From Seed to Sale: Key Contracts for Cannabis Businesses

Introduction

A cannabis business, like any other sophisticated enterprise, runs on a web of relationships—with suppliers, distributors, landlords, employees, and customers. Each of these relationships needs to be governed by a clear, legally sound contract to protect your business and ensure smooth operations. In the highly regulated cannabis space, these agreements are even more critical.

Welcome to the final installment of our series, "The Cannabis Launchpad." We've covered legal mistakes, IP, real estate, and financing. Now, we’ll break down the essential contracts that form the backbone of a successful cannabis venture.

Foundational Internal Agreements

Before you even deal with outside parties, your internal structure must be solid.

• Operating/Shareholder/Partnership Agreement: As discussed in Part 1, this is your company's most important internal document. It governs the relationship between the owners and outlines everything from profit distribution to decision-making.
• Employee & Contractor Agreements: Clearly define roles, responsibilities, compensation, and confidentiality obligations. For key employees, this might include non-compete or non-solicitation clauses (where enforceable). Our Independent Contractor Agreement services can be vital here.

Supply Chain & Operations Contracts

Your ability to produce and sell your product depends on a reliable supply chain, governed by strong contracts.

The Pitfall: Relying on informal purchase orders or handshake deals, which can lead to disputes over quality, quantity, delivery times, and pricing.

The Savvy Solution: Implement legally sound agreements for each step of your operation:

• Cultivation/Supply Agreements: If you're a retailer or processor, this contract with your cultivator is key. It should detail strain specificity, quality standards (e.g., testing requirements), quantity, pricing, and delivery schedules.
• Processing/Manufacturing Agreements: If you're having your biomass processed into oils, edibles, or other products, this agreement should cover processing methods, yield expectations, quality control, and ownership of the final product.
• Distribution Agreements: This contract outlines the terms under which a distributor will transport and sell your products to retailers, including territory, exclusivity, pricing, and marketing responsibilities.

Real Estate & Financial Contracts

As covered in Part 3 and Part 4 of our series, your physical location and funding are critical.

• "Cannabis-Aware" Leases: Must include clauses that account for licensing contingencies and regulatory compliance.
• Loan Agreements & Investor Documents: Promissory notes, convertible notes, and subscription agreements must be meticulously drafted to comply with securities laws and clearly define the terms of the investment.

Intellectual Property & Brand Contracts

Your brand is built on your intellectual property. Contracts are how you monetize and protect it.

• Licensing Agreements: If you allow another company to use your brand name, logo, or proprietary formula on their products, a licensing agreement is essential. It should outline the scope of the license, quality control standards, royalty payments, and term.
• Non-Disclosure Agreements (NDAs): Use these when sharing any confidential information about your business, from secret recipes to marketing plans, with potential partners, investors, or key employees.

Conclusion: Your Contracts are Your Business's Armor

In the fast-paced cannabis industry, it can be tempting to move quickly and overlook the details. However, taking the time to put strong, clear, and compliant contracts in place for every key business relationship is one of the most important investments you can make. These documents are not just legal formalities; they are the armor that protects your business, manages risk, and provides the stable foundation you need to thrive.