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Create a solid ag construction contract

Create a solid ag construction contract

Farmers can take steps to reduce liabilities when hiring companies to complete building projects

By Kate Ayers
Staff Writer

New builds on the farm can be exciting projects for producers. But, to ensure these large capital-investment projects run smoothly, farmers should carefully plan and adequately communicate their needs to contractors.

A farm building is a structure that is associated with and located on land devoted to farming. The farm building does not contain a residential occupancy, OMAFRA’s “Constructing a farm building in Ontario” article said. These buildings primarily house livestock or store equipment, or are used for the production, processing or storage of agricultural commodities or horticultural produce, or feeds.

To reduce risk of liabilities and problems associated with building projects, farmers should develop strong relationships with their contractors. Producers should also ensure they work with reputable companies.

“For farmers to protect themselves from any liability, the farmer (client) should work with an insured and licensed contractor,” the Canadian Farm Builders Association (CFBA) said in an email statement to The contractor will “act on the owner’s behalf as the ‘constructor.’

“It is within this definition of ‘constructor’ that most liability is captured during the construction phase.”

To learn more about the role of the constructor, review the Ontario Ministry of Labour, Training and Skills Development website and the Occupational Health and Safety Act.

In situations where a farmer is the constructor or contractor, he or she assumes all responsibilities outlined in the Occupational Health and Safety Act and the Regulation for Construction Projects document, the OMAFRA article said.  For projects valued over $50,000, farmers must send a Notice of Project to the Ministry of Labour. All construction projects are subject to inspection by the Ministry of Labour, the article said.

Before breaking ground on a project, farmers and contractors must develop contracts and agree to all terms. These agreements should be written, the CFBA said.

“A written contract provides a hard copy of the terms of the transaction. It outlines every detail and fully captures the scope of the work being undertaken. This agreement provides both the client and the contractor with a clear interpretation of what the work involves, and the material used to obtain project completion at any time before, during, and after every project,” the CFBA said.

“Prior to signing a contract, and before any transaction continues, the client and the contractor should review the contract together to ensure there are no miscommunications. If any concerns are raised, both the client and the contractor can go back to the contract and use it to provide clarity throughout negotiation and problem resolution. It is important to both a client and a contractor that a contract is properly written to ensure mutual agreement.”

A construction contract should include the names of the parties involved (client, contractor, and registered owner of the site), site information, and building plans and specifications, the OMAFRA article said.

Other information should include source of financing, authorization to obtain credit information, owner’s and contractor’s responsibility lists, and signatures of all parties, the OMAFRA article said. If a farmer must meet deadlines, the contract must also include deadlines and penalties.

To learn more about action items for your farm building project, check out the CFBA’s “Farm building construction projects” article

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