Alcoholic Beverages
These Contract Brewing Terms and Conditions (“Terms”) apply to all Sales Orders issued by Craftsmith Beverage, LLC (“Manufacturer”, “Craftsmith”, “we”, “us”, or “our”) to the customer identified in each Sales Order (“Customer” or “you”) for the production of alcoholic beverages.
BY ACCEPTING A SALES ORDER THAT REFERENCES THESE TERMS BY URL OR LINK, CUSTOMER AGREES TO BE BOUND BY THESE TERMS. EACH SALES ORDER CONSTITUTES A BINDING AGREEMENT INCORPORATING THESE TERMS WHEN ACCEPTED BY CUSTOMER.
Manufacturer agrees to produce and supply to Customer, upon accepted Sales Orders, the Products specified in each Sales Order and accompanying specifications.
Products may include beer, ale, lager, and other malt beverages; flavored malt beverages; malt-based hard seltzers; sugar-based hard seltzers, spirits-based ready-to-drink beverages, and other Beer produced from malt substitutes; hard kombucha and hard sodas taxed as Beer; and other beverages classified as Beer under 26 U.S.C. 5052(a) as mutually agreed.
Manufacturer does not produce wine, cider taxed as wine, distilled spirits, under these Terms, and does not produce any Product containing hemp-derived cannabinoids, CBD, or delta-9 THC. Products containing less than one-half of one percent (0.5%) alcohol by volume are governed by Manufacturer’s separate non-alcoholic Terms.
The Parties acknowledge and agree that this is a contract brewing arrangement and not an alternating proprietorship. Accordingly:
If the Parties wish instead to establish an alternating proprietorship under TTB Industry Circular 2005-2, a separate written agreement and separate TTB and Illinois Liquor Control Commission qualification of Customer are required. These Terms do not create one.
Prior to acceptance of a Sales Order, Manufacturer may determine in its sole discretion which Products it can and cannot produce, and may refuse to produce any Product that is overly complex, unsafe, unstable, low-yielding, slow or difficult to ferment, condition, or package, incompatible with Manufacturer’s equipment or standard operations, or that presents cross-contamination risk under Section 4.6, or for any other reason Manufacturer determines in its sole judgment.
Customer acknowledges that differences between Manufacturer’s equipment and any other brewing equipment will produce differences in the finished Products, including in flavor, aroma, gravity, clarity, and carbonation, which cannot be entirely avoided. Manufacturer will use commercially reasonable efforts, including adherence to Customer’s recipes and SOPs, to approach Customer’s target profile as closely as reasonably practicable. Variation within these limits does not constitute non-conformance.
These Terms do not create any exclusive relationship. Manufacturer may produce similar products for itself and other customers, and Customer may engage other manufacturers.
The Parties are independent contractors. Nothing in these Terms creates any partnership, joint venture, agency, or employment relationship. Neither Party may bind the other to any third party.
Customer shall provide Manufacturer with a monthly rolling two-to-six month production Forecast. Manufacturer shall notify Customer of its acceptance, rejection, or proposed revision of any timely Forecast within thirty (30) days of receipt. A Forecast is a planning document and does not bind either Party.
Customer shall submit a written, firm order not less than thirty-five (35) calendar days in advance of the requested packaging date, stating quantity of each Product and complete packaging instructions. Manufacturer shall notify Customer of its acceptance, rejection, or proposed revision within seven (7) business days of receipt, and shall notify Customer of any delay in its ability to produce an accepted order within three (3) business days of learning of the delay.
Manufacturer shall not be required to brew batches smaller than the minimum batch size stated on the Pricing Sheet, and may brew larger or smaller batches based on recipe, order size, brewhouse schedule, and tank availability.
Manufacturer shall issue a Sales Order confirming the product, quantity, batch size, production and packaging dates, Freeze Date, applicable Pricing Sheet, and Excise Tax treatment. Acceptance by Customer creates a binding commitment. Where a Sales Order is accepted fewer than fourteen (14) business days prior to the scheduled production start date, the Freeze Date shall be deemed to occur upon acceptance.
No Sales Order is binding on Manufacturer, and no production date is held, until Manufacturer has received (i) evidence satisfactory to it of the Customer licensing required under Section 7.1, (ii) where applicable, formula approval and COLA issuance, and (iii) the deposits required under Section 6.2.
Customer accepts delivered quantities within +/- 10% of ordered quantities.
