Farming contract in Poland in the Civil Code- why modern regulation is essential?
25 listopada 2022

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Paradoxically the agreement of cultivation seems to be a topic forgotten in the doctrine of civil law in Poland in the last years. However it is the subject of a lively discussion in the world. Pursuant to Art. 613 § 1 of the Civil Code by the cultivation contract, the agricultural producer undertakes, firstly, to produce agricultural products and, secondly, to deliver (which means primarily the collection of produced agricultural products) to the contracting partner a specified amount of agricultural products of a specific type, and the contracting partner undertakes to collect these products in the agreed date, pay the agreed price and fulfill a specific additional service, if the contract or specific provisions provide for the obligation to perform such a service. A service characteristic of the cultivation contract, bearing a particular risk of its implementation, is the service provided by the agricultural producer. It takes the form of a non-cash benefit. If the essence of the contract concluded by the parties consists in the paid production and delivery of agricultural products, it will always be a cultivation contract, regardless of the nomenclature adopted by the parties to the contract and whether the specific relationship will be called "sale", "delivery" or otherwise. When regulating the rights and obligations of the parties to the contract, the regulations should take into account the fact that the production of agricultural products for sale is associated with a special agrobiological risk (understood as the biological production cycle) of the agricultural producer.

 

The cultivation contract has a significant meaning for the state's economy. From a social and economic point of view, the proper functioning of the cultivation contracts is essential.

 

In Poland, the cultivation contract was regulated in the Civil Code, which entered into force on January 1, 1965. Currently, this structure is outdated due to: a) the change of the economic system in Poland from a socialist to a free-market economy, b) the functioning of farms under the so-called subsidies to the agricultural economy of the European Union, c) a remarkable change in the ownership structure of farms, d) large activity of speculative groups on the market of agricultural products, e) change in the average size of farms, f) the so-called „stepping” resulted from the drainage works carried out in Poland, and thus the phenomenon of structural drought, g) more and more frequent extreme weather phenomena, such as hailstorms, downpours, flooding, etc. h) the problem of animal epidemics.

 

In the conditions of disrupting global supplies of agricultural products, due to geopolitical events, correct legislation relating to the cultivation contract becomes of significant importance.

Documents of significant importance for the cultivation contract have been created on a global scale (UNIDROIT). The world recognizes the key role of agriculture in providing food for human beings, as well as the increasing difficulties in running agricultural activity.

 

The cultivation contract is one of the traditional contracts in Polish civil science. Poland has been an agricultural country for centuries. grain exports, mainly via Gdańsk, were the basis for the prosperity of the Republic of Poland.

The scheme of providing the agricultural producer with the cultivation contract consists of two elements: the production of agricultural products and their delivery to the contracting party. The characteristic performance scheme under Art. 613 § 1 of the Civil Code structurally it resembles the supplier provision scheme. Pursuant to Art. 605 of the Civil Code the supplier undertakes to manufacture the goods and deliver them to the recipient. The main difference, however, lies in the driving force of producing the object of the service.

The production of agricultural products, which are the subject of the agricultural producer's service, requires (to put it in some simplification) two causative elements of varying intensity: firstly, appropriate human behavior (including the use of appropriate machinery and means in accordance with the agricultural culture, including e.g. planting, fertilizing, irrigation, etc.) and - secondly - the key contribution of the forces of nature (it is the share of sine qua non). The production of the delivery item may also require certain elements of natural forces (a plant set in motion by natural forces). Nevertheless, both cases, i.e. the production of an agricultural product and the production of the delivery item, still differ in the intensity of the influence of the forces of nature on the production of the item of performance. The operation of the forces of nature in the production of an agricultural product is predictable. Under the assumption of normal operation of the forces of nature, it is possible to agree on the achievement of specific sizes of agricultural products. Nevertheless, anomalies in the operation of the forces of nature - not caused by the agricultural producer - may, however, prevent the final fulfillment of the agreed service. The agricultural producer may not be able to fulfill the service in full or it may not be able to fulfill the service in a certain quality and / or quantity.

