Unfair Trading Practices in Contract Farming - Ensuring Commercial Justice and Contract Enforcement

This dissertation examines the issue of unfair trading practices (UTPs) in contract farming, particularly in the context of perishable agricultural commodities such as fresh and frozen fruits and vegetables. Contract farming involves agricultural production contracts (APCs) where farmers agree to produce and deliver specified quantities of products that meet the buyer’s quality, quantity, and timing criteria. In return, buyers commit to purchasing the product at a predetermined price and provide inputs necessary for producing commodities (e.g., financial assistance, technology, fertilizers, and pesticides). The APC creates a dynamic where farmers become economically dependent on buyers, leading to an imbalance of bargaining power. This power disparity allows buyers to impose UTPs that disproportionately disadvantage farmers, undermining the potential benefits of contract farming. The research begins by examining the UNIDROIT Legal Guide on Contract Farming and the FAO Legislative Study on Enabling Regulatory Frameworks for Contract Farming, providing a foundational understanding of contract farming principles and challenges. Building on this foundation, the dissertation conducts a comparative analysis of the legislative frameworks in the United States and the European Union. The US approach, exemplified by the Perishable Agricultural Commodities Act, emphasizes direct contract enforcement and accessible dispute resolution mechanisms. In contrast, the EU’s Directive 2019/633 on Unfair Trading Practices focuses on regulating buyer behavior and imposing penalties, often without direct recourse for farmers. Building on the comparative analysis, this dissertation proposes a model designed to address UTPs effectively to ensure compensatory commercial justice and contract enforcement. The Proposed Model suggests comprehensive guidelines on prohibited UTPs, drawing on the strengths of the European framework. It also recommends a multi-tiered dispute resolution mechanism inspired by the effective strategies within the American framework. The Proposed Model focuses on accessible, affordable, expert, and enforceable solutions ensuring that farmers can achieve compensatory commercial justice and contract enforcement after UTPs are imposed. To facilitate practical implementation in practice, the Proposed Model is intended to be adopted by trade associations, providing a flexible and industry-specific framework that can adapt to various legal environments. This approach encourages quicker adoption and allows complementary use alongside existing legislative frameworks, offering robust protection for farmers.