Step 1: Understanding contract farming.
Contract farming refers to a system where farmers commit to supplying a certain quantity of produce to a buyer at predetermined prices.
Step 2: Tamil Nadu's role.
Tamil Nadu was the first state in India to enact a law on contract farming to protect the interests of farmers and ensure better agricultural practices.
Step 3: Conclusion.
Thus, Tamil Nadu was the first state to enact a law on contract farming, making option (3) correct.