A co-production agreement is one of the key instruments in the agricultural sector to establish a close and coordinated relationship between farmers and enterprises. The following article provides an in-depth analysis of the role of such agreements, the governing legal framework, and the various forms applicable in co-production agreements.

I. The role of co-production agreements 

Co-production agreements play a crucial role in promoting cooperation among parties within the supply chain, particularly in agriculture. By connecting farmers and enterprises, these agreements create production stability, ensure assured output for agricultural products, and allocate risks and benefits among the parties.

In the context of an increasingly volatile agricultural market, the establishment of a cooperation agreement not only secures product output but also enhances stability for all parties involved.

II. Legal regulations on co-production agreements

1. What is a co-production agreement? 

A co-production agreement is a cooperative arrangement between parties engaged in the agricultural sector, aiming to optimize production processes and product consumption. Under such an agreement, the parties commit to conducting production activities in accordance with a pre-agreed plan, complying with the required product quality and quantity standards, while ensuring a stable output. These agreements are commonly applied in agriculture as they both guarantee output for agricultural products and allow enterprises to participate in production activities, thereby enhancing overall economic efficiency for all parties.

2. Main elements of the co-production agreement 

Under current regulations, the content of an agreement is subject to mutual agreement, provided it does not violate the law or social ethics. A co-production agreement typically includes the following essential components:

  • Information of the contracting parties: Name, address, and legal representative.
  • Subject matter of the contract.
  • Rights and obligations of each party.
  • Quality and quantity requirements: Specific standards for product quality and projected output.
  • Payment terms: Price, payment method, and payment schedule for each batch of products.
  • Provisions on contractual breaches and dispute resolution.

Depending on specific circumstances, the parties may additionally agree upon technical support measures, financial assistance, or technology transfer to enhance production capacity under the contract.

3. What is the co-production agreement integrating production with agricultural product consumption?

Under Article 5 of Decree No. 98/2018/ND-CP, the law defines such contracts as follows:

  • A co-production agreement integrating production with agricultural product consumption (hereinafter referred to as ‘a cooperation agreement’) is a contract entered into by the parties on a voluntary basis to implement cooperative forms as prescribed in Article 4 of this Decree.

Accordingly, such a type of contract is a voluntary agreement between the parties aimed at establishing and implementing cooperation mechanisms throughout the production and consumption of agricultural products in accordance with the prescribed cooperative models.

III. Legal questions regarding co-production agreements

1. What forms of cooperation are available in co-production agreements?

Under Article 4 of Decree No. 98/2018/ND-CP, it may take one of the following forms:

  • Cooperation from the supply of input materials and services, or organization of production, harvesting, preliminary processing or processing, integrated with product consumption.
  • Cooperation of input material and service supply integrated with product consumption.
  • Cooperation of organizing production and harvesting integrated with product consumption.
  • Cooperation of input supply, production organization, harvesting integrated with product consumption.
  • Cooperation of production organization, harvesting, preliminary processing or processing integrated with product consumption.
  • Cooperation of input supply, preliminary processing or processing integrated with product consumption.
  • Cooperation of preliminary processing or processing integrated with product consumption.

Accordingly, there are seven cooperative models applicable to production and consumption of agricultural products.

2. How is the cost of consultancy for preparing the co-production agreement? 

Pursuant to Clause 1 Article 7 of Decree No. 98/2018/ND-CP, the regulation provides:

  • The party in the cooperation shall be provided with 100% state-budget support for consultancy costs on cooperative development, up to a maximum of 300 million VND, including consultancy, research, agreement development, project formulation, production and business planning, and market development.

Thus, consultancy costs for developing cooperative models are supported 100% by the state budget, up to 300 million VND, as stipulated.

3. What are the sanctions for violating the provisions of the co-production agreement? 

Parties participating in the cooperative arrangement who violate its provisions may be subject to sanctions listed under Clause 2 Article 15 of Decree No. 98/2018/ND-CP, including:

  • Compulsory performance of the cooperation agreement;
  • Contractual fines;
  • Temporary suspension of performance;
  • Suspension of performance;
  • Agreement termination;
  • Compensation for damages;
  • Other measures mutually agreed upon by the parties, provided such measures are not contrary to applicable laws.

Depending on the specific violation, the breaching party may face one or multiple of the above sanctions.

IV. Legal consultancy services for co-production agreements

The above is NPLaw’s summary of the current legal regulations governing co-production agreements. With an experienced team of lawyers and legal specialists, NPLaw provides reputable and professional legal services, ensuring the best protection of clients’ lawful rights and interests. For legal inquiries or support, please contact NPLaw for further assistance.