Management of Contractual Relations of Farm

The goal of this paper is to present the economic importance and the elements of the management of contractual relations of farm, and classify agrarian contracts and analyze their economic characteristics, and suggest approach for assessment of factors for and comparative efficiency of the choice of contractual forms in different functional areas of farm. Firstly, the economic nature and the importance of contracts are determined, and the necessity for their incorporation into agricultural economics and management justified. Next, elements of the management of contractual relations are presented including identification of needs for contractual relations, choice of contract form, finding out suitable partner, negotiation of terms of exchange, preparation and signing of contract, implementation and control of contract, re-negotiation of contractual terms, disputing contractual terms, and contract completion or termination. After that, an analysis is made on the specific economic features object, particularities, risks from opportunism etc. of sale-purchase contracts, lease contracts for resources or objects, labor hire contracts, service provision contracts, lending contracts, insurance contracts, and coalition contracts. Next, the critical factors for choice of contractual forms are determined including: personal characteristics of farmer and counterpart; efficiency of institutional environment; and frequency, uncertainty and assets specificity associated with the exchange. Review is made on principal contractual forms for land and natural resource supply; labor supply; supply with short and long-term material assets; service supply; supply with innovation and know-how; financing; insurance; realization of products and services. An approach for assessment of the comparative efficiency of alternative contracts is suggested including following criteria: total costs associated with contracting and contract implementation; total benefits from using the contract form; acceptability of the growth in costs for getting the additional benefits; compliance with laws and other institutional restrictions; and farmers preferences to one or another contractual form.