Pursuant to Art. 622 § 1 of the Civil Code if, as a result of circumstances (the change of which may be - lege non distinguente - ordinary or extraordinary), for which neither party is responsible, the agricultural producer cannot deliver the subject of the contract - in other words, when there is a state of inability to provide services - he is obliged "only to reimbursement of collected advances and bank loans ". This regulation relates to the subsequent, objective impossibility of performance. The above legal norm is unilaterally binding, which results from Art. 622 § 2 of the Civil Code according to which, in the cultivation contract, the parties may stipulate the conditions for the return of advances and loans that are more favorable to the agricultural producer. A circumstance for which the agricultural producer is not responsible is e.g. flood, flooding, hail, wind, drought, epidemic. In the literature on the subject, it is rightly believed that this is a concept broader than the concept of force majeure. Force majeure is characterized by the fact that it is: unpredictable, inevitable, beyond the control of the party to the contract. The phenomena of nature (the so-called Acts of God) such as floods, frosts, droughts, storms, fires and earthquakes are the force majeure. Finally, force majeure is considered to be other disturbances such as riots and other social disturbances, wars, uprisings and revolutions. The paradigm of careful operation of the agricultural producer, for example, does not require him to provide such an irrigation system to prevent structural drought. Thus, Art. 622 of the Civil Code applies in the event of force majeure and other events beyond the control of the parties, resulting in the inability to perform the agreed obligation. In such a situation, it is also not permissible to charge the agricultural producer with a contractual responsibility or a contractual penalty for the non-production of agricultural products.

The agricultural producer is obliged to return the received advances to the contracting party. At the same time, the agricultural producer should return the advances also if he used them. Regulation of Art. 622 of the Civil Code it is therefore less favorable for the agricultural producer than the standard resulting from the general rule expressed in art. 495 § 1 in fine of the Civil Code according to which the reimbursement of the consideration is made in accordance with the provisions on unjust enrichment. The provision of art. 409 of the Civil Code stipulates that the obligation to deliver it expires if the one who has obtained the benefit, consumed it or lost it in such a way that it is no longer enriched, unless, when disposing of the benefit or consuming it, he should have reckoned with the obligation to return it. The reimbursement of advances by the agricultural producer - unless such deadlines have been provided in advance - should take place immediately after the request for return (Art. 455 of the Civil Code). The agricultural producer cannot be obliged to reimburse the interest on cash advances granted to the contracting party, nor to reimburse the equivalent of the agrotechnical and zootechnical aid granted, to reimburse the equivalent of the agricultural producer's support in obtaining a loan. However, it is permissible to exclude or limit the obligation to return advances to the contracting authority, e.g. by reducing the amount to be returned, applying a grace period, dividing the return into installments.

The agricultural producer is obliged - pursuant to the contract concluded by him with the bank - to return the loan taken for the production and collection of agricultural products. The cultivation contract may, however, provide for the agricultural producer to be supported by the contracting party in the repayment of loans to banks.

An agricultural producer who - due to circumstances beyond the control of the parties - is not able to deliver the contracted agricultural products will not receive the agreed remuneration from the contracting party. Pursuant to Art. 495 § 1 of the Civil Code (applicable to mutual contracts) if one of the mutual benefits (in the analyzed case it is the benefit of the agricultural producer) has become impossible due to circumstances for which neither party is liable, the party that was to fulfill this service (agricultural producer), does not may request a mutual benefit (payment from the contracting authority), and in the event that it has already been received, it is obliged to return it in accordance with the provisions on unjust enrichment. One should defend the view that the regulation of Art. 622 of the Civil Code the advance payment cannot be extended to cover the receipt of the entire benefit (which is rare in practice). In addition, the agricultural producer loses the outlays made by himself from his own resources. Consequently - if the contracting party has a claim for the reimbursement of advances - the major part of the cultivation contract risk rests with the agricultural producer. His position under contract is clearly weaker. With speculative policies of buyers of agricultural products, an obvious question arises about the need to change this state of affairs.

Pursuant to Art. 623 of the Civil Code if the cultivation contract requires the producer to report the inability to deliver the subject of the contract within a specified period due to circumstances for which the producer is not responsible, failure to do so due to the producer's fault excludes the possibility of relying on these circumstances (in court and out of court). This does not apply, however, when the contracting party knew about the above circumstances or when they were commonly known (e.g. a flood or a structural drought is a commonly known circumstance). However there are obsolete „old time rules”. As can be seen, the legislator introduces a strict regime in the event of failure by the agricultural producer to comply with the contractual requirement of notification. Failure to comply with this obligation results in the adoption of a legal fiction that there are no grounds excluding the producer's liability. This is a disproportionate solution. The contracting party may not suffer any damage as a result of the lack of information. It seems that the contracting party's claim for damages against the producer would be quite sufficient if the contracting party itself suffered damage limited to damnum emergens due to the lack of information.

 

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