§ 308B.311 Agricultural Product Marketing Contracts

In plain language#

A cooperative may contract with patron members or other patrons for exclusive marketing of a specified portion of agricultural product or a specified commodity produced from a certain area, to or through the cooperative or a facility it establishes. The remedies here concern contracts within this section's scope; they are not a general remedy for every cooperative contract, nor do they turn simply on labeling the cooperative “producer,” “consumer” or “worker.” ^{P1, § 308B.311}

Subdivision by subdivision#

Subd. 1 – Authority. The marketing contract may require the patron to sell a specified portion of agricultural product, or specified commodity produced from a certain area, exclusively to or through the cooperative or its facility.

Subd. 2 – Title. If a sale is contracted to the cooperative, title transfers absolutely on delivery (or at another specified time if the contract expressly says), except for a recorded lien or security interest against the patron's agricultural products in the state central notification system and liens granted against farm products under federal law. The contract may let the cooperative sell or resell the product with or without taking title, paying the resale price to the patron after deducting necessary selling, overhead and other costs and expenses, including proper reserves and interest.

Subd. 3 – Term. A single term may not exceed ten years. The contract may be self-renewing for periods of not more than five years each, subject to either party's right to terminate by written notice during a period of the current term specified in the contract.

Subd. 4 – Liquidated damages. The bylaws, the contract, or both may set a specific sum as liquidated damages for breach of any provision about sale, delivery or withholding of a product, and may require the patron to pay costs, bond premiums, expenses and fees if the cooperative sues. The remedies are valid and enforceable in Minnesota courts and "shall be enforced as liquidated damages and are not considered a penalty."

Subd. 5 – Injunction. On breach or threatened breach, the cooperative is entitled to an injunction and a decree of specific performance. Pending the action, after filing a complaint showing the breach or threatened breach and filing a sufficient bond, it is entitled to a temporary restraining order and preliminary injunction.

Subd. 6 – Criminal penalty. A person who knowingly induces or attempts to induce a patron to breach a marketing contract, or who maliciously and knowingly spreads false reports about the cooperative's finances or management, is guilty of a misdemeanor, with a fine of not less than $100 and not more than $1,000 per offense.

Subd. 7 – Civil damages. In addition, the person may be liable to the cooperative for civil damages; each violation is a separate offense.

How it works in practice#

• Subd. 4 lets the bylaws set liquidated damages, so a member who has agreed to the bylaws and a marketing contract is bound by both. The bylaw route and the contract route are alternatives or cumulative ("or both").
• The ten-year cap is on a "single term." Self-renewal is allowed in periods of up to five years, so the total relationship can be longer. The statute does not say how many renewals are allowed.
• A patron who breaches may be required to give up voting power or financial rights under § 308B.501, subd. 3.
• The cooperative should record liens and check the state central notification system before relying on title transfer (subd. 2); the exception for recorded liens is in the text.

Related#

• Powers generally: § 308B.301
• Member violations: § 308B.501
• Producer cooperatives: Organize a producer or marketing cooperative under chapter 308B