Completing various agribusiness forms Bullitt Blogs

							Agribusiness Management
                  Unit B

     Starting and Operating
            the Agribusiness
Problem Area 4

Operating the Agribusiness
Lesson 5

Completing Various Agribusiness
 Forms
Objectives

 Identify the components of a legally
  enforceable contract.
 Identify common legal documents used
  in business.
 Identify the common components of a
  lending/credit application.
 Identify the types and components of
  lease agreements.
Vocabulary
   Bill of sale              Juristic person
   Capacity                  Lease
   Cash lease                Minors
   Consideration             Mortgage
   Contract                  Principal
   Contractual offer         Promissory note
   Deed                      Share lease
   Installment purchase      Statute of Frauds
    agreement                 Title
   Installment sale
    agreement
Interest Approach

 Ask your students to define a
  contract
 Ask them what is the purpose of a
  contract
 Use this discussion to begin the
  lesson on important forms used in
  business
What are the components of a
 legally enforceable contract?
Contract

A  contract is a legally enforceable
  agreement negotiated between two
  or more persons
 A person may be either a juristic
  person or a human being
Juristic Person

A juristic person is an entity, such as
 a corporation, created by law
A legally enforceable contract
fulfills requirements in five areas:

 Agreement

 Legality

 Consideration

 Contractual capacity
 Contractual forms
Agreement

 Agreement  (Offer and
 Acceptance)—A contract must
 provide for an offer by one party and
 an acceptance by another
Legality

A   legally enforceable contract must
  have a lawful objective
 If the satisfaction of a contract
  requires breaking the law or
  violating a statute or policy, it does
  not have a lawful objective
Consideration

 Consideration  is defined as value
  given and value received as a result
  of contractual agreement
 Each of the parties involved in a
  contract must receive value
 Contract law does not require that
  the considerations be equal
Contractual Capacity

 Contractual Capacity is the ability to fully
  understand and comprehend the
  requirements of a contract as specified
  by law
 All parties to a legally enforceable
  contract
  must meet the legal requirements for
  capacity
Contractual Forms

 Contracts  may be verbal or written;
  both are legally enforceable
 Some contracts, however, must be
  written, such as contracts that are
  regulated by the Statute of Frauds
Statute of Frauds
       This law requires certain contracts to
        be written and signed
       The Statute of Frauds monitors several
        types of contracts, they are:
        Sale of land
        Sale of goods exceeding $500
        Contract for services exceeding one year.
        Promise to assume the debt/legal responsibility of
         another
        Promise to the administrator or executor of an estate
 What are the common legal
documents used in business?
Mortgage

A mortgage is a legal document
 giving the lender a claim against the
 property if the principal or amount
 borrowed, interest, or both are not
 paid as agreed
Promissory Note

   A promissory note is a written
    promise to repay based on the
    debtor’s excellent credit rating
Deed

   A deed is a document which
    transfers ownership from one party
    to another
Bill of Sale

   A bill of sale is a written statement
    transferring the ownership of
    something by sale
Title

   Title is a document stating
    ownership of a property
Installment Purchase Agreement

   Installment purchase agreement is
    a purchase agreement made with
    all or part of the payment made at
    regular times over a specified
    period
Installment Sale Agreement

   Installment sale agreement is a
    document stating the sale of
    property for which a series of
    payments is made over a period of
    time
Lease

   Lease is a contract by which an
    owner gives to a tenant the use of
    property
    What are common
     components of a
lending/credit application?
Preparation

A business preparing to borrow
 money should recognize that this
 borrowing process might be one of
 the most important selling
 operations in which the business
 participates
Lending Applications

 Lending applications will vary from
 one lending institution to another;
 however, there is some basic
 information a lender will need
Basic Information

 What will you do
  with the money
 How will it affect
  your business?
Technology

   How the business
    is adjusting to the
    changing
    technology of its
    industry and
    customers
Other Information

 Characteristics   of the business’s
  customers
 Size of operation
 Shifts in volume of business over
  the last several years
 Availability and stability of the
  markers
Other Information

 Adequacy   of facilities to meet goals
 Projection of capital requirements

 Earnings, and cash flow during the
  lending period
Managerial Capacity

 Age and
  experience of
  management
 Types of training
  programs
  scheduled to keep
  current in their
  field
Collateral

A  list of available collateral to
  support such a loan
 Audit reports from the past 3 to 5
  years to reflect the financial strength
What are the types and
 components of lease
    agreements?
Lease

A   lease may be oral or written

             leases can lead to
 Well-written
 better understanding and closer
 cooperation between landowners
 and tenants
Types of Leases

A  cash lease is one in which a fixed
  price has been set for use of the
  property
 A share lease is one in which the
  tenant and the landowner share in
  costs and revenue
Cash Lease

   Good option for:
     Any small business
     A landlord that lives a distance away

     A landlord may prefer a cash lease
      because there is:
         Less risk and guaranteed income
         Fixed rent

         Less supervision by the landlord
Cash Lease

A landlord may not prefer a cash
 lease because:
  Itgenerally provides lower income
  Landlord has less control of the
   property
Cash Lease

A tenant may prefer a cash lease
 because:
  Itwill provide more profit
  The tenant can expand the size of the
   business and lower fixed costs of the
   lease
Share Lease

 Advantages     of a share lease for the
 landlord are:
  More  opportunity for supervision
  More probability the rent amount may
   come closer to the value of the land
   than other leases
Share Lease

   Advantages of a share lease for the
    tenant are:
     Requires less capital than a cash lease
     Landlord is more inclined to improve the
      property to increase productivity
     Less risk exposure on cash outlays if
      product fails
Summary/Review

 Components of a legally enforceable
  contract
 Common legal documents used in
  business
 Common components of a lending/credit
  application
 Types and components of lease
  agreements