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Once a buyer has contacted you and price negotiations are final, you will need to enter into a legally enforceable contract with the buyer. While use of standardized contracts is not required, your contract must contain certain required elements.
Required Elements for Nutrient Trading Contracts
- Identification and contact information of the parties, with signature
- Location of Credits
- Duration of the contract in years
- Quantity of credits to be exchanged in each year of the contract
- Methods of credit generation
- Credit prices
- Obligations of the seller, including agreement to:
- Properly maintain BMPs or other specified facilities.
- Allow regular inspections.
- Comply with all applicable federal, state, and local requirements
- Obligations of the buyer
- Provisions for violation of the contract terms
In designing your contracts, you should make sure that you understand the liability issues involved for both you and the buyer. Much of the demand for agricultural credits will likely come from wastewater treatment plants. Trades with them will be incorporated into their discharge permits and become permit requirements. Under the Clean Water Act (CWA), the permit holder will remain solely responsible for meeting the permit requirements and any CWA enforcement action will be taken against it. This liability cannot be transferred to the credit seller even if it causes a violation by not generating the agreed-upon number of credits. For this reason, regulated buyers are likely to insist on contract provision that require the seller to cover all of the buyer’s financial liability caused by a default by the seller.
You can add additional elements and requirements to the contracts to address specific preferences that you may have. The additional provisions should not conflict with the contractual requirements listed above, however. Any additional provisions that are not required by the policy need not be submitted with the trade application and can remain confidential if you wish. It is recommended that you have your proposed contract reviewed by legal counsel before signing it.
All trade contracts must be reviewed by the state. Application must be made to the state by the buyer. Contracts submitted for review must provide specific information about the proposed trading arrangement, including:
- The time period for the trading arrangement
- The number of credits to be purchased each year during this period
- How the number of required credits to be exchanged was determined
- Source of credits
- The general contractual agreements
Following review of the trade, it will be entered into the Program’s web-based Trading Registry. If there are any missing elements, the contract will be returned to the applicant for revision.
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