Agriculture

Did you know about the Farm Machinery and Equipment Act?

The Farm Machinery and Equipment Act is not well known among farmers, but it has many valuable benefits.
 
The act, which is administered and enforced by the Manitoba Farm Industry Board (MFIB) (PDF 24 KB), protects farmers when they buy or lease farm machinery or farm equipment from licensed  Manitoba dealers, by governing purchase, delivery and repair. 
 
The dealer is required to deliver new machinery and equipment to farmers on time, and is also responsible for timely and reliable repair service to the machinery and equipment. The act also specifies the procedures that must be followed by lien holders if a farmer defaults on a loan to purchase equipment that is governed by the act.
 
Machinery and equipment that is used in production of food for off-farm consumption, is covered under the act.  Exclusions include cars, trucks, snowmobiles, all-terrain vehicles and machinery used or purchased at an auction, estate sale, receivership sale or bankruptcy.
 
If the new equipment cannot be delivered on time, the dealer must forewarn the buyer five days ahead of the delivery date set out in the contract. The buyer then has two options: cancel the contract, or agree to take late delivery of the purchased equipment. 
 
If the buyer decides to take late delivery, the dealer is required to loan replacement equipment or pay for the rental of equipment to replace the machinery ordered.  However, the dealer does not have to provide for replacement equipment if the reason for late delivery is beyond their control or the control of the manufacturer. 
 
The dealer also has the option to cancel the contract if they cannot deliver the machinery or equipment on time, provided the buyer is given notice 15 days prior to the agreed delivery date.  If this happens, the dealer must provide a refund on all payments provided.
 

Warranty

All new farm machinery sold or leased by a dealer to a purchaser, or sold by a dealer to a financial institution that acquires it for a financial lease to a purchaser must carry a warranty against defects in material and workmanship. The warranty applies for a one year from the date of first use of the farm machinery or equipment.
 
Dealers cannot attempt to limit their liability by making agreements with farmers that differ from the minimum warranties set out by the Farm Machinery and Equipment Act. However, a farmer can waive the labour and/or transportation portion of the warranty. The waiver must be stipulated in the contract. 
 
If transportation to a dealership is required for repair work, it is covered to a maximum of 80 kilometers from the dealer’s repair shop. Transportation only applies if the machinery cannot be driven or delivered by the farmer, due to its condition. 
 
Parts excluded from the act include ignition parts, lubricants, chemical liquids, spark plugs, fuses, light bulbs and filters. Certain other parts are subject only to the warranty of the manufacturer, including tires, batteries, communication equipment, audio equipment, and parts that are not essential to, or required for, any of the intended purposes of the farm machinery or farm equipment. 
 
Repair work resulting from normal wear and tear or due to negligent operation is also excluded from the act. The act requires a dealer to make replacement parts available to the original buyer for 10 years after the machinery is purchased. 
 
When replacement parts are requested, they must be available at the dealership within 14 days of ordering them.  If parts are ordered on an emergency basis, they must be on hand at the dealership within 72 hours.  It is important to note time allowances excluded from these timelines, which are Saturdays, Sundays, holidays, and circumstances that are beyond the dealer’s control.  
 
Purchased repair parts must have a warranty against defective workmanship or materials for 90 days from the first day of use in the first season of use. The act does not control the price of the purchased repair parts.
 
The act allows a trial period intended to determine if equipment performs as stated in the contract, or as normally intended. This trial period can be either of:
  • 50 hours for new machinery equipped with an hour meter
  • 10 consecutive days starting on the first day of use for machinery with no hour meter 
If the machinery does not function properly within these time limitations, the buyer must notify the dealer by delivering to the dealer a Notice of Rejection form that must be provided with every sale or lease contract.
 
The dealer then has seven days to repair the machinery or equipment. If the dealer fails to correct the problem in the seven-day period, the buyer then has three days to  deliver a second Notice of Rejection form. If the problem is still unable to be corrected, the buyer then has the option to cancel the contract within another three days. 

Repossession protection

If a loan for machinery or equipment covered under the act is in default, the lienholder must file an application with the MFIB in order to proceed with repossession.  A copy of the application must be sent to the farmer. 
 
The MFIB will then ask the farmer to contact the board to discuss their repayment plans. The MFIB will make a decision on whether to grant the lien holder leave to repossess the farm machinery or equipment based on the information provided by both parties. The board’s decision is legally binding, however it can be appealed to the Court of Queen’s Bench.
 
If the equipment is either properly repossessed or voluntarily surrendered, the lender cannot pursue further legal action to make up for any shortfalls that occur when the equipment is sold.  However, the farmer no longer has any rights to the equipment. If the lender makes money on the sale after it has been repossessed, the overage is to be returned to the farmer.
 
A lien on equipment means that the buyer gets possession and use of it, but the lien holder keeps title until payment is complete. The act states the lien must be specified in a lien note, as part of a Conditional Sales Contract or Lease Agreement.  

Other protection

The act provides protection to farmers signing contracts for machinery and equipment.  It states that contracts signed by buyers do not become legally binding until the dealer signs it and delivers it to the buyer, either in person or by registered mail. This part of the act does not apply to buyers that have paid the full purchase price and taken delivery of the equipment. 
 
It also states that the contract must be fully explained to the buyer, if they cannot understand the language in which it is written. A standard contract should include a detailed descript including the serial number of equipment purchased, value of equipment purchased, market and trade-in value, borrowing costs, sales terms (including amounts and dates of payments), nature and duration of all warranties, the trial period and procedure by which the purchaser may reject farm equipment during the trial period and a delivery and waiver agreement.
 
A factsheet is available entitled  What Farmers Should Know about The Farm Machinery and Equipment Act. For further information on how the act applies to specific situations contact:
 
Manitoba Farm Industry Board
812 - 401 York Avenue
Winnipeg, MB R3C 0P8
Phone: 204-945-3856 in Winnipeg
Toll free: 1-800-282-8069