IT’S been almost a year since the Horticulture Code of Conduct was revised, which means you should be using Horticulture Produce Agreements (HPAs) for most, if not all of your horticulture trade.
From April 1, 2018, all trading agreements must be in writing, and must comply with the Code’s other requirements for HPAs.
HPAs are designed to provide greater clarity and transparency to the grower-trader relationship by clarifying issues which can cause disputes such as quantity and quality specifications for produce, and under what circumstances produce can be rejected.
Whether you are a grower or a trader, now is the time to put an HPA in place because it is against the law to trade in horticulture produce without one.
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The key when entering into an HPA is to remember the purpose of the Horticulture Code is to ensure transparency in the relationship between growers and traders so that each has a clear understanding of the terms under which they are trading.
The ACCC has developed two sample HPAs: one for the grower-merchant relationship, and another for the grower-agent relationship.
These can help you understand what needs to be included in your HPA, and are available on the ACCC website (www.accc.gov.au/business/industry-codes/horticulture-code-of-conduct/horticulture-produce-agreements).
Other organisations have also developed their own template HPAs and the ACCC is aware that some growers are concerned about signing up to these.
The ACCC does not endorse any industry organisation’s template HPA, and we think the level of transparency and certainty within some templates is less than ideal.
Growers looking for more detail can seek to negotiate with traders about any terms proposed in a HPA.
While some templates may not be perfect, growers really need to put HPAs in place because the Horticulture Code requires this and the ACCC may take action against traders or growers that do not have HPAs in place.
A compliant HPA must include:
- whether the trader is acting as an agent or a merchant;
- any requirements the trader has for the delivery of produce;
- under what circumstances the trader can reject the grower’s produce;
- any quantity and quality requirements;
- the FreshSpecs Produce Specifications or other specifications used to determine quality;
- if a trader plans to pool produce, the quality requirements of the produce to be pooled;
- when the trader must pay the grower;
- whether an agent will pursue bad debts for the grower; and
- how price (merchant) or commission (agent) will be determined.
The ACCC continues to work with horticulture industry organisations to educate growers and traders about their rights and obligations under the Code.
However, we have begun to shift our focus towards enforcing the Code. We have issued compliance notices to a number of traders that operate in the wholesale central markets.
The notices require these traders to provide the ACCC with specific information or documents they are required to keep, generate or publish under the Code.
Growers and traders that are not compliant with the Code can face penalties. Courts could impose penalties of up to $63,000 for serious breaches of certain sections of the Code.
The ACCC can also issue infringement notices to the value of $10,500 for body corporates and $2100 for individuals.
The Code has other key requirements too, like the obligation on all parties to deal with each other in good faith.
You can find out more about good faith, and the other requirements of the Code on the ACCC’s website: www.accc.gov.au/horticulturecode
In addition to the requirements of the Horticulture Code, traders should be aware that HPAs must not contain terms that would be unfair under the business to business unfair contract terms law.
This law applies to standard form contracts entered into or renewed on or after 12 November 2016 where:
- at least one of the parties is a small business (employs less than 20 employees)
- the upfront price payable under the contract is no more than $300,000 (or $1 million if the contract is for more than 12 months).
To be unfair, a term must:
- cause a significant imbalance in the parties’ rights and obligations, and
- not be reasonably necessary to protect the legitimate interests of the party advantaged by the term, and
- cause detriment (e.g. financial) if it were applied or relied upon.
Ultimately, only a court or tribunal (not the ACCC) can decide that a term is unfair and this would depend on the circumstances and consideration of various factors.
In the event a term is found to be unfair, it can be struck out of the HPA and therefore will not be enforceable.
To learn more about unfair contract terms and the types of terms that can be unfair, visit www.accc.gov.au/UCT.
- ACCC commissioner Mick Keogh chairs the ACCC’s Agriculture Board and Agriculture Consultative Committee. Information in this article is for guidance purposes only and does not constitute or substitute for legal advice.