The Importance of a Clear Grape Purchase AgreementAdded by Hawley Troxell in Articles & Publications, Business Law, Wine, Brew, Spirits Law on July 30, 2013
One of the most significant challenges faced by vintners is controlling the winemaking process. Going from raw materials to bottled product requires one part faith and infinite parts planning and oversight. A vintner wants to be in control of her product from the growth of the grape to the bottling of the wine. If you’re a vintner with a vineyard, you can stay in control – albeit labor-intensive control – of your product from the ground to the bottle. If you’re a vintner who purchases grapes from an outside source, you must rely on a third-party to ensure you get grapes of the right quality and quantity for your finished product. You may have planned your upcoming vintage based on certain expectations, only to be surprised at harvest time. So how can you limit these surprises? If you’re a vintner who purchases grapes, you can take a lot of the guessing out of your plans by entering into a clear, concise written grape purchase agreement (GPA).
The Problem with the Handshake Agreement
Many grape growers and vintners prefer to rely on the friendly, casual handshake agreement to plan out their harvest. When you’ve had a working relationship for some time, it can be awkward to raise the idea of putting your agreement in writing. You don’t want the other party to think it means you don’t trust them or that you will sue them if there’s a problem. The written agreement, however, serves purposes beyond allocating future blame. Most importantly for this context, it gets everybody on the same page. If you’re looking for a specific grape of a specific quality, you’re doing the grower a favor by making him aware of your expectations. Typical long-term contracts with a grower can last 3 to 7 years. A lot can change during that time and your grower will appreciate careful, clear instructions. The written agreement helps everyone know what they’ll need to do going forward.
What to Include in Your GPA
To start, the most important aspect of your GPA is deciding which party controls the farming practices. You can negotiate your control over crop thinning, fertilizer application, method of harvesting, etc. Your level of control over farming decisions will affect, among other things, the quantity, quality, and term provisions of your GPA. Because of this, it is best to start by determining how the farming practices will be handled and to “work down” from there.
Your grape quantity may be directly determined by your farming decisions, and vice-versa. Traditional GPAs call for a set tonnage of grapes for each harvest year. However, the modern trend is to set the grape quantity to all the grapes from a vineyard or a specific portion of a vineyard. By setting a portion of a vineyard as the quantity, you are effectively making that area of the vineyard yours. A grower may be more amenable to your control over the farming practices if he knows that certain rows are meant for you specifically.
From the vintner’s standpoint, the quality of the grapes is the whole reason for choosing one grower over another. A well written GPA will be very clear and detailed regarding the quality of grapes. You can put a cap on grape defects and materials other than grapes (MOG) as a percentage of grapes delivered. If defects or MOG exceed the cap, you could reduce the purchase price to reflect this excess. More specifically, you can have an expert test the balance of sugar, acidity, and pH in your grapes. Some GPAs go as far as setting forth specific levels to be achieved in Brix, TA, and pH. If your goal is to be this precise in the quality of grapes, a grower may ask that you take more control over the farming practices and limit his liability if the grapes don’t meet certain standards. Still, this level of detail makes sure that everyone knows what is expected. You can even sweeten the deal by providing a bonus for certain levels of ripeness. After all, the quality of grapes will have a direct influence of the quality of your product.
Finding a good, reliable grower can ensure your supply for years to come. If you’re lucky enough to have such a grower, you’ll want to lock up an agreement with him as soon as you can. However, if you’re entering into a new relationship with a grower, you may want to start with a taste test: a short-term period in which you can try out the grower to make sure you’re both able to get what you expect from the relationship. This period can last 1 to 3 years and will give you the chance to see the grower’s vineyard quality and grape production. If at the end of the period, you’re satisfied this grower can give you what you want, you can convert your GPA into a long-term agreement using an automatic-renewal provision.
The Idaho wine industry is quickly evolving. Many winemakers who felt they were making a lifestyle choice in opening their wineries are now feeling the pressures that are usually found within operating a business. One of the best ways to secure your growth and continued success in the business of wine-making is to know where your grape supply is coming from, how much supply you can expect, and the quality of that supply. While it can’t turn grapes into wine, a well written and thoughtful GPA will give you one less thing to worry about in your winemaking process. For more information, please contact our Wine, Brew, Spirits Group at 208.344.6000.
More Corporate Law Blog Posts
- 10/23/17—RESPA Section 9 & Title Company Selection
- 10/23/17—Commentary on Financing of Public School Buildings
- 10/19/17—Preserving the Liability Shield in Closely Held Corporations and LLCs
- 08/22/17—In re Spanish Peak Holdings II, LLC: Lessons for Trustees and Lessees in Bankruptcy
- 05/30/17—Plan for the Unexpected
- 09/18/19—State of the City Address
- 09/20/19—55th Annual Meeting of the Idaho Association of Defense Counsel