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Addressing smoke damage in contracts between growers, winemakers

It’s becoming increasingly challenging to make good wine in California and further up the West Coast. Record-setting temperatures and historic droughts are now accompanied by devastating wildfires.

The smoke from these fires can destroy grapes on the vine. Who has to bear the financial cost – grape growers or winemakers? Many are still working that out. An official at one wine producer says, “It feels like as an industry, up and down the West Coast, we have not yet come up with a solution.” 

It’s all a matter of what’s in the contract – and the language in those contracts is starting to change. Some wineries have started including provisions in their contracts with growers that hold the growers responsible for smoke damage. However, some growers won’t sign such contracts.

Who bears the cost?

Wineries lose money if they accept grapes that turn out to be unusable or they have to spend money to remediate them for smoke damage. However, if they refuse to pay growers for unusable grapes, the financial impact on them can be catastrophic. One winemaker says, “The times that I’ve seen problems arise is when there really wasn’t an understanding between the two parties.”

So what’s the solution? That winemaker thinks it’s about “coming up with creative solutions that satisfy both our need to make high-quality wine and the grower’s need to get paid for the crops that they have grown all year.”

For both sides, it’s about managing risk. Force majeure clauses don’t always work to prevent losses due to wildfires unless an evacuation order prevented them from harvesting or processing the grapes. They typically wouldn’t cover smoke damage to the crop. Insurance can help lessen the financial damage.

Older contracts often don’t address the problem

Growers doing business with a contract negotiated years ago may have no protection for grapes rejected or not paid for due to smoke damage. Therefore, at least one first step is to make sure you have a contract that addresses grapes damaged by smoke

Negotiating contracts amid ever larger and more destructive wildfires requires good communication between growers and winemakers and experienced legal guidance.