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 cannabis-related businesses may be lucrative. Still, marijuana’s federal criminal status–and the patchwork of conflicting local, state, and federal laws–means doing business in this industry triggers distinct legal issues 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 contracts, the risks of entering into a contract in the cannabis industry remain high because of enforceability issues.
Multiple innovative options are available for informed counsel representing companies contracting with cannabis-related businesses, including contractual provisions addressing marijuana’s legal status, subject matter description, contract invalidation, choice-of-law and venue, severability terms, and mediation or arbitration.
Listen as Katy Young, Esq. explains the unique considerations and legal risks facing cannabis-related businesses and their partners, identifies specific techniques counsel should consider when entering into marijuana-related contracts and provides insights for drafting contract terms to lower the legal risks of cannabis business arrangements.
Katy M. Young, Esq.
December 11, 2020