CONTRACTUAL RELATIONS:
LICENSE AGREEMENTS: CUSTOM CRUSH AGREEMENTS

A new trend in wine making in Oregon, following a similar trend in California, is wine production under custom crush agreements. Under these agreements, existing wineries crush, ferment, age and bottle wine for individuals who then market the wine under their own labels. Custom crushing presents an opportunity for a mutually beneficial relationship. But as more and more wineries and winemakers enter such arrangements, timely access to the proper facilities, which is of crucial importance to both parties, may become limited.

In order to protect their interests and preserve a good working relationship, both winery owners and prospective wine makers will want to pay special attention to the terms of custom crush agreements. A carefully prepared custom crush agreement should eliminate any potential problems arising from such arrangements and allow both parties to prosper.

A license in real property is a personal, revocable and unassignable privilege to use the property of another for a certain purpose without possessing an interest in the property.

Custom crush agreements should be negotiated and drafted to accurately reflect the terms of the parties' agreement, i.e., provide a reasonable allocation of costs, risks and liabilities, delegate responsibilities and address the particular requirements associated with your business. Specific issues that should be addressed are:

• Identify the parties. Be sure to include: name, address and nature of entity.
• Describe the premises, facilities and equipment that the licensee is authorized to use. Be particularly specific if the licensee's use is restricted to certain fermentation, aging or storage processes.
• State the purpose of the license. A licensee's authority is restricted to actions within the terms of the license or incidental thereto.
• Specify the duration of the license. Be particularly specific with regard to the availability of storage facilities.
• Explain the availability, process and consequences of exercising the power of termination.
• State all necessary payments, what they include, and the schedule by which they are to be paid (i.e., license fee, deposit, etc.).
• Allocate applicable local, state and federal taxes.
• Identify which party is responsible for acquiring any necessary insurance.
• Clarify which party is responsible for providing the labor and performing the activities necessary to crush, ferment, process, age and bottle the licensee's wine at the costs for any services to be performed by the winery owner or its agent.
• Specify whether licensee is required to indemnify licensor for any resulting liability.
• Identify which party is responsible for repair of any damages to the premises incurred during processing.
• Delineate available remedies (i.e., specific performance, damages).

Next Page>>

Back to Index