As we predicted, litigation concerning hemp production continues to rise. At this point, it is the rare week that we do not see at least one new lawsuit on the state or federal docket– and that is just in Oregon. Given the extraordinary growth in hemp licensure and cultivation nationwide, it seems the courts will have their hands full for the foreseeable future with hemp industry litigation.
This post concerns a contract to purchase between 9,000 to 14,000 pounds of industrial hemp at $50 per pound. The Oregon state-court lawsuit, Boring Hemp Company v. Natural Health Resources, LLC, is simple enough: Natural Health, the purchaser-defendant, picked up a load of industrial hemp from the producer’s (Boring Hemp) warehouse. Per the agreement, the purchaser transported the hemp to a certified scale in Oregon where the hemp was weighed – the load net weight was 10,240 pounds. The terms of payment were “net 30 days” with a ten-day grace period and a 10% fee added to the balance if payment was not made within that period. The complaint alleges the purchaser has not made any payments to the producer and the producer seeks to recover approximately $560,000 under breach of contract and unjust enrichment theories. Run-of-the-mine stuff.
What is worth mentioning is the one-page “Hemp Purchase Agreement” between the parties. The agreement does not require the industrial hemp contain a certain percentage of cannabidiol (CBD). The agreement does not place any limitation on the moisture content of the hemp (an important term when you pay by the pound). The agreement does not make any reference to THC content, or “total THC” content, nor any other of the terms that hemp producers and purchasers ought to be thinking about such as testing, pesticide content, and so forth.
To be sure, a better contract may not have prevented non-payment for the hemp (though a better contract may have provided some form of security or other terms to lessen the chance that the purchaser simply decide not pay the producer). But we continue to be somewhat alarmed at the poor quality of the hemp production contracts we see. For further reading on hemp production contracts, see below – and note that it may be no coincidence that the hemp contracts ending up in court are the poorly drafted ones.
Not only do many of the contracts we see lack what ought to be basic provisions, many hemp production contracts fail to account for the evolving federal and state regulatory environment – including those governing the growing, handling, processing, testing, and the manufacturing of hemp and CBD products. Feel free to email me if you’d like a copy of the complaint.
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