LEGAL PHASES OF COOPERATIVE ASSOCIATIONS. 69 
Sec. 2. Any member who fails or refuses to deliver his fruits and vegetables 
to the association in accordance with the contract entered into by him with the 
association shall pay to the association the sum of for each 
of not delivered by him to compensate the 
association for itsi expenditures in providing and maintaining for him the ma- 
chinery, equipment, facilities, personal services, and information necessary to 
market his crop. And in addition thereto, he shall be liable to the association 
for all damages suffered by it as a result of the breach of the contract. All 
contracts entered into by the association with members for the delivery of 
produce contemplate the delivery of such produce and not the payment of com- 
pensation in lieu thereof. 
Note. — Many organizations have failed because members were 
bound only by a " gentleman's agreement," which is totally inade- 
quate for a stable and enduring organization. The laws of the 
State should be studied to ascertain the status of a provision of 
this kind. 
Article XIX. — Accounts and Auditing. 
Section 1. This association shall install a standard system of accounts and 
provide other accounting appurtenances that may be necessary to conduct the 
business in a safe and orderly manner. 
Note. — The Bureau of Agricultural Economics has devised sys- 
tems of accounts for several types of cooperative business, such as 
grain elevators, fruit organizations, creameries, live-stock shipping 
associations, and stores. Information in regard to systems of ac- 
counts may be obtained by writing to the Bureau of Agricultural 
Economics, U. S. Department of Agriculture. 
Sec 2. The books and business of the association shall be audited quarterly 
by the auditors selected from the membership. A complete annual audit shall 
be made by a competent accountant previous to the date of each annual meet- 
ing, at which meeting his report shall be presented in full. Special audits 
shall be made upon order of the board of directors or upon a majority vote 
of the members at any regular or called meeting. 
Sec 3. This association shall endeavor to cooperate with other farmers' 
cooperative associations in this locality in securing the services of a competent 
accountant for its annual audit. 
Note. — While small associations may not feel the need of such a 
strict system of investigating their accounts, it will pay to have 
this work done often and thoroughly. If the business of the asso- 
ciation is being conducted carelessly, frequent audits will make this 
fact known, and better methods may be adopted before any great 
loss occurs. An audit by an expert accountant gives the members 
confidence in the business methods of the manager and directors. 
Article XX. — Amendments. 
Section 1. These by-laws may be amended at any meeting by a two-thirds 
vote in the affirmative of the members present, provided that notice of the 
proposed amendment is included in the call for said meeting. 
ASSOCIATIONS FORMED WITH CAPITAL STOCK. 
Organizations which are formed with capital stock should replace 
Articles III and X of the suggested by-laws for organizations with- 
out capital stock with the following articles : 
Article III. — Membership. 
Section 1. Any (bona fide) grower of farm products in any territory tribu- 
tary to rhe shipping points of this association may become a member of the 
