§421-18 Contracts between association and members. (a) Period, withdrawal. The bylaws may require members to execute contracts with the association in which the members agree to patronize the facilities created by the association, and to sell all or a specified part of their products to or through it, or to buy all or a specified part of their supplies from or through the association or any facilities created by it. If the members contract to sell to the association, the fact that for certain purposes the relation between the association and its members may be one of agency shall not prevent the passage from the member to the association of absolute and exclusive title to the products which are the subject matter of the contract. The title shall pass to the association upon delivery of the product, or at any other time specified in the contract. If the period of the contract exceeds ten years, the bylaws and the contracts executed thereunder shall specify a reasonable period, not less than twenty days, in each year, after the tenth year, during which the member, by giving to the association such reasonable notice as the association may prescribe, may withdraw from the association. In the absence of a withdrawal provision, a member may withdraw at any time after ten years; provided that if a member is expelled from the association before the end of the ten-year period, the contract shall be void.

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

(1) The contract may fix, as liquidated damages, which shall not be regarded as penalties, specified sums to be paid by the members 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 breaks the member's contract shall pay all costs including premiums for bonds, and reasonable attorney's fees, to be fixed by the court, in case the association prevails in any action upon the contract.

(2) Any member who breaches any provision of the contract with the association shall be subject to removal from the association including the forfeiture of all rights and privileges pertinent to membership in the association as may be provided for in the bylaws of the association. In the absence of any provision in the association's bylaws relating to the removal of members, removal may occur by majority vote of the board of directors. Any member so removed shall be entitled to reapply for membership including the reinstatement of all such rights and privileges as may have been previously forfeited subject either to (A) any provision in the association's bylaws relating to readmission, or (B) in the absence of such provision, by majority vote of the board of directors at the time readmission is sought.

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

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

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

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

The association may file from time to time thereafter affidavits containing revised or supplementary lists of the members producing the product in the county without setting forth therein a copy of the uniform contract but referring to the filed or recorded copy thereof. All affidavits filed under the section shall state in substance that they are filed pursuant to this section. The bureau of conveyances shall file the affidavits and make endorsements thereon and record and make entries thereof in the same manner as is required by law in the case of chattel mortgages, and shall compile and make available for public inspection a convenient index containing the names of all signers of the contracts, and collect for its services hereunder the same fees as for chattel mortgages. The filing of the contract, or the affidavit, shall constitute constructive notice of the association's title or right to the product embraced in the contract, to all subsequent purchasers, encumbrancers, creditors, and to all persons dealing with the members with reference to the product. No title, right, or lien of any kind shall be acquired to or on the product thereafter except through the association or with its consent, or subject to its rights; and the association may recover the possession of such property from any and all subsequent purchasers, encumbrancers, and creditors, and those claiming under them, in whose possession the same may be found, by any appropriate action for the recovery of personal 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 authorize associations to effectively produce and market agricultural products, and to derive the maximum benefits possible from such cooperative production and marketing. Accordingly, the contracts between an association and its members shall be deemed to authorize the collective production and marketing of the members' products, including but not limited to the combining, pooling and blending of production quotas, marketing adjustments and distribution rights, the provisions of any other law to the contrary notwithstanding. This section shall be liberally construed in favor of associations and their contracts with their members. [L 1949, c 234, pt of §1; RL 1955, §176-19; HRS §421-18; am L 1969, 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.