The Horticulture Code requires growers and traders to have a written contract, called a Horticulture Produce Agreement (HPA) before they can trade with each other.
The Code provides that growers and traders must not trade in horticulture produce without a written HPA that complies with the Code. The Code sets out certain matters that must be included.
If horticulture growers and traders don’t have a written HPA that is compliant with the Code, they could be subject to penalties. Agreements made before 15 December 2006 are no longer exempt from the Code.
Under the Code, HPAs must be in writing. Both parties must also accept the agreement by either signing it, or giving a written notice of offer and a written notice of acceptance (such as in an email) to the other party.
Subject to the transition period, these obligations apply from 1 April 2017.
Clauses 16, 17 and 18 of the Code set out matters that must be included in a HPA. A HPA can have additional terms and conditions as agreed by both parties, provided they do not conflict with the Code.
We have developed two sample HPAs – one for the grower and merchant relationship and another for the grower and agent relationship. These can help you understand what needs to be included in your HPA. You can also use the sample as a template for your own agreement.
The HPA must specify any requirements the trader has for the delivery of horticulture produce to the trader by the grower.
It is important to have minimum quality standards applied to horticulture produce given its variable and perishable nature. HPAs must include specifications that will be used to determine the quality of the horticulture produce, as well as how the trader will deal with produce that does not meet quality standards.
Parties can choose to include specific quality specifications or the FreshSpecs Produce Specifications. FreshSpecs is administered by Fresh Markets Australia and contains specifications for general appearance, major defects, minor defects, and consignment of horticulture produce.
If a trader sets a minimum or maximum quantity of horticulture produce that growers can supply them, the quantity specifications must be included in the HPA.
The HPA must also specify how the trader will deal with horticulture produce delivered by the grower that doesn’t meet the quality or quantity specifications.
The HPA must state the circumstances under which the trader may reject horticulture produce delivered by the grower. A trader is not entitled to reject horticulture produce unless the reason for rejection is included in the HPA.
If a trader rejects horticulture produce, they must notify the grower that the produce has been rejected within 24 hours after the time at which the produce was rejected. If the trader fails to give notice within the required time period, they could face penalties.
The Code allows traders to pool horticulture produce from a number of growers. The pooled produce must be the same quality as that sourced from the grower party to the HPA.
If a trader intends to pool a grower’s horticulture produce with other growers’ produce, the HPA with the growers must specify:
- the quality requirements relating to the pooled produce
- the specifications that will be used to determine the quality of the produce to be pooled.
A HPA must specify the period in which:
- an agent must pay to the grower the proceeds of sale of horticulture produce received by the agent
- a merchant must pay the grower for horticulture produce delivered by the grower.
A HPA between a grower and a merchant must specify whether the price merchants will pay growers for produce will be agreed before or upon delivery. In addition to fixed pricing, parties can now agree on a method or formula to determine the price merchants will pay. This provides parties with additional flexibility in the trading relationship and better reflects the way merchants and growers do business. It is up to the parties to decide which pricing method or formula they will use in the HPA.
A HPA between a grower and an agent must specify:
- whether the agent will charge commission, fees or extra costs
- the amounts or rates of the commission, fees or extra costs, and
- whether charging the growers commission, fees or extra costs is contingent on the sale of the horticulture produce, or any other event or kind of event.
For agent HPAs, the agent must pay to the grower any proceeds the agent receives for the sale of produce under the horticulture produce agreement, less any commissions, fees and extra costs permitted under the agreement, and any extra amounts that may be deducted under the agreement.
For merchant HPAs, a merchant must pay a grower for horticulture produce delivered under a HPA within the timeframe specified in that agreement. If a grower does not receive payment within the agreed timeframe, under the Code the grower may give written notice to the merchant of their intention to:
- suspend any further deliveries until payment is made
- cancel the agreement.
If following such notice, payment is still not made, then the grower can take either of these steps.
If a HPA is to be in place for a period of 90 days or more, or has no end date, either party to the agreement may terminate the agreement in writing:
- within 14 days of entering into the agreement, or
- a shorter or longer period as agreed between the parties in accordance with the Code. However, the period cannot be less than 7 days.
The HPA must specify the process for varying or terminating the agreement.
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