As longtime Los Angeles cannabis business lawyers, we recognize that there are significant legal barriers to entry in California’s legal marijuana market. For this reason, an increasing number of smaller farmers are jumping on the bandwagon of something called “contract cannabis farming.” This is a common practice in mainstream agriculture that is just starting to gain steam in the cannabis market.
These types of contracts diverge from the normal model of cultivation employment, and they can even vary significantly from contract to contract. Basically land owners gain the appropriate cultivation permits from local and state authorities. From there, they contract with experienced cannabis crop growers who conduct the actual farming. Many of these farmers are legacy growers who weren’t successful in landing their own state cultivation permits due to so many barriers to entry. The land owners and the growers then split the profits. Additionally, farmers get their foot in the door of an industry they may not have otherwise. That could result in more opportunities down the line.
Cultivation contracts vary in length and scope, but they typically last a year or so, but some continue in perpetuity until one or both parties dissolves the relationship. Neither should enter such an agreement until having it carefully examined by a California cannabis business lawyer experienced in contract drafting and review. The importance of this is underscored by the fact that there have been numerous lawsuits stemming from these arrangements, with allegations including fraud, breach of contract and labor law violations. Continue reading