For the third and final confession in my Boneheaded Beef Business Blunders series, I want to cover land lease and custom grazing contracts. I got myself into some sticky situations in my early years of ranching, due to assuming too much.
In the past my land lease contracts have fit on one printed page with big type. I wanted my potential partner to think that leasing their land to me would be easy and convenient. Most people would not use those words when handed a 10-page document to read and analyze. Unfortunately, quarrels ensued between myself and a past landowner because our contract was too vague. The landowner believed that it entitled him to certain things, and I saw nothing in the contract that bound me to any of those things. This one could have easily ended up in court. The days of the handshake deal are over, for better or worse. Your idea of common sense might be very different from that of your partner.
Insist on written, signed agreements for everything. If you can’t get that, discuss things via e-mail or text message whenever possible. This gives you a record of exactly what was said. Save these transcripts of your conversations, even if you think nothing bad will ever happen. My landowner issues would have been more easily solved had I been able to produce proof of what we had verbally agreed to the prior year. It’s easy for people to forget or misinterpret what is said. The chances of a “he-said-she-said” situation going in your favor are low.
Make contracts very detailed. Don’t think you can get away with a simple one. If handing a potential partner a long, detailed contract scares them off, so be it. Someone who is serious about entering into a mutually profitable deal with you will welcome the security of a strong contract, because it benefits both parties. If things change over the course of a contract term, make written and signed amendments to the contract.
You may be thinking “only a total airhead would take someone’s word,” right? Remember that miracle custom grazing and land lease deal I started out with? Due to preexisting ties with this company, I had trusted them enough to take on their cattle and set up shop on the land they owned before any contracts were signed. We had informally agreed on rates via e-mail. For the next six months I pushed them to sign custom grazing and land lease contracts with me, and they ignored all of my attempts to contact them about it. They also took their time paying me for my custom grazing services.
Looking back, this was the biggest red flag of my entire career so far. If someone refuses to sign a fair, timely, transparent contract with you regardless of what your business together may be, they do not respect you. The wealthy owner of this company knew that if our deal went south, I could never afford a court battle. They weren’t worried about protecting themselves. I should have been much more worried. Amazingly, I made it out of the deal having collected all of the money I was owed for my work. It was enough to get my new leased farm set up. This could easily have been a business killer though.
In next month’s article, I will give an exhaustive rundown of everything I now make sure to put in my land leasing, custom grazing, and cattle sale contracts.