DEPARTMENT OF AGRICULTURE


clearly specify the terms and conditions under which the
association will function with reference to the commod-
ity in question. Purchasing associations ordinarily do
not enter into contracts with their patrons, although it
is believed that there would be advantages in a purchas-
ing association entering into "firm" contracts with its
patrons so that it could learn in advance the number of
tons of fertilizer, for instance, that its patrons would
need.

 One advantage that accrues from entering into a
 marketing contract is the fact that the parties have an
 opportunity of specifying the exact status of all amounts
 that are deducted by the association. All agricultural
 cooperative marketing or purchasing associations should
 be organized and their papers should be so drawn that
 it will be clear that all amounts received by the associa-
 tion in connection with or on account of business done
 by the cooperative for its patrons, over and above the
 operating and maintenance costs and expenses of the
 association, will have the status of capital at the instant
 of receipt. Associations ordinarily and normally increase
 their capital out of receipts from current operations. It
 is unusual for an agricultural cooperative association
 to begin business with more than a relatively small
 amount of capital.

 INCLUDE "TRUE COOPERATIVE" PROVISIONS:

 In forming a cooperative association, if it is desired
that the association be what the courts have called a
"true cooperative." Provisions should be included in
the organization papers positively obligating the associa-
tion to account to its patrons on a patronage basis for
all amounts over operating and maintenance costs and
expenses received by the association.
 Of course, the members of an association would have
notice of the provisions in the by-laws as a matter of
law by reason of their membership. In the case of non