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California North Coast wine grape contracts get more stringent on smoke damage in 2021

After the major North Bay wildfires in 2015, 2017, 2018 and 2019, vintners in the region have been increasingly interested in strengthening the fruit-quality clauses and force majeure (calamity) clauses in their grape purchase contracts, while growers want more the contracts to give them more security from rejected fruit blamed on smoke damage, according to local attorneys.

This issue has come to the foreground after the Walbridge, Hennessey and Glass fires of 2020 resulted in a lot of fruit that wasn’t picked, with some estimates putting that total into the tens of thousands of tons.

“We're seeing a lot of activity in terms of renegotiating (grape contracts) or less willingness on the winery side to go into long-term contracts to maintain flexibility,” said Erik Lawrence of GVM Law in St. Helena. “And certainly (vintners are wanting to) revise their contracts to address issues with smoke-tainted fruit.”

Those revisions include specifying when a winery can reject a fruit delivery or how suspect fruit will be handled if it is picked. Some growers have been calling for specific testing thresholds for the compounds commonly associated to smokiness in wine, while a number of producers have been hesitant for such specificity because the evolving science has shown how the impact can increase over the aging of the wine, Lawrence said.

Contract revisions also are addressing the steps growers must take when fires are or have been burning near a vineyard, but this has left some farmers in a Catch 22 in 2020 and thinking that the rejection of fruit has more to do with limiting the volume of incoming grapes amid what had been a local industry glut, according to John Mackie of Carle Mackie Power & Ross in Santa Rosa.

Clauses added after previous fires called for taking grape samples to labs before picking and delivering to wineries, so the winery could decide if to accept the fruit and the grower could seek a crop insurance payment if it were rejected. But in 2020, the fires were around some of the North Coast’s choicest regions just before harvest ramped up, and hundreds of samples flooded local labs leading to backlogs of over a month for results.

For small-scale growers and boutique wineries, smoke damage can be a severe financial impact, Mackie said.

“But there's been a lot more saber rattling than actual lawsuits,” Mackie said.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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