§421-18  Contracts between association andmembers.  (a)  Period, withdrawal.  The bylaws may require members toexecute contracts with the association in which the members agree to patronizethe facilities created by the association, and to sell all or a specified partof their products to or through it, or to buy all or a specified part of theirsupplies from or through the association or any facilities created by it.  Ifthe members contract to sell to the association, the fact that for certainpurposes the relation between the association and its members may be one ofagency shall not prevent the passage from the member to the association ofabsolute and exclusive title to the products which are the subject matter ofthe contract.  The title shall pass to the association upon delivery of theproduct, or at any other time specified in the contract.  If the period of thecontract exceeds ten years, the bylaws and the contracts executed thereundershall specify a reasonable period, not less than twenty days, in each year,after the tenth year, during which the member, by giving to the associationsuch reasonable notice as the association may prescribe, may withdraw from theassociation.  In the absence of a withdrawal provision, a member may withdrawat any time after ten years; provided that if a member is expelled from theassociation before the end of the ten-year period, the contract shall be void.

(b)  Damages for breach; effect upon membershipstatus of association members.

(1)  The contract may fix, as liquidated damages,which shall not be regarded as penalties, specified sums to be paid by themembers to the association upon the breach of any provision of the contract,regarding the use of any facilities of the association or the sale, delivery, handling,or withholding of products; and may further provide that the member who breaksthe member's contract shall pay all costs including premiums for bonds, andreasonable attorney's fees, to be fixed by the court, in case the associationprevails in any action upon the contract.

(2)  Any member who breaches any provision of thecontract with the association shall be subject to removal from the associationincluding the forfeiture of all rights and privileges pertinent to membershipin the association as may be provided for in the bylaws of the association.  Inthe absence of any provision in the association's bylaws relating to theremoval of members, removal may occur by majority vote of the board ofdirectors.  Any member so removed shall be entitled to reapply for membershipincluding the reinstatement of all such rights and privileges as may have beenpreviously forfeited subject either to (A) any provision in the association'sbylaws relating to readmission, or (B) in the absence of such provision, bymajority vote of the board of directors at the time readmission is sought.

(c)  Equitable relief.  A court of competentjurisdiction may grant an injunction to prevent the breach of the contract by amember and may decree specific performance thereof.  Pending the adjudicationof the action and upon filing a verified complaint showing the breach orthreatened breach, and a bond in such form and amount as may be approved by thecourt, the court may grant a temporary restraining order or preliminary injunctionagainst the member.

(d)  Recording contracts.  The association mayfile contracts to sell agricultural products to or through the association inthe office of the bureau of conveyances.  If the association has uniformcontracts with more than one member in any county, it may, in lieu of filingthe original contracts, file the affidavit of its president, vice president, orsecretary, containing or having attached thereto:

(1)  A true copy of the uniform contract entered intowith its members producing the product in the county;

(2)  The names of the members who have executed thecontract and a description of the land on which the produce is produced, if thedescription is contained in the contract.

The association may file from time to timethereafter affidavits containing revised or supplementary lists of the membersproducing the product in the county without setting forth therein a copy of theuniform contract but referring to the filed or recorded copy thereof.  Allaffidavits filed under the section shall state in substance that they are filedpursuant to this section.  The bureau of conveyances shall file the affidavitsand make endorsements thereon and record and make entries thereof in the samemanner as is required by law in the case of chattel mortgages, and shallcompile and make available for public inspection a convenient index containingthe names of all signers of the contracts, and collect for its serviceshereunder the same fees as for chattel mortgages.  The filing of the contract, orthe affidavit, shall constitute constructive notice of the association's titleor right to the product embraced in the contract, to all subsequent purchasers,encumbrancers, creditors, and to all persons dealing with the members withreference to the product.  No title, right, or lien of any kind shall beacquired to or on the product thereafter except through the association or withits consent, or subject to its rights; and the association may recover thepossession of such property from any and all subsequent purchasers,encumbrancers, and creditors, and those claiming under them, in whosepossession the same may be found, by any appropriate action for the recovery ofpersonal property, and it may have relief by injunction and for damages.

(e)  Effect of other statutes upon contracts. The provisions of this chapter are intended to encourage and to authorizeassociations to effectively produce and market agricultural products, and toderive the maximum benefits possible from such cooperative production andmarketing.  Accordingly, the contracts between an association and its membersshall be deemed to authorize the collective production and marketing of themembers' products, including but not limited to the combining, pooling andblending of production quotas, marketing adjustments and distribution rights,the provisions of any other law to the contrary notwithstanding.  This sectionshall be liberally construed in favor of associations and their contracts withtheir members. [L 1949, c 234, pt of §1; RL 1955, §176-19; HRS §421-18; am L1969, c 200, §1; am L 1972, c 103, §5; am L 1978, c 183, §1; gen ch 1985]

 

Cross References

 

  Bureau of conveyances; recording, see chapter 502.

 

Rules of Court

 

  Injunctions, see HRCP rule 65.