Brands | Read Time: 2 minutes

Alcoholic Beverage Contract Manufacturing in Florida: Two Model Processes

Sometimes an alcoholic beverage brand developer wants to focus on developing and promoting a product brand and leave the manufacturing to someone else (sometimes called “white labeling”). This can mean good business for the manufacturer too. Whether the product is classified a beer, wine, or distilled spirits, a variety of contract manufacturing arrangements are available in Florida. This article describes two model contract manufacturing arrangements: (1) contract manufacturing with a licensed brand owner, and (2) contract manufacturing with an unlicensed brand owner. Contract Manufacturing with Licensed Brand Owner Brand owners that have a Florida manufacturer (CMB, AMW, or DD) license or a Florida Broker-Sales Agent (BSA) license can contract with a contract manufacturer to make and package the products and deliver them to a licensed distributor. This is often the best arrangement when the brand owner wants to take an active role in the supply process and wants to designate its own distribution partners. In this arrangement, the contractor sells the finished products to the licensed brand owner and delivers possession directly to the distributor. For the brand owner, this means that it can collect payment directly from its own distributors. For the contractor, this means that it is not required to add the brand owner to its own manufacturing license. Contract Manufacturing with Unlicensed Brand Owner In some cases, the brand owner does not have a Florida manufacturer license or BSA license. This might be the case where the brand owner is content to let its products be sold through the contract manufacturer’s own distribution partners. In this arrangement, the brand owner grants to the contract manufacturer a license to make the products, and the contract manufacturer pays the brand owner a licensing royalty. For the brand owner, this means that it will be paid directly by the contractor. For the contractor, it means that the brand owner because an Interested Party that must be included on its manufacturing license. Do you have any questions about alcoholic beverage contract manufacturing in Florida? Contact us at contact@brewerlong.com to schedule a consultation with a beverage attorney. Because we’re attorneys: Disclaimer.

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Breweries | Read Time: 4 minutes

COVID-19 is a Force Majeure Event – What Does That Mean?

Force Majeure: It’s Out of Control “Force majeure” is one of those legal terms that might be hard to explain (and spell), but you know it when you see it. The term literally means “superior force,” but it has come to mean any extraordinary event that is beyond the control of contracting parties. Force majeure events might include acts of God (like hurricanes, tornadoes, floods, earthquakes, or volcanic eruptions) as well as man-made circumstances (like war, riots, strikes, or government action). Many commercial contracts have a force majeure clause. The force majeure clause usually appears towards the end of the contract, with other miscellaneous or boilerplate terms. The purpose of a force majeure clause is to relieve one or both parties from performing certain duties during circumstances outside their control. A typical force majeure clause is: Force Majeure. A party shall not be liable for any failure of or delay in the performance of its obligations hereunder for the period that such failure or delay is due to causes beyond its reasonable control, including but not limited to transportation or carrier delays, shortage of materials, shortage of labor, labor dispute, picketing, strike, unavailability of utility services, acts of God, acts of a public enemy, storm, flood, earthquake, tornado, hurricane, tsunami, other act of nature, fire, explosion, riot, protest, sabotage, pandemic outbreak, war, civil disturbance, political unrest, terrorist or other criminal act, embargo, judicial, executive, or other government order. If a delay continues for a period of more than sixty (60) days, either party may terminate the Agreement upon written notice to the other party, with all payments and liabilities accruing through the date of termination. COVID-19 Creates Multiple Force Majeure Events The worldwide spread of coronavirus, outbreaks of the COVID-19 disease, and government and industry measures to control the pandemic all create immediate force majeure events and the potential for future events. As of this writing (March 22, 2020), several state governments have imposed lockdowns on most face-to-face business and recreational activities, and all states have taken some measures to limit transmission of the coronavirus. In Florida, Governor DeSantis’ Executive Order No. 20-71 closes all restaurants and bars to on premises service. Restaurants and bars are prevented by government action from carrying out their normal business. However, many lease agreements require restaurants and bars to be open during certain hours and to continue business without interruption. The governor’s order creates a force majeure event that should relieve restaurants and bars from their lease obligation to stay open while the order remains effective. As more and more workers (or their family members) come down with COVID-19, labor shortages might follow. This could make it difficult for contractors to fulfill their contracted delivery schedules. For instance, if a contract brewer is required by contract to finish an order for contracted beer within a 45-day period, that might become difficult if all the brewers call in sick, are quarantined, or are required by a government order to stay home. Even if things are not so bad in Florida, for instance, the impacts of the disease in Washington could make it difficult for breweries to get hops for several months. These might create additional force majeure events. Read Your Force Majeure Clauses All business owners should pull out their contracts and look for the force majeure clauses. This is especially true for beverage industry members–breweries, wineries, distributors, and retailers–who are likely to be especially hard hit by COVID-19 and government intervention to control the pandemic. In reviewing a force majeure clause, focus on these questions: What circumstances or events are covered? Which party is relieved from liability because of a force majeure event? Is there a time limit on how long relief from liability continues? Is the party affected by the force majeure event required to notify the other party or take other steps? Does the continuation of a force majeure event give either or both parties the right to terminate the agreement or take other actions? A word of caution: While most commercial lease agreements do include a force majeure clause, in most cases they do not relieve a tenant from its obligation to pay rent during a force majeure event. However, every tenant should review the force majeure clause in its own lease agreement. Do you have questions about a force majeure clause in your contract? Contact us at contact@brewerlong.com to schedule a 15-minute introductory call at no charge. Because we’re attorneys: This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.

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Breweries | Read Time: 4 minutes

Ownership Agreements: 3 Common Mistakes

Beverage manufacturers–breweries, wineries, and distilleries–are often the creation of a core group of owners. One of the owners might be the mad-scientist brewer, who loves to create new style-busting beers. Another might be the marketing genius, who believes that a beer can be sold with the right branding and marketing. Still another might be the financier, who knows a good business opportunity when he or she sees it. Bringing these personalities together to create “The Brewery” or “The Winery” or “The Distillery” is a wonderful thing. To help owners come together and stay together, they need an Ownership Agreement. Not only is this good business practice, but it’s also required by the TTB as part licensing process. Ownership Agreements go by different names–Operating Agreement, Shareholders Agreement, Partnership Agreement, Buy-Sell Agreement–but they all have a common goal: Provide a clear roadmap for the brewery owners to jointly manage and grow the business and to minimize the impact of conflict and adversity among owners.  Avoid These Change-of-Ownership Mistakes:

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Contracts | Read Time: 3 minutes

Save Money on Contracting with These Two Words

Reading, writing, and revising complicated business contracts: the central parts of my practice. I am often asked to prepare a written contract my client wants to send to a contract partner or to revise a contract they received from their contract partner. For these situations – there are two words that will help save my clients save money: Term Sheet. Term Sheet (it may also be called a Letter of Intent, Memorandum of Understanding, or other names) contains the essence of the agreement between the involved parties. The term sheet is written in basic language that emphasizes important points of the agreement to all parties involved. The idea is that the decisions-makers will work out the key points of their agreement and write them down on a Term Sheet. This is the agreement without all the legal provisos, conditions, and boilerplates. A term sheet is a page (or two) in length, and is the most efficient way for contract partners to highlight the points that are significant to include within the agreement.  Along with the terms, the contract partners should include specific directions for the attorney who is tasked with preparing the formal written contract (often, myself). Best of all, a Term Sheet will help you save money and time:  You can prepare a Term Sheet on your own without calling the attorney.

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