Preparing Early Can Potentially Ensure You Get Paid For Services
Updated: Jun 30, 2020
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All of us like to get paid once we have provided a service. I appreciate when UMD pays me every two weeks for the work produced during that period. Many producers provide services like custom farming, spraying, or other services; to paraphrase ZZ Top, at the moment like this many of you gotsta get paid for those services. So what can a producer do? You can develop strategies and tools that ensure you get paid. For some services provided in Delaware, the operator may obtain an automatic lien in a crop harvested or baled. For other services in Delaware and Maryland, custom operators should develop contracts to ensure timely payment.
In Delaware, a custom operator receives an automatic statutory lien to ensure payment. A lien is a security interest given to a creditor in a debtor’s property lasting until a debt is satisfied. Under Delaware’s statute (§ 4101), the automatic lien is given to those harvesting a crop or baling hay. Let’s say Terry harvests Eric’s corn. Terry would receive an automatic lien in the corn he harvested which would last until Eric pays for the harvesting services. This lien requires any money made from selling the crop to go to the custom operator for the services. With a crop used on-farm, the custom operator could foreclose on the lien and sell a portion of the crop to satisfy the debt. Under Delaware’s law, removal of the crop from the farm requires first getting written permission from the lien holder (§ 4102).
I should point out here that you should never attempt self-help remedies such as taking a portion of the crop to satisfy what you are owed. Taking a crop could result in criminal charges against you for theft and trespass – charges that could be considered felonies in many states, meaning you could face jail time of over one year or higher fines.
In Maryland and for non-custom harvesting and baling services in Delaware, custom operators should maintain good business records to demonstrate how much they are owed. Records should show how many acres, the type of work, and receipts or bank statements to prove how much clients have paid on previous jobs. Such evidence goes a long way to explain the amount owed to a custom operator.
With such records, a custom operator could work with an attorney or represent himself or herself in a breach of contract lawsuit to collect on outstanding services. A breach of contract suit will take time and money to receive what you are owed. Another option in this situation to resolve the dispute without going to court would be using mediation. In Maryland, a custom operator could request mediation of the dispute by the Maryland Agricultural Conflict Resolution Service (ACReS) which provides alternative dispute resolution to producers through mediation. Using ACReS allows both parties to sit down with a mediator, a neutral third-party who helps the parties efficiently resolve the issues.
Regardless of the state, before each season, a custom operator should develop a simple contract laying out the terms of the services provided and rates to charge. Although for many custom operator these have always been handshake deals, it is time to consider a simple contract if not being paid for services is a recurring issue. A contract would allow the parties to spell out definitively when payment for services is due and set forth consequences if payment is late. The document could be a simple invoice given to the customer after each job. Working with an attorney to develop a contract before the season can ensure the custom operator is paid in a timely fashion and avoid expensive court processes to obtain payment owed.
Sadly, customers’ not paying their bills is a recurring problem in many industries. Even attorneys face issues with clients who fail to pay. But forewarned: do not ever repossess a crop in lieu of of what is owed you without first going to court to get the authority to do so. Remember, in Delaware an automatic lien which exists until payment is created in the crop if you are performing the harvesting or baling. In Maryland and for non-harvesting work in Delaware, a custom operator needs records to demonstrate the services provided and the agreed-upon rate, and may bring a breach of contract suit in court to get paid, or use a mediation program as an alternative to court. Each season, use a simple contract to define the services provided and when payment is due. Each of these tools will help ensure prompt payment.
De Code Ann. tit. 25 § 4101-4102 (2017).