Contract Growing Agreement Philippines: Rules for Growers and Companies

A contract growing agreement in the Philippines is a private arrangement between a grower and a company — often a processor, integrator, or buyer — where the grower raises crops, livestock, poultry, or fish and the company supplies inputs, technical support, and a ready market for the harvest. Philippine law does not have a single stand-alone statute called the "Contract Growing Law." Instead, these agreements are governed by the general law on contracts, by the Revised Corporation Code where a corporation is a party, and — where the land is agricultural — by the Comprehensive Agrarian Reform Law of 1988 (Republic Act No. 6657), which expressly recognizes grower and service contracts over agricultural lands.

What a contract growing agreement covers

In a typical contract growing arrangement, the company provides the seedlings, feeds, veterinary or technical services, and sometimes financing. The grower provides the land, labor, and day-to-day management. The company then buys the produce at a pre-agreed price or formula.

The arrangement is contractual. Its terms — price, quality standards, delivery schedules, sharing of losses, and termination — depend on what the parties agree on, subject to Philippine law and public policy. Because these are commercial contracts, the parties are generally free to set their own terms, provided the terms are not contrary to law, morals, good customs, public order, or public policy.

How Philippine law treats grower and service contracts

The Comprehensive Agrarian Reform Law of 1988 expressly refers to grower and service contracts in the context of agricultural lands held or leased by multinational corporations and other enterprises. Under Section 8 of Republic Act No. 6657, lands under lease, management, grower or service contracts, and similar arrangements, are covered by specific rules.

For large holdings, Section 8 provides that lease, management, grower, or service contracts covering lands in excess of 1,000 hectares (or in excess of 500 hectares where held by foreign individuals) are deemed amended to conform with the limits set in Section 3, Article XII of the Constitution. Contracts covering areas within those limits were allowed to continue under their original terms but not beyond August 29, 1992, unless confirmed by the appropriate government agency.

Importantly, Section 8 also states that such contracts may continue even after the land has been transferred to beneficiaries or awardees. Where it is not economically feasible to divide the land, the workers may form a cooperative or association that deals with the corporation or business association for the purpose of entering into a lease or growers agreement. This means Philippine law contemplates grower agreements continuing between a company and a workers' cooperative or association after land distribution.

Section 8 further provides that the implementation of the law must not result in the reduction of status or diminution of benefits received by worker-beneficiaries. And under Section 32 of the same law, production and income-sharing provisions apply to farms operated by multinational corporations.

The corporation side: who can enter these contracts

Where the company is a corporation, its authority to enter a contract growing agreement flows from the Revised Corporation Code of the Philippines (Republic Act No. 11232). Under Section 2, a corporation is an artificial being created by operation of law with the powers, attributes, and properties expressly authorized by law or incidental to its existence.

Under Section 22, the board of directors or trustees exercises the corporate powers, conducts all business, and controls all properties of the corporation. In practice, this means the board — or an officer duly authorized by board resolution — signs the contract growing agreement on behalf of the company. A grower dealing with a corporation should ask for proof of that authority.

Section 24 requires the corporation to elect a president, treasurer, and secretary, among other officers, who manage the corporation and perform duties set out in the bylaws or by board resolution. These are the officers normally authorized to bind the company.

Key terms a grower should check

• Price and payment terms. How is the buying price set — fixed, formula-based, or tied to market indices — and when is payment due?
• Inputs and deductions. What inputs does the company supply, and are their costs deducted from the grower's payout?
• Quality standards and rejection. What happens if the harvest does not meet the agreed specifications?
• Risk sharing. Who bears the loss from disease, weather, or force majeure?
• Term and termination. How long does the agreement run, and on what grounds may either side end it?
• Dispute resolution. Is there an arbitration clause, or will disputes go to court?

Frequently asked questions

Is a contract growing agreement legal in the Philippines? Yes. Philippine law recognizes grower and service contracts over agricultural lands, and Section 8 of Republic Act No. 6657 expressly refers to them. There is no single statute specifically regulating all contract growing arrangements, so the general law on contracts applies.

Can a company continue a grower contract after the land is distributed to farmers? Under Section 8 of Republic Act No. 6657, such contracts may continue even after the land has been transferred to beneficiaries or awardees. Where dividing the land is not economically feasible, the workers may form a cooperative or association that enters into a lease or growers agreement with the company.

Who signs a contract growing agreement for a corporation? The board of directors exercises corporate powers and conducts all business under Section 22 of the Revised Corporation Code. The contract is typically signed by the president or another officer authorized by a board resolution.

Practical takeaways

• A contract growing agreement is a commercial contract; its terms depend on what the parties agree, subject to Philippine law and public policy.
• Republic Act No. 6657 expressly recognizes lease, management, grower, and service contracts over agricultural lands.
• Grower contracts may continue even after land is transferred to agrarian reform beneficiaries or awardees.
• Where the company is a corporation, verify that the signatory is authorized by the board under the Revised Corporation Code.
• Put price, inputs, quality standards, risk sharing, and termination in writing before planting or stocking.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 6657 - AN ACT INSTITUTING A COMPREHENSIVE AGRARIAN REFORM PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION, PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.