The existence of an appropriate legal framework is therefore essential for the successful implementation and long-term sustainability of contract farming. A legal system is essential to help farmers and their buyers negotiate and design contracts. It is also important to protect them from risks that may arise during the performance of the contract, such as. B abuse of power by a larger party to the negotiations or violation of the treaty. Strengthening farmers` organizations to improve their contract negotiation capacity can help avoid future misunderstandings.  Several countries have adopted guidelines and legislation to ensure fair contracting practices and to provide remedies for dispute resolution.  A “Legal Guide on Contract Farming” was developed in 2013/2015 by the International Institute for the Unification of Private Law (UNIDROIT) in collaboration with FAO.   Contract farming must be economically viable. To maximize profitability, companies need to choose the best farmers available. Once suitable farmers have been identified, it is necessary to build trust, as contracts only work if both parties think they are better off by their participation. To achieve this, one must be prepared to cooperate and exchange information. For example, discrepancies on product classification can be avoided by defining clear and simple specifications in a contract and ensuring that farmers or their representatives are present at the product classification. Late payments can immediately lead to a breach of trust and should be avoided.
Contracts should be flexible to take into account the possibility of extreme events such as high open market prices or bad weather conditions. Finally, even if the parties try, differences are inevitable. Contracts should ideally provide for an arbitration procedure by someone that is acceptable to both the company and the farmers. FAO`s Guiding Principle for Responsible Contract Agriculture  contains concise guidance on how to maximize the chances of success for both businesses and farmers. . . .