Issue link: https://read.dmtmag.com/i/56967
MANAGEMENT Grape n the wine business, the only long-term certainty is uncer- tainty. Take grape contracts: Recent short harvests and reductions in plantings have seen some parts of the market swing- ing from glut to shortage, and a renewed interest among some win- eries in securing grape contracts. A good grape contract can help protect growers from market swings. Photo: Thinkstock The oversupply difficulties of the recent past, however, have highlighted the compounding of uncertainty, even for those with long-term contracts. Markets change, wineries change, their winemakers change, ownerships change, their ability to pay changes, and their needs and wants change. Growers trying to take advantage of the latest shift in market power and to buy some certainty through a long-term contract have the oppor- tunity to protect themselves – but it should be done through carefully 64 VINEYARD & WINERY MANAGEMENT MAR - APR 2012 Contract Provisions By Dean Gloster and Matt Lewis Growers need to protect themselves in uncertain times drafted grape contracts that antici- pate these changes. Lesson one from recent tough times is: You don't get the deal you deserve, or even the one you thought you negotiated. You get the deal you documented, and the one you can enforce. GRAPE REJECTION When wineries over-committed to fruit beyond now-expected sales, the imbalance sometimes played out as disputes over grape rejection and viticultural control. Contracts that give wineries unfettered dis- cretion to reject grapes can lead to a grower's nightmare: many tons of recently harvested grapes with no home in a buyer's market. Similarly, many recent disputes have seen long-ignored viticultural control pro- visions suddenly wielded to force uncompensated reductions in pro- duction. The key to ensuring a fair, pre- dictable, enforceable contract for a grower is to make sure that the buyer's legitimate interests in qual- ity standards and production are reflected in the way in which the contract allocates risks. For exam- ple, a winery's right to reject grapes can be tied to an objective stan- dard, such as a defined excessive MOG (material other than grapes), or sugar content in an agreed range of Brix. This is particularly appropri- ate when the grower and vineyard have a long, successful history of grape deliveries, and the winery has significant viticultural control and has specified degrees Brix at harvest. Even where the winery wants a broader right to reject unsuit- able grapes, the grounds can be specific and objective: excessive MOG, mold, rot, mildew, wildfire smoke taint, etc., with rejection to be exercised lot-by-lot, with a short time for exercise of that right after delivery, requiring a written rea- son. Other contract provisions to discourage financial disputes mas- querading as quality issues include AT A GLANCE The grape market can swing from glut to shortage from one year to the next. Growers can protect themselves through carefully drafted grape contracts that anticipate market changes. The terms of grape rejection and viticultural control should be outlined in as much detail as pos- sible. It's better to get what you need up front than to try to make contract modifications later. WWW.VWM-ONLINE.COM