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12 May 2020
Cultivation Contract

A cultivation contract is regulated by Articles 613-626 of the Civil Code (kc). Article 613(1) kc provides a statutory definition of a cultivation contract. The essence of a cultivation contract is the commitment of a farmer to produce and transfer on the contracting party the ownership rights to a specified quantity of products specified as to its kind or identity, which do not exist at the time of the conclusion of the contract. The goods must meet the definition of an agricultural produce.

The elements necessary for a contract to be called a cultivation contract are:

  • party to the contract may only be a farmer;
  • obligation of a farmer to produce and supply a specified quantity of products;
  • designation of the type and quantity of agricultural produce;
  • contracting party’s commitment to collect the products and pay the price.

The object of contract farming is not a supply of a product marked in genere and originating from anywhere, but the production and supply of an agricultural produce produced at the farmer’s farm. Own production is a crucial element of a cultivation contract. This fundamental feature of a cultivation contract clearly distinguishes it from a sales contract (Supreme Court of 18/03/1998 I CKN 576/97, Legalis).

A cultivation contract must be made in writing or else null and void.

A cultivation contract refers to agricultural production which, by its very nature, is subject to the risk of adverse weather conditions unfavorable to the producer or natural disasters. Therefore, pursuant to Article 622(1) kc, if, due to circumstances for which neither party is liable, the farmer cannot supply the object of the contract farming, he is obliged only to return the advance payments and bank loans received.

The reasons of inability to perform may be of various nature. Typically, involuntary reasons will include Force Majeure, such as flood, hurricane or hailstorm. Judicature interprets the notion of Force Majeure quite broadly on the basis of Article 622(1) kc, including draught or a plague of insects (judgment of SC of 1 February 1968, II CR 393/67, OSNC 1969, no. 1, Item 13; judgment of SC of 23 March 1956, I CR 1146/55, OSN 1958, no. 1, Item 9).

Article 622(1) kc is a mandatory rule. This indicates that it may not be changed by the intention of the parties under differing contractual provisions. Only the conditions of the return of advance payments or bank loans may be modified to be more advantageous for the producer.

At the same time, it means that contractual penalties due to non-supply of a relevant quantity of agricultural produce may not be imposed, if the non-supply is a result of circumstances for which the parties are not liable. A contractual penalty is a form of compensation.

In addition, the provisions of the Civil Code (kc) regulating liability for damages (Article 471 kc and following) including consequential impossibility of performance (Article 475 and Article 495 kc), the rebus sic stantibus rule (Article 3571 kc), and contractual penalty mitigation (Article 484(2) kc) also apply to the cultivation contract, depending on the circumstances of a given case.

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