Customer shall purchase not less than the Volume Commitment in each Term. The Volume Commitment for a partial first Term is prorated from the packaging date of the first full-scale production batch.
For any Term in which Customer fails to satisfy the Volume Commitment, Customer shall pay Manufacturer the production service fee that would have been payable had Customer purchased the full Volume Commitment, less amounts actually invoiced for production during that Term (the “Shortfall Fee”). The Shortfall Fee is invoiced within thirty (30) days after the end of the Term and is due on receipt.
Manufacturer is not obligated to produce volume in excess of the Volume Commitment except pursuant to Sales Orders it has accepted.
Manufacturer shall provide Customer with inventories of finished Products and of any raw or packaging materials supplied and owned by Customer within two (2) business days after each month-end.
Customer shall provide Manufacturer with complete specifications, including recipes, formulae, ingredient sources, processing instructions, SOPs, expected flavor and aroma profiles, quality standards, target alcohol content and tolerance, packaging specifications, and labeling requirements. Manufacturer may modify any specification to the extent necessary to comply with 27 CFR Parts 7 and 25 or with an approved formula.
Customer warrants that its recipes, specifications, formulations, and SOPs are fully developed, final, previously piloted and packaged, scalable to the minimum batch size, and that the Products are inherently safe and shelf-stable for the period Customer requires.
Manufacturer shall follow good manufacturing practices, produce Products in accordance with Customer’s commercially reasonable specifications (subject to Sections 2.4 and 4.1), and maintain appropriate quality control procedures.
Routine in-house testing performed by Manufacturer includes gravity testing throughout the process, yeast viability and cell counts, pH testing, and forced fermentation. Any additional lab testing, supplies, or equipment requested by Customer or required by Customer’s specifications will be charged at cost. Manufacturer shall notify Customer before incurring any such cost.
Where a Product requires TTB formula approval under 27 CFR 25.55, Manufacturer shall submit the formula as Brewer of Record. No production shall be scheduled or commenced until formula approval is issued. Customer shall provide all ingredient disclosures, supplier documentation, usage rates, and flavor formulation data required for submission no later than sixty (60) calendar days prior to the requested production date. Delays attributable to formula review, incomplete Customer submissions, or TTB requests for additional information are Customer-caused delays under Section 6.6.
Customer shall specify target alcohol content by volume for each Product. Manufacturer shall produce to that target within the tolerance permitted under 27 CFR Part 7 and any narrower tolerance stated in the Sales Order. Finished alcohol content within the applicable labeling tolerance conforms to specification and is not grounds for rejection.
Customer shall disclose in writing, prior to the Freeze Date, all ingredients in each Product, including any ingredient presenting cross-contact, carryover, staining, or sanitation-validation concerns for Manufacturer’s other production.
Where a Product requires enhanced changeover, additional sanitation cycles, dedicated materials, or cleaning validation, Customer shall bear all incremental costs, including sanitation labor and chemicals, validation and verification testing, and production downtime at the rate on the Pricing Sheet. Ingredients not disclosed prior to the Freeze Date and discovered after production has commenced constitute non-conforming specifications, and Customer shall bear all resulting costs.
Where a Product is not a Malt Beverage and is therefore subject to FDA labeling under Section 8.3(b), Customer remains solely responsible for any ingredient and allergen declaration required by 21 C.F.R. Part 101.
Where any Product utilizes bacteria, wild yeast, Brettanomyces, mixed cultures, or similar organisms, Customer shall provide or reimburse Manufacturer, at Customer’s sole cost, for dedicated hoses, gaskets, valves, and other soft parts, additional ATP swabs, and any other supplies or equipment required to produce and test the Products safely and to reduce cross-contamination risk.
Manufacturer reserves the right, in its sole reasonable judgment, to refuse production of, or to terminate under Section 12.4, any Product that creates cross-contamination risk to Manufacturer’s other production.
Manufacturer shall retain representative samples of each production lot under controlled conditions for the stated shelf life of the Product plus twelve (12) months, and shall retain associated batch, quality, and Part 25 records for the periods required by applicable law.
In the event of a dispute regarding Product conformance, the Parties shall first compare results from Manufacturer’s retained samples. If the dispute is not resolved, either Party may submit retained samples and Customer’s samples to an independent accredited laboratory mutually agreed by the Parties. The laboratory’s determination shall be binding on the Parties as to the factual question of conformance, and its costs shall be borne by the Party whose position is not sustained.
