party from performance." But is this rule fully applicable to cooperative associations in differences with their members? Strong reasons exist for urging that the rule has less application to such contracts than to other business contracts.

Cooperative contracts are apparently universally regarded as not only contracts with cooperatives as legal entities, but as contracts between and among the various members. 155 An advantage given one member is ordinarily at the expense of other members. The defection of a member may increase the share of the total expenses that each of the others is called upon to pay.

The effectiveness and efficiency of an association depends to a high degree on the faithfulness with which each member works with all the other members.

They [marketing contracts] are not simply agreements
entered into with an agent, although a few people may
be selected to act in the capacity of officers to manage
the business of the association. The agreements are
essentially to and with all the other members of the
cooperative association, and the interests of every
member rest upon the same foundation, and no
member can be advantaged to the detriment of any
other member. 156

To release a member from his contract or to permit him to defend a suit brought against him by the association by showing that directors or an officer, manager, or some other employee of the association has done something which should not have been done, fails to take into consideration the obligation of the member in question to all the other members. Clearly, the contract among the members is not breached by the act of omission or

155 McCauley v. Arkansas Rice Growers' Co-op Association, 171 Ark. 1155, 287 S.W. 419 (1926); Staple Cotton Co-op Association v. Borodofsky, 143 Miss. 558, 108 So. 802 (1926); Haarparinne v. Butter Hill Fruit Growers' Association, 122 Me. 138, 119 A. 116 (1922); Manchester Dairy System, Inc. v. Hayward, 82 N.H. 193, 132A. 12 (1926); Rifle Potato Growers' Coop Association v. Smith, 78 Colo. 171, 240 P. 937 (1925); California Canning Peach Growers v. Downey, 76 Cal. App. 1, 243 P. 679 (1925); Anaheim Citrus Fruit Association v. Yeoman, 51 Cal. App. 759, 197 P. 959 (1921); Kansas Wheat Growers' Association v. Schulte, 113 Kan. 672, 216 P. 311 (1923).

156 California Canning Peach Growers v. Downey, 76 Cal. App. 1, 243 P. 679, 684 (1925).

commission, as the case may be, on the part of a delinquent officer or manager of the association.

The proposition becomes more transparent if the same situation arises with respect to an unincorporated association in which various producers are banded together by a contract which specifies that a certain party, or parties, is to act as marketing agent, and which vests in this agent certain stated powers. If the agent is delinquent or fails to abide by the terms of the contract, this would not release a producer from the contract or enable him to excuse nonperformance of his obligations under the contract. It would be obvious that the remedy lay in discharging the agent or in taking other appropriate action within the association for correcting the situation.

Does the fact that an association is incorporated change the essential character of the enterprise? The interdependent relation among the members is present in each case. The object sought to be accomplished is the same. The means employed are identical except for incorporation. At least one appellate court has given partial if not complete application to the doctrine under discussion, and in this connection said: "Appellants signed the 'marketing contract' with the other members of the association. Hence, appellants' agreements were made in consideration of like agreements of the other members and for their mutual advantage. If appellants could be absolved from the performance of the contract because the officers of the association had committed breaches of the contract in certain respects, it is certain that the other members of the association would suffer by this course."157

In this case the court held that 118 members of the association, who had joined in a suit for the purpose of having the association placed in the hands of a receiver, would be required to carry out their marketing contracts in the future. But it was also held that the association should be enjoined from seeking to collect liquidated damages from the members on account of their failure to abide by their contracts in the past. As to the future, the court held that the members must specifically perform their con

tracts.

On the other hand, as will be shown in the following section, the failure of a cooperative to carry out the terms of its marketing contract with a member has frequently been held to

157 McCauley v. Arkansas Rice Growers' Co-op Association, 171 Ark. 1155, 287 S.E. 419, 423 (1926).

constitute a defense to a suit brought by the association against the member on the contract.

As a general rule, when members of an association believe that the directors they have elected to manage the association, or its officers or other agents, are not complying with its charter, bylaws, or marketing contract, they should be required to seek relief within the association. 158 This might involve the election of new directors and officers, or through other corrective measures. 159 To use a figure of speech, the members of a cooperative embark together for a common voyage and no member should be allowed to leave the ship except in accordance with specified conditions.

Defenses to Contracts

A member of a cooperative may not question the constitutionality of the statute under which the association is incorporated, or the terms of the contract entered into with the association. 160 Likewise, members are generally held to be estopped from setting up the invalidity of certificates of stock. 161

Although the charter of a corporation did not disclose that it was intended to function on a cooperative basis, a stockholder who became such with knowledge of the fact that the corporation was so functioning could not successfully complain of this fact. 162

158 In Davis v. Appalachian Electric Cooperative, Inc., 213 Tenn. 215, 373 S.W. 2d 450 (1963), members were denied relief because there was no showing that they had exhausted their remedies within the corporation or that such an attempt would be a useless gesture. But see Shadow v. Volunteer Electric Cooperative, 448 S. W. 2d 416 (Tenn. 1969), where members were allowed to maintain a class action for distribution of revenues alleged to be "excessive." 159 Cf. Indianapolis Dairymen's Cooperative, Inc. v. Bottema, 226 Ind. 237, 79 N.E. 2d 399, 226 Ind. 260, 79 N.E. 2d 409 (1948).

160 Johnson v. Georgia-Carolina Retail Milk Producers Association, 182 Ga. 695, 186 S.E. 824 (1936); Owen County Burley Tobacco Society v. Brumback, 128 Ky. 137, 149, 107 S. W. 710 (1908). See also Lennox v. Texas Cotton Co-op Association, 55 S. W. 2d 543 (Tex. Com. App. 1932); Zander v. Schackel, 161 Minn. 116, 201 N. W. 308 (1924); Hancock v. Frederick Co-op Mercantile Co., 48 S.D. 1, 201 N.W. 714 (1925); Berry v. Maywood Mutual Water Company Number 1, 13 Cal. 2d 185, 88 P. 2d 705 (1939); Vermont Farm Machinery Co. v. DeSota Cooperative Creamery Co., 145 Iowa 491, 122 N. W. 930 (1909).

