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Contract farming: Legal considerations on contractual design and enforcement

Year of publication 2017

Place of publication Rome, Italy ;

Pages 4p.

Author FAO

Publisher FAO ;

Product type Brochure, flyer, fact-sheet

ISBN No ISBN

Edition 1

Synopsis (short abstract) Contract farming can be defined as agricultural production carried out according to an agreement between farmers and a buyer which establishes conditions for the production and marketing of a farm product. To be binding and enforceable, such agreements depend not only on good contractual design, but also on the existence of an adequate legal framework. This brief aims to illustrate some of the legal issues involved in the design, negotiation and enforcement of farming contracts.

Revised 22 April 2020 - contact information changed and link updated

Language English

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    One of the main challenges to successful contract farming in a number of developing countries is the absence of strong legal systems that guarantee an adequate protection to the parties in their contractual relations. The general principles of contract law discussed in this brief, applicable to international commercial contracts, may serve as a model to help overcome this difficulty.
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    Contract farming, broadly understood as agricultural production and marketing carried out under a previous agreement between producers and their buyers, supports the production of a wide range of agricultural commodities and its use is growing in many countries. Mindful of the importance of enhancing knowledge and awareness of the legal regime applicable to contract farming operations, the International Institute for the Unification of Private Law (UNIDROIT), the Food and Agriculture Organizatio n of the United Nations (FAO) and the International Fund for Agricultural Development (IFAD) have prepared this UNIDROIT/FAO/IFAD Legal Guide on Contract Farming. The Guide is a useful tool and reference point for a broad range of users involved in contract farming practice, policy design, legal research and capacity building. It can contribute as well to create a favourable, equitable and sustainable environment for contract farming.
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    In contract farming schemes, the process of developing the contract is very important for building long-lasting trust between farmers and buyers. As a common best practice, the whole contract formation process should be carried out in a fair and transparent manner and in good faith. A good practice is for farmers to be involved in discussions with the buyer from the beginning of the negotiation and contract formation phases, to make sure they understand all the conditions included in the contract, and to ensure that their interests and rights are considered. The following questions aim to serve as a guiding tool for analyzing contracts and can be used by all involved parties. The signing of the contract should only take place after a full agreement on all the conditions has been reached and the negotiation phase is completed.
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