Guidelines for Preparing a Timber Sale Contract
Many owners of timber are discouraged during and after their first timber sale. They may even avoid future sales because of mistakes made during a previous sale. A good contract, in the very least, can reduce your anxiety over the sale. It can potentially produce a mistake free harvest.
The legal consequences resulting from cutting, purchasing and selling timber should be of major concern to all parties involved in a timber sale. Most any forestry professional will recommend that you always use a timber sale contract...and you should customize every contract around a sale's unique conditions.
Sample Contracts Might be Inadequate
What the Buyer Should Agree To
What the Seller Should Agree To
Using a Sample Timber Sale Contract
Always be careful, if using a sample timber sale contract, not to duplicate it word for word. It is easy to copy an example thinking that it will cover all of your conditions. In many cases it will not be adequate. You are advised to use a representative contract only as a general guide.
The Society of American Foresters lists these sites where you can look through a variety of contracts:
- Cornell University
- Michigan State University
- University of Georgia
- University of Nebraska
- Wisconsin Department of Natural Resources
There are many reasons sample contracts might be inadequate.
*** State forestry and environmental laws differ and a contract should be specifically written to reflect those differences.
*** Conditions of the sale are never the same from one sale situation to the next. These conditions should be custom detailed in every contract.
*** Property located in and around the sale area may be subject to damage. Language in the contract should indicate penalties if damage to that particular property should occur.
*** Your legal ownership status - individual, partnership or corporate - may not be the same from one sale to the next and should be implied through the contract.
Use a lawyer! As you would have a forester review the sale, use a lawyer to review the contract. All timber sale contracts should be legally reviewed before being signed....and do not be afraid to use a buyer's contract or deed. Just have it reviewed like any other contract.
All you really want to do is legally convey the timber to the buyer. Punitive language must be included to protect your interest against contract violations.
It is suggested that you set the contract up into five sections. They are called the preamble, the description of sale area, trees designated for sale, conditions of sale (for both buyer and seller), and the witness to signature.
Create a Preamble...
Make sure you indicate who is conveying what to whom. You should legally define who the seller is and who the buyer is, including company names and addresses.
You should also include the exact dollar amount for the designated trees purchased at a specific location. The bargained price, in most cases, should be paid at the signing of the contract. This can either be included in the preamble section or under the conditions of sale section.
It might also be important to mention whether or not the people harvesting the timber are your employees. If they are not, make it perfectly clear that they are not.
Describe the Sale Area...
Obviously, a survey description would adequately indicate where the sale is to occur. A good description significantly improves the contract. Describe the area as accurately as possible. This might, additionally, be supported with flagging or paint around the sale area.
You have an obligation to guarantee good title which gives you the right to sell. Double check the description and deed to insure that you have the right to sell all timber in the defined area and who else has an interest in the timber. This is very important when the time comes for signitures.
Designate the Trees to be Sold...
Trees can be sold in various ways. Depending on the condition of the forest, you will be planning a complete liquidation cut or some type of partial cut. Specific silvicultural practices would determine how you might signify trees to be sold.
Partial or selection cuts should either indicate a paint spot at breast height plus a stump spot to indicate trees included in a sale or you may further indicate a minimum diameter and/or species of tree to be cut. The paint would be used to assist loggers in finding appropriate trees to cut and help you inspect for inappropriate cutting of non-sale timber.
Complete liquidations should be supported by either a flagged or painted boundary around the sale area described above. A species cut may be appropriate and should be indicated.
Define Conditions of the Sale...
There are conditions that both the you and the buyer must agree to. It would make sense to list in the contract, those things that both parties agree to do separately. This, too, is the section where you indicate any penalties for violation of contract. Always remember to include a time frame - when the timber is to be cut!
Important to Remember: You are building this contract, in addition to trading property for money, to define what you expect the harvest site to look like after the sale. The more the contract can assist you in this effort, the better, even if it increases the content of the contract.
The Buyer should agree to the following:
--To make full payment before the harvest begins for an exact amount and to waive claim to the timber if not cut by a specific date. There should be an exact termination date where all uncut wood becomes yours again. You may want to indicate further terms if an extension is requested.
--To protect growing stock not included in the sale and to allow periodic inspection reports to correct potential problems. Damage to this growing stock or the cutting of inappropriate trees should result in a rate of charge per tree defined in the contract.
--To insure that all improvements are left in as good a condition as they were before the sale. Fire prevention measures should be maintained and all state fire laws observed. Failure to do any of this would result in significant penalties.
--To hold the you harmless against liability incurred or caused by the buyer and his operation.
--To insure a high degree of woodsmanship by maintaining proper stump heights, appropriate disposal of litter and slash, efficient utilization of all merchantable material purchased, and following all environmental and water quality guidelines according to Best Management Practices (request a copy of this from your forestry agency).
--To avoid subcontracting or assigning of any logging without your written consent. Remember that you are not limited to the above considerations. Other factors to consider might be areas off limits to equipment; location of decks, roads, and skid trails; dispute arrangements through an arbitration board; requiring liability insurance and Workman's Compensation Insurance; release from timber theft liability.
The Seller should agree to the following:
--To guarantee good title to the forest products covered by the contract and to defend it against all claims at his expense.
--To grant the freedom of entry and right-of-way to the buyer through lands under his control for the purpose of the immediate timber sale. You should still insist on determining what roads to use and approve all new roads to be built.
To Conclude...
All contracts have to be signed and witnessed to include the date of signatures, two witnesses attesting to the signatures, and the signatures of you and the buyer. The contract should be signed in duplicate, one kept by you, one given to the buyer.
This report is a guideline for creating a timber sale agreement. It should be understood that the terms of such an agreement need to be reasonable and realistic. You may be limiting your purchase price or even the ability to sell the tract if restrictions are severe.
One final note. You should sit down with the buyer and discuss all terms prior to the sale. This mutual agreement may be the key to a successful timber sale and certainly will help mitigate future problems.
More on Making a Timber Sale from your About Forestry Guide...
SAF's Report here's HOW to… Write an Iron-Clad Timber Sale Contract...