161 Bliss v. California Coop. Producers, 23 Cal. App. 2d 245, 72 P. 2d 885 (1937).

162 Allen v. Llano Del Rio Co, of Nevada. 166 La. 77, 116 So. 675 (1928).

Before an association was incorporated, a producer signed a contract providing for the delivery of milk by him. It was found that the association was authorized to do business with members only. Since neither the producer nor the association had complied with the bylaw provisions for making the producer a member, the association could not enforce its contract with the producer. 163

Mismanagement or unwise conduct of the affairs of an association is no defense to a suit for breach of a marketing contract. 164 The courts analogize the marketing contracts of an association for the delivery of products to contracts of commercial corporations for the delivery of money to the corporation in payment for stock purchased. The rule is that mismanagement of a commercial corporation is no defense to a suit for the recovery of the purchase price of stock. 165

The failure of an association correctly to account operated to relieve a member from his obligations under the contract. 166 It also has been held that the release by the directors of certain members operated to release other members from performing their contracts. 167 It has been intimated that the failure on the part of an association to enforce its marketing contract against certain members might operate to release others. 168

In a Washington case, 169 it was contended "that no member

163 Tulsa Milk Producers' Cooperative Association v. Hart, 145 Okla. 263, 292 P. 558 (1930).

164 Nebraska Wheat Growers' Association v. Smith, 115 Neb. 177, 212 N.W. 39 (1927); Pittman v. Tobacco Growers' Co-op Association, 187 N.C. 340, 121 S.E. 634 (1924). See also California Bean Growers' Association v. Rindge Land & Nav. Co., 199 Cal. 168, 248 P. 658, 47 A.L.R. 904 (1926); Toy v. Lapeer Farmers Mutual Fire Insurance Association, 297 Mich. 174, 297 N.W. 232 (1941); California Bean Growers' Association v. Sanders, 86 Cal. App. 689, 261 P. 717 (1927).

165 Mississippi, Ouachita & Red River R. R. Co. v. Cross, 20 Ark. 443 (1859); 7 R.C.L. sec. 235; 4 Fletcher, Cyc. Corp. (Perm. Ed.) §§ 1777-1778; American Building & Loan Association v. Rainbolt, 48 Neb. 434, 67 N. W. 493 (1896). See also Brewer v. Boston Theater Co., 104 Mass. 378 (1870).

166 Brown v. Georgia Cotton Growers' Co-op Association, 164 Ga. 712, 139 S.E. 417 (1927); New Jersey Poultry Producers' Association v. Tradelius, 96 N.J. Eq. 683, 126 A. 538 (1924).

167 Staple Cotton Co-op Association v. Borodofsky, 143 Miss. 558, 108 So. 802 (1926). See also Beaulaurier v. Washington State Hop Producers, Inc., 8 Wash. 2d 79, 111 P. 2d 559 (1941).

168 California Bean Growers' Association v. Rindge Land & Nav. Co., 199 Cal. 168, 248 P. 658, 47 A.L.R. 904 (1926).

169 Washington State Hop Producers v. Eglin, 6 Wash. 2d 531, 108 P.2d 329,

of the association could lawfully be released from his membership contract and obligations without the consent of all the members of plaintiff association." It was held that compromise agreements entered into by the officers of the association with members, which released the members from their obligations to deliver their commodities under the marketing contracts, were valid. It appeared that with respect to all but one of these members there was a question regarding the validity of the contracts; that all the members paid money to the association for the purpose of obtaining release from their marketing contracts; and that, after the compromise agreements were consummated, all the members of the association had knowledge of the transactions and did not object.

Although an association may be justified in breaching its marketing contract by refusing to receive commodities, it has been held that the refusal of an association to allow the grower to sell such commodities to others permits the member to recover his membership fee.170

In an Oregon case,171 the court found that, "The price did not depend on what any other grower was to get, and the release of another grower could not in any way increase or diminish his compensation." It was therefore held that the release of a member from his contract did not release others.

If an association by the terms of its marketing contract is required to receive the products covered under the contract, refusal to accept such products terminates the marketing contract.172

A cotton cooperative entered into an agreement to purchase cotton of a given grade and staple and at certain prices. It received

330 (1940). See also Beaulaurier v. Washington State Hop Producers, Inc., 8 Wash. 2d 79, 111 P. 2d 559 (1941).

170 Central Texas Dairymen's Association v. Jones, 67 S. W. 2d 896 (Tex. Civ. App. 1934). See also Kansas Wheat Grower's Association v. Toothaker, 128 Kan. 469, 278 P. 716 (1929); Guglielmelli v. Walla Walla Gardeners' Association, 157 Wash. 109, 288 P. 251, 77 A.L.R. 385 (1930).

171 Phez Co. v. Salem Fruit Union, 103 Ore. 514, 201 P. 222, 25 A. L. R. 1090 (1921), 205 P. 970 (1922).

172 Central Texas Dairymen's Association v. Jones, 67 S. W. 2d 896 (Tex. Civ. App. 1934). See also Guglielmelli v. Walla Walla Gardeners' Association, 157 Wash. 109, 288 P. 251, 77 A.L.R. 385 (1930); Mountain States Beet Growers' Marketing Association v. Monroe, 84 Colo. 300, 269 P. 886 (1928); Wisconsin Cooperative Milk Pool v. Saylesville Cheese Manufacturing Company, 219 Wis. 350, 263 N.W. 197 (1935).