Legal Definitions - farm out

To "farm out" means to transfer a task, right, or responsibility, such as an oil-and-gas lease, to another party for them to perform or manage. This involves delegating the performance of an obligation or the exercise of a right to a third party.

Farm out refers to the act of transferring a specific task, responsibility, or the right to manage an asset or project, to another party for them to perform or oversee. This often involves delegating a specialized function or a portion of a larger undertaking to an external entity.

• Example 1: Construction Project Subcontracting
  A large real estate developer undertaking the construction of a new residential tower decides to farm out all the electrical wiring and installation work to a specialized electrical contracting company. The developer retains overall project management but delegates this specific, technical aspect to an external expert.

  How this illustrates the term: The developer is transferring the responsibility for performing a particular part of the construction (electrical work) to another company, rather than handling it with their own in-house teams.

• Example 2: Government Service Management
  A county government, facing budget constraints and a need for specialized expertise, chooses to farm out the management and operation of its public parks and recreational facilities to a private facilities management firm. The firm is now responsible for maintenance, staffing, and programming for these public spaces.

  How this illustrates the term: The county is delegating the ongoing management and operational tasks of its parks to an external private entity, which will now perform those duties on the county's behalf.

• Example 3: Business Process Outsourcing
  A rapidly growing software company, needing to focus its internal resources on product development, decides to farm out its entire payroll processing and benefits administration to a third-party human resources service provider.

  How this illustrates the term: The software company is transferring the recurring tasks and responsibilities associated with payroll and benefits to an external provider, allowing that provider to perform these specific business functions.