DESIGNING BUYER-SELLER CONTRACTS

Wherever possible it is desirable to spell out the roles of buyers and sellers in a written contract, which is understood and signed by each partner. Even if such a contract is not a legally binding document, it helps to avoid misunderstandings, clarifies expectations and obligations, and builds confidence and trust between the partners.

If many farmers in one location are contracted by the same company, it may be easier for the company to enter into a contract with the farmer group or with one farmer representative who then sub-contracts other farmers. It is obviously vital that the representative is trusted and respected by the other growers.

The facilitating NGO may act as witness to the contract between company and farmers. A separate contract between company and NGO may be needed if the NGO is contracted by the company to perform certain services.

A buyer-seller contract would normally be expected to include the following components:

• Rights and obligations of farmer;
• Rights and obligations of company;
• Charges for services rendered;
• Quality requirements of product;
• Purchase and payment procedures;
• Restrictions on sales;
• Price and method of determining and adjusting;
• Penalties and bonuses for bad or good performance;
• Compliance requirements with national laws and regulations;
• Arbitration procedure in case of disputes;
• Duration and renewal of contract.

Related information: Guide to the preparation of smallholder contracts; Example of a standard buyer-seller contract.