Several grape contract issues came to us during the 2016 harvest. These arose frequently enough that we think our clients should review their contracts and consider modifications. Here are two:
The tight availability of labor at harvest has caused some disruption, as well as added costs. In several extreme cases, wineries called for a pick and the growers were unable to obtain sufficient labor within the required harvest time. The growers in a couple of cases invoked the “force majeure” section of the grape contract to excuse late performance.
The more common, and probably more permanent trend, is toward mechanization of harvest. Some grape contracts for premium grapes prohibit machine picking and/or specify bin sizes that are not compatible with machine harvest. Some contracts are silent on the subject – at least explicitly. Technology and knowledge of machine harvesting equipment has certainly improved in recent years. Some growers and wineries have agreed upon a “phase-in” whereby an agreed upon percentage of the crop may be machine harvested. The parties can retain the right to test the success of this option and adjust the percentage of grapes machine harvested each year.
Most grape contracts specify an acceptable range for brix at harvest. However, many contracts do not make clear how “out of range” delivered grapes will be handled. In the strictest interpretation – if the grapes are outside the range, the winery can reject them. In practice, it more often gives the winery an opportunity to dictate another price than the contract specifies. The most common complaint by growers on this subject (at least as expressed to lawyers), is that a winery has called for a pick when the grapes are likely to exceed the brix range and have begun to desiccate (thus weigh less in a price per ton contract situation).
The more “thoughtful” contracts are those that specify consequences under different potential scenarios. It is not uncommon to see grape contracts that specify a price penalty if a grower delivers a load of grapes that is below the minimum brix range, but by no more than, say, a degree.
The more common disputes these days are about grapes that exceed the maximum brix range. If the winery has called for a pick and the grower delivers grapes that exceed the range because of grower delay, some grape contracts provide for a price penalty for grapes that exceed the range by a small amount. If, on the other hand, it is a delay by the winery that causes grapes to be delivered with a brix level above the agreed upon range, and desiccation is occurring, a few contracts provide for a price increase based upon degrees of brix above the range. Of course, there is debate about when and to what degree such adjustment is appropriate.
Please feel free to discuss these issues further with CMPR attorneys who are knowledgeable about grape contracts.