Marketing Contracts

Marketing contracts are created between a cooperative marketing association and its members.  Such contracts are created to obtain agreement on the conditions that members will market their products exclusively through the association for a said period and the association will obtain the best price possible for them.  Marketing contracts provide the association with the authority to carry out its purpose.  However, marketing contracts should be authorized by the governing statutes.

When a contract is terminated, the membership of the person is also terminated.  When a condition precedent is not followed, the membership also becomes inoperative.  A member has all rights to terminate the membership voluntarily.  Concerning marketing contracts, any modifications made should be with mutual consent.

A marketing contract is like a normal contract.  It can be held void if it is against public policy.  Any contract entered by an association will be void if the association is not created under the organized laws of the state.  A contract is subject to validation by a statute.  A marketing contract created through fraudulent means is not valid[i].

A marketing contract is construed just like an ordinary contract is.  Therefore, when the language of a contract is ambiguous then the contract is construed by considering the instrument as a whole.  The intention of the members of the association is taken into consideration[ii].  Courts should go through the governing statute, bylaws, and articles of association before construing a contract.

Generally, a cooperative marketing contract creates a relationship of principal and agent between a member and the association.  When a cooperative marketing contract provides for advances by the association to the members and the cooperative association makes such advances in excess of the amount received from the proceeds of the sale of produce turned over by the member, the association can recover the amount of this excess[iii].

A cooperative association should not discriminate between its members without exercising due diligence.  However, if a member violates a contract term, the member cannot claim advantage on the basis that the action against another member was not taken even after committing the same mistake[iv].

When an association makes unreasonable demands to a member of the association, the member is under no obligation to perform according to the demand.  However, an association’s judgment in classifying and selling the subject matter of marketing contracts can only be questioned if there is valid proof of gross mistake or fraud[v].

When a marketing contract prescribes the time of performance of the contract, the contract should be performed according to the prescribed time.  In case of delay in making sales under the contract, the association cannot be held liable if the member cannot prove that the loss was suffered because of the association’s negligence[vi].

Generally, damages for breach of marketing contracts can be claimed as in an original contract.  However, there should be clear and definite evidence of the breach of contract[vii].  If an association does not have capital stock, it can be completely cooperative.  Therefore, a remedy for breach of contract cannot be effective.

[i] New York Life Ins. Co. v. Occidental Petroleum Corp., 43 Cal. App. 2d 747 (Cal. App. 1941).

[ii] In re Taxes, 46 Haw. 292 (Haw. 1963).

[iii] Wilcox v. St. Croix Labor Union Mut. Homes, Inc., 567 F. Supp. 924 (D.V.I. 1983).

[iv] Wright v. Dobie, 3 Tex. Civ. App. 194 (Tex. Civ. App. Austin 1893).

[v] Hopkins v. Harper, 46 Ark. 251 (Ark. 1885).

[vi] California Western Holding Co. v. Merrill, 7 Cal. App. 2d 131 (Cal. App. 1935).

[vii] Washington Cranberry Growers Ass’n v. Moore, 117 Wash. 430 (Wash. 1922).


Inside Marketing Contracts