Unlike individual consumers, companies can sign their rights away

The AWRI has, over many years, played a pro-active role in protecting the integrity and purity of Australian wines. We reported in 20071 the case of a taint derived from tartaric acid. The investigation identified 2,6-dichlorophenol as exhibiting a ‘plastic/chemical/beachball-like’ taint. The case was notable in a number of respects: the significant volume (>5million litres) and attached commercial value >$10M of the wine affected. The taint only became apparent when the tartaric acid was added to the juice/must and underwent primary fermentation2. As part of our service to the grape and wine sector, technical reports were also prepared for winery levy-payers to support insurance claims or legal proceedings against suppliers of tainted processing aids or additives.

This particular case made it to the Supreme Court of Victoria in December 2010. A number of proceedings were involved due to the number of parties concerned.

It was accepted that the “contaminated” tartaric acid provided by the supplier was not reasonably fit for use by the winery as an additive in the making of wines for human consumption for itself or for others, and that the tartaric acid delivered by the supplier to the winery was not of merchantable quality. However, the court ruled in favour of the supplier and the key argument was based on some of the terms and conditions of sale which were included in a credit application. The supplier’s terms and conditions included clauses which absolved the supplier of any responsibility…

“…the company gives no condition or warranty whatsoever as to the suitability or fitness of the goods…”

“it is the responsibility of the purchaser to satisfy himself as to the condition, quality, suitability and fitness of the goods…”

“The company shall be under no liability to the purchaser for any loss of any kind…arising out of the supply of or failure to supply goods…”

The terms of credit application had been signed six years previously by a finance officer from the parent organisation of the winery, located in a different region. It was also clear that the significance of the contractual fine points were not clearly understood at the time of signing the credit application. The signing of the credit application was also confirmation of the credit applicant’s agreement to all clauses in the suppliers’ terms and conditions.

Whilst the AWRI does not wish to comment on specific details relating to the Court’s decision, we would like to remind levy payers to ensure they understand the risks associated with the transfer and use of additives used in the winemaking process.

As we are now entering a buying period for harvest 2012:

  • We strongly urge wineries to review their contractual arrangements with their suppliers to ensure your organisation has legal recourse.
  • If you do not have copies of current terms and conditions then ask for complete copies from your supplier.
  • If you are not satisfied with the terms and conditions, then renegotiate or seek to work with alternative suppliers. If in doubt you should seek legal advice.
  • The dual roles of negotiating supply contracts and receival / use of additives need to be combined to avoid ambiguous situations about who takes responsibility and when.
  • We remind wineries that it is your responsibility, and not that of your suppliers, to ensure that the wine is fit for purpose.
  • In contract processing arrangements, generally the processing winery cannot transfer the risk to a supplier where a tainted additive has been used (unless the contract has been specifically tailored to allow this to occur, which would be unusual).
  • The grape and wine sector needs to be more pro-active about the surety of products that it uses in the winemaking process.
  • We recommend wineries implement procedures for simple, sensory-based screening of winemaking additives and processing aids prior to vintage – procedures are available on our website (http://www.awri.com.au).

Whilst the AWRI is unable to give legal advice, we can assist Australian winemakers on technical matters. If you have any questions please contact the AWRI technical problem solving team on (08) 8313 6600 or e-mail: winemakingservices@awri.com.au

1 The Australian Wine Research Institute, Annual Report 2007, pp27-29
2 The 2,6-dichlorophenol was covalently bound to the acid and only released during fermentation (presumably by enzyme hydrolysis)