Most cannabis businesses have to amend written cannabis contracts on a regular basis. And many of them do it all wrong. Today, I’ll look at some of the key issues cannabis businesses must consider in amending cannabis agreements.
First off, any halfway decent cannabis contract will have an amendments provision. These clauses only permit amendment or modification (1) in a written form (2) signed by both parties. Sometimes they’ll require only the signature of the affected party. But the bottom line is that it must be a signed, written document to be valid.
There can of course be exceptions to this rule. It’s common in litigation to see arguments made that a course of conduct or action after an oral amendment evidences an amendment. The law in many jurisdictions allows these kinds of arguments, though the party making the claim bears the burden of proving it. So even if it’s possible to argue that parties amended a contract, it’s must easier (and saves lots of time/money) to just do it in writing. Handshake deals are almost always bad and can be lead to some of the biggest mistakes out there.
Parties who go the written route usually do one of two things. If they want to amend only a few cannabis contract provisions, they’ll just prepare a short amendment agreement. The amendment lists the provisions that are amended or deleted, and contains the replacement language. The amendment also usually contains boilerplate incorporating defined terms from the original cannabis contract. They also almost always explain that they only modify the provisions at issue and nothing else.
The other common option is to amend and restate an entire contract. This happens when the parties want to significantly re-write cannabis contracts. An amended and restated version essentially copies and pastes the original cannabis agreement with edits throughout. So unlike a simple amendment, it’ll look like the original but with changes.
Suppose a cannabis retailer enters into a year-long supply agreement with a manufacturer, and the parties decide they want to change only the timing of when payments are made. They’d likely use a simple amendment with the appropriate change and boilerplate. But if they wanted to also change the length of term, representations about product quality, delivery times, list of products, etc., they’d do the longer amendment and restatement.
There’s one other option our cannabis attorneys use for contract provisions that the parties anticipate amending in the future: schedules. If there are terms we anticipate will change often throughout a term, we’ll put those terms in a schedule. Then, we’ll note that the parties can agree to swap out the schedule if they follow certain procedures. This works well for things like product lists in supply agreements that may change a lot over a multi-year term. It can even be simpler than using a simple amendment for many parties.
Amending a cannabis contract doesn’t need to be rocket science. But it should be done correctly so as to avoid pitfalls or expensive litigation.
How to Amend Cannabis Contracts on Harris Bricken Sliwoski LLP.