Drafting a Successful Livestock Sire Lease

More and more today producers are electing to lease a sire for their cattle herds, sheep flocks, or horse herd.  There are many reasons why livestock producers may choose to lease a sire. Oftentimes, these transactions are done “on a handshake”; however memorializing the terms of the lease can protect both parties, help articulate a clear agreement, and provide a roadmap for resolving disputes to preserve a business relationship.  This article illuminates a few relevant points that should be considered in a sire lease.

Identification

a. The Sire(s): The lease should be clear on which sire(s) are subject to the lease. If the sire is registered with a breed association, it is recommended to include the breed registration number and a copy of the registration as an addendum. Producers should consider putting the approximate weight and body condition score of the animal at the time of the agreement; in some cases, the owner will include a photograph of the sire to illustrate his condition on or around the date of delivery.

b. The Dams: In most cases, sire leases should be clear on which females the sire will be bred to. In some instances, a detailed list of the dams, their Identification numbers, dates of birth and breed may be attached as an addendum in the lease. This may be important for  multiple reasons: (1) to show that the sire will not be overworked, (2) to demonstrate that the sire will or will not be used on first-time dams, or (3) the sire will not be bred to unapproved dams owned by the breeder or third parties.

c. Sire Use Location(s): The sire lease should be clear where the animal will be housed. Will the animal be on pasture on the breeder’s property? Will the animal transfer among three different properties owned or rented by the breeder.

Delivery

How is the sire being transported from the owner’s property to the breeder’s property? Who is the paying for the expense of the transportation and bearing any risk of loss, injury or illness of the animal during the delivery time? Are there penalties for late delivery?  It is also recommended that both parties agree to comply with the transportation laws for the truck and trailer and any  animal welfare laws that apply to the transportation of livestock, including the “Twenty-Eight Hour Law”.

 

Payment Terms & Term Length

Sire leases should have unambiguous payment terms along with term length and procedures for extending lease length. What is the rate, timing of payment, payment method(s) and instructions, and penalty for late payment (including interest). Some sire leases require a security deposit for $X to help insure the delivery of a healthy animal at the end of the term.

Option to Purchase

Will the breeder have an option to purchase the sire at the end of the lease or is this a “rent-to-own” contract for a sire?

Care of the Sire

Parties to a sire lease should consider language concerning the health of the animal. Are there certain nutritional programs or management techniques that should be followed? Is there a penalty if the animal is returned malnourished or experienced significant weight loss? Is there a certain veterinarian that the breeder should utilize? It is suggested that the breeder be required to call the bull owner immediately if a medical issue occurs.

Warranty/Guarantee

Is either party making a warranty or guarantee? Perhaps the sire owner wants to give a warranty that the animal is of a certain breed and free of genetic birth defects. Most breed associations have posted online the genetic testing status of registered sires, which can be included as an addendum to the leases, illustrating that the animal is pedigree-free, tested-free or assumed-free of genetic birth defects. If a warranty to the sire’s fertility is made, then the bull owner should supply a veterinarian  approved and signed “Breeding Soundness Evaluation” as proof that the animal is a “Satisfactory Potential Breeder”. On the other hand, the breeder may guarantee the dams are healthy. Warranties on health and fertility are common if the payment terms are directly related to confirmed pregnancies. Conversely, the sire owner may want to specifically state that he does not warrant that the semen is fit for a particular purpose or that the sire’s semen will result in the production of progeny or that the progeny will result in congenital birth defects.

Termination

Under what circumstances can either party  terminate the sire lease? For example, many sire leases allow for the termination of the lease if either party materially breaches the contract. Furthermore, there could be a clause saying that either party could terminate the lease giving the other party X days of written notice.

A Few Other Provisions

If the sire owner and the breeder are in different states, it is paramount that the contract should say what the choice of law is (e.g. Missouri, Pennsylvania, Louisiana, Texas). Is there an exclusivity between the parties? Can the agreement be modified in writing? How will the parties handle “Acts of God” (e.g. tornadoes, flood, fire)?  Can the sire be subleased?

As you can see, there is no “one-size fits all” sire lease that is suitable for every transaction.  That’s why it is dangerous for livestock producers to pull forms off the internet, fill in a few blanks, and hope that it’s “good enough.”  Sire leases should be tailored for the unique needs of your operation and the  circumstances surrounding a particular transaction.  It benefits livestock producers to sit down with an outside party to help craft a lease either from scratch or modify an online form.  Livestock producers can help keep legal costs down by using this check list to create a written lease and working through the issues with the other party before a problem arises.

Source: Nathanial Cahill, Agricultural Business Specialist