2021 Colorado Code
Title 7 - Corporations and Associations
Article 56 - Cooperatives
Part 5 - Powers and Purposes: Application of Other Laws
§ 7-56-502. Marketing or Purchasing Contracts

Cooperatives limiting membership to agricultural producers may make and execute marketing or purchasing contracts requiring the members to sell or purchase, for any period of time not over ten years, all or any specified part of their agricultural products or specified commodities, goods, services, or input supplies exclusively to or through the cooperative or any facilities utilized or to be created by the cooperative. If such producers contract to sell to the cooperative, it shall be conclusively held that title to the products passes absolutely and unreservedly, except for recorded liens, to the cooperative upon delivery or at any other specified time if expressly and definitely agreed to in the contract. The contract may provide, among other things, that the cooperative may sell or resell the products delivered by its members with or without taking title to the products and pay over to its members the resale price, after deducting all necessary selling, overhead, and other costs and expenses, including interest or dividends on stock which shall not exceed eight percent per annum, and reserves for proper purposes.

History. Source: L. 96: Entire article R&RE, p. 510, § 1, effective July 1.

This section is similar to former § 7-56-119 as it existed prior to 1996.

Annotator's note: Since § 7-56-502 is similar to § 7-56-119 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Standard cooperative marketing agreements made before they were authorized by this article have been held to be void as in contravention of public policy because in restraint of trade or competition. Burns v. Wray Farmers' Grain Co., 65 Colo. 425 , 176 P. 487 (1918); Campbell v. People, 72 Colo. 213 , 210 P. 841 (1922); Johnson v. People, 72 Colo. 218 , 210 P. 843 (1922); Atkinson v. Colo. Wheat Growers' Ass'n, 77 Colo. 559 , 238 P. 1117 (1925); Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529 , 253 P. 30 (1927); Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300 , 269 P. 886 (1928).

But such contracts are valid where there is a concurrence of the following conditions: The agreement was made after this article was passed; it was authorized by this law and executed in compliance therewith; it was made by and between an association formed under this article and a member of such association. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171 , 240 P. 937 (1925); Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529 , 253 P. 30 (1927).

Rejection of a contract for the growing of a crop is held within the discretionary powers of the marketing association of which the growers are members, where such power is not arbitrarily exercised. Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300 , 269 P. 886 (1928).

But rejection by a marketing association of a growing contract and its refusal to release a member from his obligations under his membership contract was arbitrary and without just grounds or excused where the association, in its negotiations, had stated that the tendered contract was acceptable in all its terms and would be approved by the association on condition that another contract be entered into with it for the purchase of its members' crops for the three subsequent years, which the purchaser declined to do. Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300 , 269 P. 886 (1928).

Marketing contract based on good consideration. A marketing contract between an association and producer by which the former agrees to buy, resell, and give the latter something out of the proceeds is based on a good consideration. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171 , 240 P. 937 (1925).

And a marketing contract was not breached by a marketing association because it turned sales over to brokers, the contract giving it power to sell to dealers, shippers, or otherwise. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171 , 240 P. 937 (1925).

An assignment of a claim in a marketing contract by a member is not against public policy or unconstitutional, for an assignment of a chose in action is neither against public policy nor unconstitutional; and although the cooperative contract itself might be against public policy and unconstitutional, that matter is of no concern, for whether other parts of a contract are open to these objections is irrelevant to the propriety of such an assignment. Austin v. Colo. Dairymen's Coop. Ass'n, 81 Colo. 546 , 256 P. 640 (1927).

A tenant who leases with the knowledge that his landlord has entered into a contract with a cooperative association for the marketing of his products is charged with knowledge of the provisions of this article concerning such contracts. Wilson v. Monte Vista Potato Growers' Coop. Ass'n, 82 Colo. 428 , 260 P. 1080 (1927).

For the provisions of this article constitute an essential part of a lease between the owner of land, who is a party to such a contract, and his tenant, who has knowledge of the contract, as much so as if its provisions were incorporated in the lease. Wilson v. Monte Vista Potato Growers' Coop. Ass'n, 82 Colo. 428 , 260 P. 1080 (1927).