agreement was unclear on this point, it is typically assumed that the lease would end (unless renewed) at the start of the new crop year, which historically has been the first of March. If this is the case, notice has to be delivered by December 1 of the current year.

A basic notice should include the date, tenant’s name, a sentence explaining that the lease ends at the end of the current year, a description of your property, and your name as the landlord.

Clearly communicate your expectations.

One of the many issues that can arise from a purely verbal agreement is that both parties might have completely different understandings or interpretations of the same information. Think of how often, just in your day to day conversations, you have been misinterpreted or have misunderstood something: you read someone’s inflection as sarcasm when it wasn’t, or they assumed you must have meant X when really you meant Y. This happens to everyone; it’s human nature. But when you’re having a conversation that directly affects your primary source of income and livelihood, you don’t want to leave anything open to interpretation. Writing down the terms of your verbal agreement, in the clearest and most explicit terms, can protect you and your assets from any potential misunderstanding.

Understand what’s at stake.

There is only so much farmland available in Indiana, and the demand for it is high. A handshake agreement regarding your land or a tenant’s right to lease it can leave you—and this incredibly precious asset—extremely vulnerable. While in a perfect world everyone’s word would be their bond, lived experience tells us that’s not always the case. Do you really want to leave any room for error, fraud, or misinterpretation in an agreement that’s meant to protect something so irreplaceable?

While it is perfectly legal and acceptable for individuals to create their own written contracts and leases, at BB&C we believe that type of work is best left to an attorney. It’s an attorney’s job to be your advocate, your interpreter, your champion. An attorney can tailor a contract to your specific and individual needs; can help you ensure that your interests are protected and can create a clear, enforceable, legally binding written document that preserves your interests in terms far more certain than a handshake.

To learn more about how you can protect your farming interests, contact Cecelia Neihouser Harper at 765-637-9175.

The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.

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