A Brief Introduction of Cattle Lease Agreement
If the farmers or the lessee can’t afford to buy a cow or herd, they rely on owners. Owners also are always on the lookout for operators who can take care of the cattle, and benefits can be shared between both parties. These parties sign an agreement to make the process legally binding; this agreement is known as the Cattle Lease Agreement.
The leasing of cows allows the lessee not to pay the full amount of the cow and still benefit from it. It should be noted that in such an agreement, apart from profits, risks are also shared. The agreement needs to include all crucial details such as how the risk and profit will be shared, who will pay for the breeding of the animal, etc. There are other things to be shared, such as calf crops, medicines, vaccines, etc. This agreement is legally binding, and it protects both parties in case of any breach or misunderstanding. It must also contain a dispute resolution method.
Other names for Cattle Lease Agreement are Cow-Calf Lease Agreements and Cow Lease Agreement.
Who Takes the Cattle Lease Agreement?
This Agreement is signed by a lessee and lessor. They can also be called the operator and owner, respectively. The agreement makes sure that the farmers who can’t afford to buy cattle, heard, or cow-calf can earn some profits by taking care of the owner’s cattle. It can be treated like most other lease agreements except here sometimes; the profits are also shared with the owner.
Purpose of the Cattle Lease Agreement
This agreement ensures some tax benefits to the owner or seller. If the owner is busy doing many other things, it is very convenient for him to give responsibility to a lessee. It also allows both parties to share crops in the same proportion as they share the cost. For instance, if they share the cost at 60:40, then the crop will also be shared between 60 and 40.
Here are some more pointwise reasons to sign this agreement –
- It allows a person to lease the cattle
- It also gives a person a chance to buy the cattle eventually
- It allows a person to take care of the cattle
- It reduces capital investment for the lessee
- It tells the lessee about management risks and makes him work on the production
- It allows the owner to continue his investment while the operator takes care of most things
- It protects both parties legally
- It ensures there are no confusions and dispute
Contents of the Cattle Lease Agreement
Like any other agreement, a Cattle Lease Agreement should have the basic details of both the lessee and lessor. Basic details include
- The names, phone numbers, addresses, etc.
- Further, the agreement should have terms and conditions of the lease.
- The agreement should first include a section of definitions. It is important for both parties to understand the meaning of each word written in the agreement.
- The title of ownership remains in the name of the owner. For this purpose, the owner must have the original registration papers
- The lessor has exclusive rights to exhibit and use the leased animal during the period of the lease agreement.
- The lessor is responsible for all expenses incurred in exhibiting the animal, such as veterinarian, transportation, etc. The lessor shall keep any premiums or awards won while exhibiting the animal during the duration of the lease agreement.
- The owner of the leased animal/s agrees not to hold the youth lessor for any financial loss arising out of injury/death to the leased animal/s, unless otherwise stated in the lease agreement.
- The owner is not responsible for any financial liability from any injury that the youth may incur while working with the leased animal.
Further, the agreement would have a description of the bred animal. Who will take care of the animal and who will bear the expenses – the agreement must answer these very important questions. Moving forward, there are a few other aspects such as death, insurance, loss, etc. Further, the agreement will have details of crop share between both parties. The agreement must also have a termination policy and the rights of both the lessee and lessor.
How to Draft the Cattle Lease Agreement?
Such agreements are sometimes orally decided, but it is suggested that you draft a written agreement. An oral agreement can create confusion and misunderstanding. Before drafting the agreement, both parties should sit together and decide on the terms and conditions of the agreement. Once all terms are decided, the agreement should be drafted in a very simple and basic language so that all involved parties can understand it easily.
The terms ideally include
- Feed Costs
- Veterinary Care/Costs
- Daily Care
- Insurance
- Show Ring
- Breeding
- Option to Purchase
- Rental Fee
A healthy relationship between the operator and the owner makes everything easy and simple. In each state, the rules for such an agreement can be different. You must understand your state’s law entirely before signing the agreement. Both parties should know how they are protected by the law. It is always good to know your rights. Well-drafted Cattle Lease Agreement template outlines all the terms and obligations of respective parties, leaving no scope of ambiguity.
There is a lot of scopes for both parties to negotiate. Negotiations are an important and crucial part of the agreement. Both parties should sit and decide on who is contributing to how much and how the percentage of profit will be divided. Further, the parties must also decide on the terms of health, nutrition, etc. The other aspect that can be negotiated is the termination policy.
Benefits & Drawbacks of the Cattle Lease Agreement
For the operator and the owner or for the lessee and the lessor, there are multiple benefits of the agreement. For both, some of the benefits are common, while some are different.
Some common benefits are –
- This agreement provides tax benefits for the seller. On leasing a cow to a farmer, the seller instantly recognizes the full gain on the particular sale. In general, a cattle lease agreement renders greatest tax benefit by allowing the seller to recognize the sale income in a period of time,
- Moreover, even if the farmer can no longer afford to feed and take care of the herd, the agreement allows a farmer to gain income from a herd, without permanently having to sell the herd. The farmer/youth can lease out the herd and when funds are available, he can take back the cattle.
For the owner or lessor alone, the benefits are –
- Continuous investment in the cowherd
- Partial ownership maintained with less labor but the risk involved
- Have the option to transfer the cowherd to the lessee
For the operator or lessee, the benefits are –
- Reduced capital investment
- Shared production, price risk, and management
- Option to gradually acquire ownership of the cowherd
There are no drawbacks to signing a Cow Lease Agreement, but it contains a lot of risk for both parties. If parties can maintain a healthy relationship and transparency between them, then unforeseeable situations can be tackled by them with ease and understanding.
What Happens in Case of Violation?
In case of any violation, parties must refer to the agreement. They can also choose a mediator’s name in the agreement who can intervene in case of any conflict. However, in the case of a bigger breach, parties are well within their rights to approach the court. All states have different rules for leasing cows. You must be fully aware of all the details of your state laws to avoid any fight(1).
When making a Cattle Lease Agreement, parties must understand that they have to risk their capital. They both must have a healthy relationship between them for a smooth partnership. The lessee should hold full responsibility and should be able to convince the owner. There are many Cattle Lease Agreement forms available online, but you should choose the one drafted by experts.