Member Advisory

Mycoplasma Bovis - Legal obligations

May 30, 2018

To:  All Federated Farmers Dairy members

Following the government's announcement on 28 May 2018 that it will continue to attempt to eradicate Mycoplasma bovis from New Zealand, Federated Farmers wishes to remind sharemilkers, farm owners and contract milkers about their legal obligations under the various dairy agreements.  These are the Herd Owning Sharemilking Agreement (also known as the 50:50 Sharemilking Agreement), the Variable Order Sharemilking Agreement and the Contract for Contract Milking.

To cancel Sharemilking or Contract Milking business arrangements without a positive test for Mycoplasma bovis or MPI deeming a farm or a herd to be 'at risk' could entitle the other party to damages.  If you are willing to offer compensation to the other party for cancelling, then you should have a discussion with the other party immediately.    

Positive test
If, after the commencement of the season, the herd is discovered to be positive for Mycoplasma bovis or to be deemed at risk by MPI, we recommend that both parties work together to manage the outcome.   This may include cancelling the agreement or working on, together.

If you are considering cancelling an agreement due to Mycoplasma bovis please obtain legal advice to ensure that you will not be liable for damages to the other party.     If your contract is being cancelled without proper grounds, or you would like further information about your legal rights (for example under the Contracts and Commercial Law Act 2017 (CCLA)), please call the 0800 Federated Farmers number (Remember - Federated Farmers members can call 0800 327 646 for 15 minutes of free legal advice) or contact your local lawyer.  If you do not have a lawyer and would like to find out where one exists, you can search at this address:  

Special care needed
While it is understandable to have concerns about the upcoming season and the transfer of herds onto new farms, all parties should take special care to ensure that they are not breaching their agreements by attempting to cancel upcoming or even current agreements.  Unless very specific situations arise, it may not be possible to cancel an agreement without having to offer some form of compensation to the other party.

We are aware of several instances where parties have cancelled (or have attempted to cancel) upcoming sharemilking agreements that are due to begin on 1 June 2018.  In some cases, the grounds for cancellation have been based on rumours about particular herds and farms being infected with Mycoplasma bovis and which are not supported by MPI.  This is concerning to Federated Farmers and could also amount to a breach of the relevant agreements that are in place.

Federated Farmers Agreements
The express rights to cancel only exist in the new versions of agreements (which we understand are not widely circulated) and can only be relied on in very specific situations - generally, where a herd or farm is infected with Mycoplasma bovis and the herd owner has not yet moved the herd onto the farm or the sharemilker or contract milker has not moved onto the farm.  

The previous versions of the Federated Farmers agreements (such as the Herd Owning Sharemilking Agreement, Variable Order Sharemilking Agreement and Contract Milking Agreement) do not expressly allow a party to cancel the agreement before commencement.

If you are using a previous version of a Federated Farmers agreement and have concerns about the farm that your herd is going to, or the herd that is coming onto your farm, or the herd that is already on the farm, we recommend that you obtain specific warranties and representations (i.e. promises given by one party) about the farm/herd (some warranties already exist).  Specifically, we recommend you ask for any Mycoplasma bovis test relevant to the herd and the other cattle that the herd may have mixed with, for example, at grazing.  This test is likely to be the bulk milk test.

In the event that the warranty or misrepresentation turns out to be incorrect (whether intentionally or not), you may have rights to cancel the agreement under the CCLA.  The CCLA provides for situations where a party has been induced into entering into a contract due to a misrepresentation.  In such situations, if the misrepresentation is serious, the other party may have a right to cancel the agreement or claim damages as a result.

Please note that even if you have legitimate grounds for cancelling an agreement due to Mycoplasma bovis, MPI will likely request that the herd remain on the farm until further notice.  It is important that you comply with any directions from MPI.

If you need further information, call Federated Farmers on 0800 327 646.