Structuring Enforceable Contracts in the Cannabis Industry: Managing Risk Under State and Federal Law

Subject Matter Description and Contract Invalidation, Choice-of-Law and Marijuana-Friendly Courts, Arbitration Provisions

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, March 20, 2019

Recorded event now available

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Program Materials

This CLE webinar will examine contractual enforcement issues presented by the conflict between the legalized use of marijuana in many states and its treatment as a controlled substance under federal law, and guide counsel through structuring contracts with marijuana-related businesses (MRBs). The panel will review how courts have ruled on the interpretation and enforcement of these agreements, explain the potential risks associated with their use, and provide best practices for carefully drafting provisions to mitigate those risks given the current regulatory environment.

Description

The expansion of marijuana's legal status nationwide has positioned the cannabis industry for massive growth and fueled a surge in cannabis-related business opportunities.

Besides individual entrepreneurs, many large and mid-sized companies have sought to tap into new revenue streams by pursuing contracts with businesses that have established cannabis-related operations. Contracting with such MRBs can be lucrative, but marijuana's federal criminal status--and the patchwork of conflicting local, state and federal laws--means doing business in this industry triggers a highly distinct set of legal issues, particularly relating to contract validity and enforcement.

These issues give rise to contract challenges unlike those in any other industry. And while some courts show a trend toward robust enforcement of cannabis-related contracts, uncertainties persist on the enforceability of these agreements. Whether cannabis distribution engagements, company acquisition contracts, or third-party equipment-supply agreements, the risks of entering into a contract in the cannabis industry because of enforceability issues predominate.

But multiple innovative options are available for informed counsel representing companies contracting with MRBs, including specific contractual provisions addressing marijuana illegality, subject matter description, contract invalidation, choice-of-law and venue, severability terms, and mediation or arbitration.

Listen as our veteran panel of practitioners explains the unique considerations and legal risks facing MRBs and their partners, identifies specific techniques counsel should consider when entering into marijuana-related contracts, and provides hard-earned insights for drafting contractual terms that lead to high-yield, low-risk cannabis business arrangements.

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Outline

  1. Risks of entering into a contract in the cannabis industry
  2. Federal law enforcement policies and state law conflicts
  3. Cannabis-related contract enforceability issues
  4. Recent judicial decisions
  5. Specific techniques counsel should consider when drafting arbitration clauses for cannabis businesses
    1. Preliminary statement
    2. Express acknowledgment of marijuana illegality
    3. Subject matter description and contract invalidation
    4. Choice-of-law, venue and conflict-of-law provisions
    5. Severability terms
    6. Independent consideration
    7. Remedies
    8. Arbitration and mediation clauses
    9. Best practices for different types of cannabis-related contracts
  6. Additional legal considerations for counsel representing marijuana businesses

Benefits

The panel will review these and other high-priority issues:

  • What are the risks of entering into a contract in the cannabis industry?
  • What are the practical implications of federal and state law conflicts?
  • What are the primary marijuana-related contract enforceability issues?
  • How effective is arbitration as a dispute resolution mechanism for MRB contracts?
  • What are the specific techniques counsel should employ when drafting arbitration clauses for cannabis businesses?
  • What concerns should counsel for MRB have regarding remedies given the illegal nature of the subject matter under federal law?
  • What are the most marijuana-friendly jurisdictions?

Faculty

Gard, Jeffrey
Jeffrey S. Gard

Founder
Gard Law Firm

Mr. Gard represents numerous patients, doctors and marijuana businesses throughout the state of Colorado and has...  |  Read More

McCall, Kathryn
Kathryn L. McCall

Partner
Sideman & Bancroft

Ms. McCall focuses on helping early stage and mature companies, as well as family-owned and life-style businesses,...  |  Read More

Young, Katy
Katy M. Young

Partner
Ad Astra Law Group

Ms. Young’s areas of practice are mainly business and commercial litigation, including partnership disputes,...  |  Read More

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