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Smoke taint and the legal obligations of winegrape sellers

 

Contractual obligations with respect to smoke taint

Legal obligations in selling winegrapes principally depends upon the particular wording in any given contract and close examination of individual contracts is required.

Express terms of contract

In a contract, smoke taint may be dealt with expressly in one or both of two ways in a written contract:

  1. A description in the section of the contract that deals with ‘general’ quality requirements.  For example ‘goods need to be sound and merchantable’ or ‘goods need to be of merchantable quality’.
  2. Further or alternatively, smoke taint may be included in a specific list of defects that trigger price downgrades or rejection.  This could be a specific reference to smoke taint or a more general form like ‘taints’ on contamination.

Implied term

Failing any express reference to smoke taint in a contract, it needs to be remembered that an implied condition of any contract is that for the goods concerned the buyer and seller understand they are being purchased as ‘fit for the purpose’ – that is in this case, for making wine to be sold and consumed.  Hence, even if the contract doesn’t specifically deal with smoke taint in any express written quality descriptions or defect exclusions, the seller is obliged to ensure the grapes are suitable for winemaking and sale.

Exclusion of implied term

The limiting exception to the existence of an implied term will be a contract which specifically excludes any implied terms or conditions.

The obligation to raise a concern about smoke taint with the buyer

Consistent with seller being tied to their individual contract, the first point of reference for a seller’s obligation to raise a concern about smoke taint with a buyer, is the terms of their contract.

If the seller’s contract contains no express contractual duty to report (for example) the presence of smoke in a vineyard, then there is prima facie no legal requirement to advise the buyer of the occurrences.  The exception may be if the sellers’ concerns lead the seller to believe the winegrapes are not fit for winemaking. The sale of tainted grapes unfit for winemaking could involve legal consequences for the seller if the buyer suffers loss as a result of taking in tainted grapes.

Need to get urgent independent expert advice

If a seller has any real concerns about smoke taint, their interests will be best served by obtaining some confidential, professional advice on the smoke taint status of their fruit.  The benefits of this are numerous.

  1. Peace of mind.
  2. The seller achieves clarity around the smoke taint status of their fruit including the risk that they may contravene any express on implied conditions of their contract in regard to the fruit’s suitability for winemaking.
  3. A professional opinion is available to the seller in the event that there is disagreement between the buyer and seller on the incidence, severity or level of smoke taint and its suitability for winemaking and subsequent sale.
  4. The seller has evidence against which the buyer’s opinions about smoke taint status can be cross-checked.
  5. lf there is any comeback from a buyer some time after the purchase is made, the seller’s position, if consistent with the advice they sought, is defendable.
  6. There are many factors influencing whether smoke results in smoke taint in grapes (for example – variety, stage of development, wind direction, time after infusion) and the relationship between them is still in the process of being understood.  Professional advice available to the seller will ensure they will only raise concerns about smoke taint when it is warranted and avoids jeopardizing the sale of their fruit unnecessarily by raising concerns that may not be warranted.

The relationship may be as important as the legal obligation

Another issue is the advisability of disclosing concerns about smoke taint to buyer in order to preserve a relationship with them.  Valuable relationships will be maintained and enhanced by raising the concerns early and are likely to yield solutions to the problem that are favourable to both.  This may not be as much of a consideration in a relationship that is not well-developed.

… and then there’s the buyer

Finally, the obligation to disclose concerns about smoke taint may not be required in normal circumstances.  Fires that raise the prospect of smoke taint are likely to be well-known to the buyer and any buyer will be wise to protect their investment by seeking their own assessment of smoke taint status.

 

Additional Resources

  1. Samples for smoke taint analysis – FAQs
    http://www.awri.com.au/wp-content/uploads/awri_smoke_analysis_faq.pdf
  2. Completing the Smoke Effect Picture: Systems development to reduce the negative effects of smoke on grapes and wine
    http://www.gwrdc.com.au/completed_projects/completing-the-smoke-effect-picture-systems-development-to-reduce-the-negative-effects-of-smoke-on-grapes-and-wine/
  Mark Hamilton
  Managing Partner
  Grope Hamilton Lawyers, Adelaide
  08 8231 0088
  Lawrie Stanford
  Executive Director
  Wine Grape Growers Australia
  08 8133 4000
 (Provided without prejudice for general guidance)