My Best Mistake: Verbal Agreements Rarely Work

February 28, 2012 10:53 PM

An Indiana grain producer and 2011 Top Producer of the Year shares his best business lesson

p56 Verbal Agreements rarely work
<< Jim Kline is principal owner and manager of Kline Family Farms Partnership in Hartford City, Ind. Four partners (Jim; his wife, Lou; his son, Adam; and his daughter, Kayla) own various percentages of four entities: a 7,500-acre corn and soybean farm as well as trucking, custom farming and tiling businesses. In 2006, Kline partnered in a joint farming venture called Brasil Farms LLC with two Brazilians and three other U.S. investors. Today the venture exclusively raises eucalyptus for firewood or charcoal for fuel. Kline was named the Top Producer of the Year in 2011.

Read below to learn about his best business mistake, as told to Jeanne Bernick


The most notable mistake I have made during my farming career involved a verbal agreement driven by emotion. For 29 years, we had an ideal working relationship with a group of Purdue professors on a rather large farm. Every summer, we met at the farm to discuss sustainability and performance improvements for the land.

As one might expect, the time came for the professors to retire. Their families had no interest in retaining the land. Though the professors offered us the opportunity to purchase the land, we were not in a position to do so. Ultimately, the land changed hands and was purchased by an insurance company that entered into a long-term lease with a multistate dairy corporation.

We had a year remaining on our contract after the sale of the land and wanted to do whatever we could to demonstrate to the new owners that we were capable of being good stewards and turning
a profit on their new property.

Phone Agreement. While away on vacation, we were contacted by one of the dairy managers to see if we would be interested in selling our corn crop on that tract of land as silage. Hoping that this would be a way to demonstrate our willingness to cooperate with the new land-owners, we agreed over the phone to sell the silage. The verbal agreement was that we would be paid for our corn during the next 12 months without any payment up front.

The dairy did not pay us for the silage. After much haggling and legal discussion with our attorneys, we ended up receiving less than 20% of what we were due. The dairy ultimately filed for bankruptcy.

At the end of the day, it was a difficult financial loss and a sad conclusion to a courtship with a farm.

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