35Loyalty payments

35 Loyalty payments

(1) This section applies if the milk supply agreement provides for a loyalty payment to the farmer. (2) The milk supply agreement must not impose on the loyalty payment a condition that the farmer: (a) supply milk to the processor after the agreement ends; or (b) agree to vary the agreement to postpone the end of the supply period; or (c) enter into a new milk supply agreement with the processor. (3) The milk supply agreement must provide that, if the agreement is terminated before the end of its supply period, the farmer is entitled to a portion of the loyalty payment, calculated on the basis of the proportion of the supply period completed before the termination, (subject to any other conditions to which the loyalty payment is subject). (4) Subsection (3) does not apply if the milk supply agreement is terminated in circumstances involving a material breach of the agreement by the farmer.