Updated: Nov 5, 2020
By Sarah Everhart
The article is not a substitute for legal advice. See here for the site’s reposting policy.
Now that spring is upon us, many area farmers markets are back in business. Farmers markets serve as an important source of income for many Maryland farmers and perform the vital function of connecting consumers to farmers. Although farmers markets vary in structure, all have rules and procedures vendors must follow, typically found in vendor agreement. A vendor agreement is a legally binding contract between the vendor and the market. Although operating a farmers market without vendor agreements is possible it subjects the parties to financial and legal risks.
A vendor agreement should contain the minimal aspects of any valid contract, in other words, it should be between two legal parties and contain an offer and an acceptance of that offer for something of value. In this context, deciphering the proper legal parties to the agreement should not be overlooked. Farmers markets differ in ownership structure and, if the farmers market itself is not a business entity (LLC, corporation, etc.) the vendor agreement may need to entered into by a town or non-profit organization. Similarly, if a farmer has an entity which owns his/her farm, that entity as opposed to the farmer in his/her individual capacity, is most likely the proper party to sign the vendor agreement. As for the other aspects of the contract, vendor fees, the costs charged to vendors for participating in the market, should be clearly outlined. For example, many markets charge vendors a flat seasonal fee while others charge a fee per market day and/or a sales percentage fee.
Market standards are provisions written into a vendor agreement explaining what products can be sold and how the products can be sold. There are many different types of market standards, such as product standards (grown in a certain region, organic, prohibition on re-selling, etc.), vendor standards (i.e., signage requirements, equipment rules, etc.), and market safety and sanitation requirements (i.e., no smoking requirements, prohibition on pets, etc.). If a market wants the ability to enforce market standards, compliance with market standards and the consequence for violation of those standards (ex. termination of the right to sell at the market) are key provisions of a good vendor agreement.
Markets with strict product standards often include farm inspection clauses in the vendor agreement. Inspection clauses ensure vendors know and understand what rights the market reserves to ensure the products sold by vendors are within the market requirements and safe for customer consumption. Markets may also want to include product inspection clauses to ensure high quality and stall inspections to allow for market management to verify that stall usage requirements are being followed.
Any standards the market management chooses to incorporate should be clearly explained to define the parameters of selling at the market and set expectations. If a market is operated pursuant to a lease, it is advisable to include all lease restrictions into the vendor agreement. Clearly articulated market standards protect vendors and market management by setting customer and vendor expectations, preventing conflicts between market management and vendors, and/or vendors and customers, and ensuring only market-approved products are sold.
Reducing liability exposure is a reason many markets create vendor agreements. To ensure vendors are operating in compliance with the law, markets may consider a provision in the vendor agreement requiring vendor compliance with all local, state, and federal laws and/or permitting requirements and requiring proof of all necessary permits before a vendor can sell at the market. Depending on the size of the market, farmers markets may also require vendors to submit proof of insurance (general liability and/or product liability) coverage with the market named as an additional insured. Lastly, a vendor agreement can address whether a vendor agrees to indemnity and hold a market harmless for liability related to the vendor’s participation in the market.
To help farmers and market managers create a vendor agreement, the Agriculture Law Education Initiative recently created the Farmers Market Vendor Agreement Legal Guide. The Farmers Market Vendor Agreement Legal Guide outlines many of the considerations markets and vendors will want to consider when creating a vendor agreement and contains model vendor agreement language. It is always advisable, however, to seek the advice of an attorney when creating a contract.