Top Four Concerns for Tri-Party Cannabis Supply Chain Agreements
Cannabis supply chain agreements (e.g., manufacturing agreements, distribution agreements, license agreements, supply agreements) can be difficult enough to draft and negotiate when there are just two parties. The immense amount of over-regulation in the cannabis world can make contract drafting a headache, and even more difficult for attorneys who are not well-versed in cannabis.
That said, cannabis attorneys love complexities. So, over the last two years, our California cannabis attorneys have seen a huge uptick tri-party supply chain agreements. These contracts come up relatively frequently in licensing deals. A brand may want to have branded cannabis products made and distributed to retailers across the state. If the brand wants to use a different manufacturer and distributor, it may be more cost-effective to have one master agreement among all three of them, than to have a separate agreement with both the manufacturer and distributor and force the manufacturer and distributor to enter into a contract with one another. It also may allow the brand more flexibility to have control over how the manufacturer and distributor do business with each other.
Tri-party agreements present a number of challenges that are not present in normal contracts, and I want to address some