Farm leases often rely on longstanding relationships, but when a dispute arises, Indiana courts look first to the written agreement. A recent Indiana Court of Appeals decision highlights why every important lease term should be clearly documented.
The Importance of Definite Contract Terms
Indiana contract law generally requires courts to enforce contracts according to their plain language. When a written agreement is clear and unambiguous, the courts look only to the words contained within the four corners of the documents. Outside evidence is typically not considered.
Problems can arise, however, when a contract contains vague, incomplete, or inconsistent language. In those situations, courts may determine that the agreement is ambiguous. Rather than simply accepting one party's interpretation, the court may consider testimony and other evidence to determine what the parties actually intended.
Even then, Indiana law requires that important contractual obligations be sufficiently definite. If an essential payment term cannot be determined from the agreement or from an objective formula contained within the agreement, enforcing that obligation becomes difficult.
For agricultural producers, this principle is particularly important because modern farm leases frequently include variable rent provisions tied to commodity prices, yields, or other performance measures. Those provisions can work well, but only when the calculation method is clearly spelled out.
Variable rent provisions should answer several basic questions:
- What triggers the additional rent?
- What formula will be used?
- What commodity prices will be used?
- What yield data will control?
- What publication or source provides these numbers?
- When is the calculation performed?
- When is any additional rent due?
Leaving any of these questions unanswered creates unnecessary uncertainty and increases the likelihood of litigation. The following case is an example of what can happen when these provisions are not sufficiently defined.
Case Study: Parsons Farms
Parsons Farms leased approximately 589 acres of farmland in Hendricks County, Indiana from two entities owned by landowner Mike Eaton. In February 2021, Parsons Farms signed two written Crop Rental Agreements—one with MPE Land & Cattle LLC for 574 acres, and one with Brazos Family Properties LLC for 15 acres. Both agreements specified a base rent of $250 per acre, payable in two installments.
The written lease agreements each included a second page titled "Crop Rent Agreement – Bonus Calculation.” That page contained fields for corn prices, county yield data, a “Bonus Rate” of 35%, and blanks for calculating additional rent. However, the page did not contain an actual formula explaining how to perform the calculation, and when signed, the bonus fields showed negative placeholder numbers with a note that “bonus will show negative numbers until the avg prices and yields are entered.”
Parsons Farms timely paid the base rent for both the 2021 and 2022 crop seasons. It was not until November 2022—after the second year of farming the land—that the landlords first demanded payment of over $250,000 in alleged “bonus rent” for both years. When Parsons Farms refused to pay, the landlords sent a letter in March 2023 terminating the leases and demanding that Parsons vacate the land.
Summary Judgment
Parsons Farms filed suit seeking a declaratory judgment that no bonus rent was owed and damages for the wrongful termination. Both parties filed motions for summary judgment. Parsons Farms argued that the written lease agreements unambiguously required only base rent of $250 per acre and that the second “Bonus Calculation” page was unenforceable because it contained no actual formula for calculating the bonus. The landlords countered that the bonus provision was enforceable and pointed to years of prior dealings with Parsons Farms’ predecessor to show the parties’ intent.
The trial court denied both motions, finding that genuine issues of material fact existed regarding whether the parties agreed to bonus rent and how any such bonus would be calculated. The case proceeded to a bench trial.
Trial
At the October 2024 bench trial, the testimony revealed critical facts. Jon Parsons testified that he never saw page two of the lease agreement when he signed the contract and never agreed to pay bonus rent. When asked about the “Bonus Calculation” page, he stated: “I never saw the second page” and “I still never signed that piece of paper.” He testified that no one had ever explained to him how any bonus would be calculated.
Eaton, the landlord, testified that he terminated the leases because Parsons Farms “refused to pay the bonus rent” which he considered a “breach of their obligations under [the] written contract.” However, when asked whether the actual formula for calculating bonus rent appeared anywhere on the written agreement, both Eaton and his office manager admitted it did not. The formula existed only as an embedded calculation in an Excel spreadsheet that had never been shared with Parsons Farms.
Trial Court’s Judgment
In February 2025, the trial court entered judgment in favor of Parsons Farms. The court found that the 2021 Agreements “unambiguously provided for rent in the amount of $250 per acre” and that “neither Parsons nor the Parsons Brothers ever agreed to pay MPE, Brazos, or Mike Eaton a formula or method of calculation for a bonus rent.” The court also found that the landlords’ termination letter in March 2023 breached Indiana’s year-to-year tenancy statute, which requires at least three months’ notice before the end of the lease term. The court awarded Parsons Farms $87,939.60 in damages for lost profits from the 2023 crop season, plus interest.
Indiana Court of Appeals’ Decision
The landlords appealed, arguing that the lease agreements unambiguously required bonus rent and that the trial court erred in denying their motion for summary judgment. They argued that the second page of the contract, titled “Bonus Calculation,” clearly established an obligation to pay bonus rent and that the court should enforce the contract according to its plain terms.
In January 2026, the Indiana Court of Appeals issued its Memorandum Decision unanimously affirming the trial court’s judgment. The Court explained that while the lease agreement referenced a “bonus,” the actual method for calculating that bonus was ambiguous because no formula appeared anywhere in the written agreement. Under Indiana contract law, courts cannot enforce a contract term that lacks sufficient certainty. The Court noted that “all parties agreed” the written lease did not contain the formula for calculating bonus rent. Because the essential term—how to calculate the bonus—was missing from the written agreement, the Court held that bonus rent could not be enforced against Parsons Farms.
The Court also rejected the landlords’ argument that Parsons Farms should be bound by prior dealings between the landlord and the Parsons brothers’ late father, Rex Parsons. Because Parsons Farms LLC was a new legal entity that signed its own lease agreement in 2021, the Court found that whatever arrangements Rex Parsons may have had with the landlord were not binding on the new company.
Indiana Supreme Court Denies Transfer
The landlords sought transfer to the Indiana Supreme Court, arguing that the Court of Appeals’ decision undermined Indiana’s longstanding policy of enforcing written contracts. They framed the issue as whether a court can refuse to enforce an “unambiguous” contract term by finding that a separate, related term is ambiguous. They argued that the bonus rent obligation itself was clear—the only question was how to calculate it.
Parsons Farms responded that the appellate decision correctly applied basic contract principles: a party cannot be bound by a payment obligation when the amount owed cannot be determined from the contract itself. Parsons Farms argued that there was no conflict with existing law and no question of public importance requiring Supreme Court review.
On May 28, 2026, the Indiana Supreme Court denied the petition to transfer, allowing the Court of Appeals decision to stand. With all appeals exhausted, the judgment in favor of Parsons Farms became final.
Practical Lessons for Farmers and Landowners
This decision offers several practical lessons for Indiana farmers and landowners:
- Put every material lease term in writing.
- Clearly explain any bonus rent or flexible cash rent formula.
- Do not rely on prior business relationships or assumptions to fill gaps in a new agreement.
- Review lease terms carefully before signing or terminating an agricultural lease.
Well-drafted farm leases reduce uncertainty and help avoid costly litigation.
Gutwein Law represented Parsons Farms from filing the declaratory judgment complaint – through trial, judgment, and appeal – and all the way to payment in full. Our firm understands that agricultural leases are more than contracts, they are critical to the success of farming operations. We are proud to represent farmers, agricultural businesses, and landowners in negotiating leases, resolving disputes, and protecting their interests when disagreements arise.
The Parsons Farms case serves as an important reminder that clear agreements protect everyone involved and that Indiana courts will enforce the contract the parties actually signed—not terms that were never clearly agreed upon.