On May 7, 2019, the Virginia Department of Alcoholic Beverage Control (VABC) issued a decision confirming the applicability of arbitration clauses in distribution contracts between brewers and beer distributors under the Virginia`s Beer Franchise Act (BFA). In Loveland Distributing Co., Inc. and Premium of Virginia, LLC v. Bell`s Brewery, Inc., the VABC panel unanimously decided to compel the parties to settle their dispute through arbitration, as stipulated in the parties` distribution agreement (the agreement). The development of an agreement that avoids non-solid clauses and contains strategic clauses to protect the parties in the event of a dispute is the art and science of negotiating a good allocation agreement. You now have a checklist with five common errors that you should avoid when developing your next distribution agreement. Distribution agreements are an essential instrument for establishing a relationship between a distributor and a beverage manufacturer. A well-written agreement can help develop this relationship. The agreement cannot extend the life of a relationship as soon as the relationship expires. A poorly written agreement often results in legal litigation that consumes management time, financial resources and the involvement of lawyers, courts and arbitrations. A well-written agreement can eliminate resource expenditures for these non-productive activities and encourage the distributor and manufacturer to do their business at the end of the relationship. The VABC`s decision at Loveland is a strong indication that, without a clear attempt by the parties to evade its legal authority, the VABC will impose arbitration clauses in written beer distribution contracts. The decision will help future parties (probably suppliers) who are trying to bring beer and wine distribution disputes into the balance in Virginia and will also strengthen the negotiating position of beer and wine suppliers trying to introduce a compromise clause in virginia distribution agreements.
Examples of general requirements include: achieving certain distribution and marketing objectives, maintaining appropriate records and reporting on stock and sale, transport and storage of the product under certain temperature and lighting conditions, implementing appropriate quality control measures to ensure product freshness and payment of invoices within a specified time frame. It is also customary to include termination rights when the distributor is declared bankrupt, when it makes a voluntary insolvency application, reaches a compromise or agreement in favour of its creditors, or when all federal and regional licences and authorizations necessary for the proper management of its operations are not in good condition. The most critical section of the agreement defines how and under which a supplier can terminate the distributor. In a franchised state, the law generally states that a supplier may resign for “good reasons.” If a good thing is defined in the law, it is of the utmost importance that the distribution contract reflects the language of the law, because in many cases a contract contrary to the law is invalidated, so that the supplier is able to have no agreement at all. Relationships between manufacturers and distributors of craft beverages begin and develop over time. They`re growing up. They`re maturing. Sometimes they degrade. They ended up perishing.
External factors regularly increase the pressure on the distributor and manufacturer of craft beverages who request a change to the dealer agreement after a 30-day period. If the agreement allows for changes later this year, there are few problems. However, if the agreement allows for changes only once a year, one or both partners must face undue pressure until the agreement can take such an annual change into account. The best distribution agreements allow for changes during the year. When a distributor is hired to bear the brand of a brewery, it is generally entitled to all products of that brand.