093_HB0264eng HB0264 Engrossed LRB093 06232 BDD 06343 b 1 AN ACT concerning agriculture. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 1. Short title. This Act may be cited as the 5 Agricultural Production Contract Code. 6 Section 5. Definitions. As used in this Act, unless the 7 context otherwise requires: 8 "Capital investment" means a purchase or lease of any of 9 the following: 10 (1) A structure used for producing or storing a 11 commodity required to be provided by the producer under 12 the terms of the production contract if the structure has 13 a useful life in excess of 3 years. This includes, but 14 is not limited to, swine farrowing buildings, grain 15 storage facilities, and manure storage structures. 16 (2) Machinery or equipment used for producing a 17 commodity required to be provided by the producer under 18 the terms of the production contract if the machinery has 19 a useful life in excess of 3 years. This includes, but 20 is not limited to, trucks, tractors, combines, wagons, 21 augers, and planters. 22 "Commodity" means livestock, raw milk, fruits, 23 vegetables, or a crop. 24 "Contract input" means a commodity or an organic or 25 synthetic substance or compound that is used to produce a 26 commodity, including but not limited to, livestock, plants, 27 agricultural seeds, semen or eggs for breeding livestock, 28 fertilizer, pesticides, or petroleum products. 29 "Contractor" means a person who offers, provides, or 30 enters into a production contract with a producer for the 31 production of commodities in this State by the producer. HB0264 Engrossed -2- LRB093 06232 BDD 06343 b 1 "Crop" means a plant used for food, animal feed, fiber, 2 oil, pharmaceuticals, nutriceuticals, industrial uses, or 3 seed, including but not limited to, alfalfa, barley, 4 buckwheat, canola, corn, flax, forage, fruits, millet, oats, 5 popcorn, rye, sorghum, soybeans, sunflowers, tobacco, 6 vegetables, wheat, and grasses used for forage or silage. 7 "Livestock" includes, but is not limited to, beef cattle, 8 dairy cattle, poultry, sheep, or swine. 9 "Person" means an individual or entity, including but not 10 limited to, a sole proprietorship, a partnership, a 11 corporation, a cooperative, an association, a limited 12 liability company, an estate, or a trust. 13 "Produce" means to do any of the following: 14 (1) Provide feed or services relating to the care 15 and feeding of livestock. If the livestock is dairy 16 cattle, then "produce" includes milking the dairy cattle 17 and storing raw milk. 18 (2) Provide for planting, raising, harvesting, 19 identity preserving, or storing a crop. 20 "Produce" includes preparing the soil for planting and 21 also for nurturing the crop by the application of fertilizers 22 or soil conditioners, including those substances regulated 23 under the Illinois Fertilizer Act of 1961, or pesticides as 24 defined in the Illinois Pesticide Act. 25 "Producer" means a person who has been offered or who has 26 entered into a contract to produce a commodity. "Producer" 27 does not include a fertilizer or pesticide applicator, a feed 28 supplier, or a veterinarian, when acting in that capacity. 29 "Production contract" means: (1) Any written document 30 offered to or executed by a producer, under the provisions of 31 which (i) the producer would sell to a contractor, or the 32 contractor's designee, an identified commodity or commodities 33 and (ii) the contractor has, or exercises some control or 34 direction over, the production process; or (2) any written HB0264 Engrossed -3- LRB093 06232 BDD 06343 b 1 agreement offered to or executed by a producer under the 2 provisions of which the producer would produce, care for, or 3 raise a commodity or commodities not owned by the producer, 4 using land, equipment, or facilities owned or leased by the 5 producer, in exchange for payment. For purposes of this 6 definition, control or direction over the production process 7 includes (i) the contractor's designation of special 8 commodity characteristics, such as those present in 9 value-enhanced grains, or specific genetics in livestock or 10 (ii) the contractor's designation of a production input, such 11 as a seed variety, to be used by the producer to fulfill the 12 production contract. 13 Section 10. Limited applicability. This Act shall not 14 apply to a production contract under the provisions of which 15 the commodity is to be delivered by the producer to the 16 contractor or the contractor's designee within 30 days after 17 the date of the production agreement. 18 Section 20. Readability of production contracts. 19 (a) A production contract must comply with all of the 20 following: 21 (1) It must be in a typeface at least as large as 22 10-point modern, one-point leaded. 23 (2) It must be divided and captioned by its various 24 sections, have an index of the major provisions of the 25 production contract and the pages on which they are 26 found, and use commonly-used and understood words and 27 terms, but may include technical or industry terms 28 customarily used and understood by producers in the 29 ordinary course of business. 30 (3) It must limit references to other sections or 31 provisions and, when incorporating a document, have a 32 copy of the document attached. HB0264 Engrossed -4- LRB093 06232 BDD 06343 b 1 (4) It must have a Flesch scale analysis 2 readability score of at least 50. 3 (b) A contractor may include a provision in the index 4 required by Section 25 that the production contract being 5 offered meets the requirements of this Section as to 6 readability. 7 Section 25. Index. An index of the major portions of 8 the contract and the pages on which they are found must be 9 included with each production contract offered to a producer 10 that exceeds 2 pages in length. The index must contain 11 references for any of the following that are included in the 12 contract: 13 (1) The names of the parties to the contract. 14 (2) The definition sections of the contract. 15 (3) The provisions governing cancellation, renewal, 16 or amendment of the contract by either party. 17 (4) The sections outlining the duties or 18 obligations of each party. 19 (5) The compensation information. 20 (6) Any provisions subject to change in the 21 contract. 22 (7) Any special provisions relative to production 23 guidelines. 24 Section 30. Confidentiality clauses. A production 25 contract may include a confidentiality provision, but 26 communications with any of the following shall not be 27 considered a breach of any such provision: (i) a producer's 28 spouse; (ii) a producer's parents, siblings, and children of 29 the age of majority if these persons are partners, 30 shareholders, officers, or directors of the producer's 31 agricultural operations; (iii) accountants; (iv) attorneys; 32 (v) bankers; (vi) financial institutions; (vii) farm HB0264 Engrossed -5- LRB093 06232 BDD 06343 b 1 managers; (viii) trusts or trust beneficiaries; or (ix) the 2 partners, officers, or directors of the producer's 3 agricultural operations. When communicating with these 4 persons, the producer must request each person to treat the 5 information as privileged and confidential. 6 Section 35. Special provisions. If a production 7 contract requires any special production or handling 8 guidelines required by the producer, these provisions must be 9 fully explained in the contract. These provisions include, 10 but are not limited to, disease protocols for livestock and 11 segregation or identity preservation for grain. 12 Section 40. Termination or alteration of contracts. 13 (a) A contractor may not provide, offer, or execute a 14 production contract that allows the contractor to 15 unilaterally terminate the contract unless (i) the 16 termination is the result of a legitimate force majeure as 17 applied to the contractor or (ii) the producer breaches a 18 material term of the contract or voluntarily abandons the 19 contractual relationship. 20 (b) A contractor may not alter the quality, quantity, or 21 delivery times of contract inputs provided to the producer, 22 unless agreed to by the producer. 23 (c) Any cancellation or termination provisions must 24 include specific causes for the cancellation or termination 25 and any circumstances under which the commodity produced 26 under the contract might be rejected in whole or part by the 27 contractor. 28 (d) Any circumstances in which the compensation to be 29 paid by a producer may be discounted or increased shall 30 include specific causes to be clearly and concisely stated. 31 Section 45. Investment requirements. HB0264 Engrossed -6- LRB093 06232 BDD 06343 b 1 (a) This Section applies to all production contracts 2 that have capital investment requirements. 3 (b) Except as provided in subsection (c), a contractor 4 shall not take action to terminate or cancel a production 5 contract until the contractor has done the following: 6 (1) Provided the producer with written notice of 7 the intention to terminate or cancel at least 60 days 8 before the effective date of the termination or 9 cancellation. 10 (2) Reimbursed the contract producer for the value 11 of the remaining useful life of the capital investment 12 items. In calculating this reimbursement amount, the 13 contractor may take into account the producer's ability 14 to use the capital investments in other business 15 enterprises of the producer and the opportunity to recoup 16 the cost of the capital improvements by sale or lease. 17 (c) Exceptions. A contractor may terminate or cancel a 18 production contract without remedy as required in subsection 19 (b) if the basis for the termination or cancellation is any 20 of the following: 21 (1) A voluntary abandonment of the contractual 22 relationship by the producer. A complete failure of a 23 producer's performance under a production contract shall 24 be deemed to be abandonment. 25 (2) Failure of the producer to meet the specific 26 provisions of the contract and failure to remedy his or 27 her default. 28 (3) The conviction of a producer of an offense of 29 fraud or theft committed against the contractor. 30 Section 50. Enforcement; offenses; remedies. The 31 Attorney General is primarily responsible for enforcing this 32 Act. 33 A person who violates Section 20, 25, 30, or 35 commits a HB0264 Engrossed -7- LRB093 06232 BDD 06343 b 1 business offense under the Code of Civil Procedure. 2 A producer may recover his or her actual damages for a 3 contractor's violation of Section 40 or 45 of this Act. 4 Section 55. Statute of limitations. A claim that a 5 production contract violates this Act must be filed within 4 6 years after the date on which the party alleging the 7 violation knew or should have known of the existence of the 8 violation. 9 Section 60. Conflict with the Uniform Commercial Code. 10 To the extent that any provision of this Act conflicts with 11 or is inconsistent with any provision of the Uniform 12 Commercial Code, the provision of this Act shall control. 13 Section 90. The Uniform Commercial Code is amended by 14 adding Section 1-104b as follows: 15 (810 ILCS 5/1-104b new) 16 Sec. 1-104b. Agriculture Production Contract Code. This 17 Act is subject to the provisions of the Agriculture 18 Production Contract Code. 19 Section 99. Effective date. This Act takes effect on 20 January 1, 2005.