Customer or its designated representatives shall have the right, upon at least five (5) business days’ prior written notice and not more than once per twelve (12) month period (except for cause following a confirmed Product non-conformance), to visit and inspect those portions of the Facility used in the production or storage of Customer’s Products, during normal business hours and at Customer’s sole expense. All visits shall be escorted by Manufacturer personnel and limited to no more than two (2) representatives and one (1) business day unless otherwise agreed.
Customer shall have no right to access areas dedicated to other customers’ products, to review records relating to other customers, to review Manufacturer’s Excise Tax returns or Brewer’s Reports of Operations, or to photograph, record, or take samples of any equipment, process, or product other than Customer’s own, without Manufacturer’s prior written consent. Customer’s representatives shall abide by all facility safety, GMP, and confidentiality rules, shall execute Manufacturer’s standard visitor confidentiality acknowledgment, and shall not include any competitor of Manufacturer. No inspection shall be conducted in a manner that would cause Customer to be deemed a brewer or co-producer.
After the Freeze Date, any Customer-requested change to specifications, formulas, or packout constitutes a change order, is subject to Manufacturer approval, and will incur the change order fees on the Pricing Sheet. Any change requiring a new or amended formula approval or a new COLA resets the production schedule and is not subject to any committed production date.
Except as the Parties otherwise agree in writing, Customer shall supply at its sole cost, and deliver to the Facility no later than fourteen (14) calendar days prior to the requested packaging date, all Custom Materials and all specialty ingredients not normally inventoried by Manufacturer or available from its regular vendors.
All Customer-supplied packaging must conform to Manufacturer’s requirements and be suitable for use on Manufacturer’s equipment, including:
Manufacturer will supply and invoice at laid-in cost its standard, normally inventoried materials, including standard silver or black 202 lids, brite non-printed standard cans, standard handles, generic 24-count glued case trays, and standard raw materials including malt, sugar, yeast, and hops where available on Manufacturer’s contracts or on the spot market from its regular vendors.
“Laid-in cost” means material cost plus freight, taxes, surcharges, and upcharges invoiced to Manufacturer by the supplier.
Where the Parties agree in writing that Manufacturer will procure Custom Materials or specialty ingredients on Customer’s behalf, such items are invoiced at laid-in cost plus the markup stated on the Pricing Sheet, are subject to 100% prepayment under Section 6.2(a), and will not be ordered until that invoice is paid in full. Art, plate, and setup fees are invoiced to Customer when Manufacturer is billed and are payable prior to any production run of the affected materials. Graphic design work performed by Manufacturer is billed at the hourly rate on the Pricing Sheet.
Manufacturer is not obligated to procure any Custom Material on Customer’s behalf absent advance written agreement.
Manufacturer may reject non-conforming materials, including any labeling material that does not match an approved COLA. If Customer-supplied materials are not received in the required quantities by the required date, Manufacturer has no obligation to produce the Products as scheduled or to have them ready on the requested packaging date, and the Parties shall agree on a revised date. Downtime is charged at the rate on the Pricing Sheet.
Packaging materials bearing Product labels may not be delivered to the Facility or applied to any Product prior to COLA issuance where a COLA is required.
Customer-supplied packaging shall include an overage of not less than five percent (5%) for cans, ends, labels, shrink, and secondary packaging to account for normal line loss, setup, and quality sampling. Failure to deliver the required overage may result in short production, for which Manufacturer has no liability.
Customer acknowledges that yield loss and scrap are inherent to the manufacturing process. Manufacturer provides no guarantee of final yield and shall not be liable for the replacement cost of any materials, packaging, or ingredients lost during production, except to the extent directly caused by Manufacturer’s gross negligence or willful misconduct.
Where Beer is lost or destroyed at the Facility, Manufacturer shall pursue any available Excise Tax credit, refund, or relief under 27 CFR Part 25 and shall credit Customer with amounts actually recovered, net of the costs of pursuing them.
Upon termination, or upon Customer’s discontinuance or obsolescence of any Custom Materials, such materials in Manufacturer’s possession shall be shipped to Customer at Customer’s sole expense. Customer shall pay for any Custom Materials remaining in Manufacturer’s or a supplier’s inventory that have not already been prepaid, within fifteen (15) calendar days of invoice. Discontinued materials need not be returned where they remain in sufficient quantity for use in an order that Customer directs within five (5) business days.
If Customer requests a capability not presently available on Manufacturer’s equipment, and Manufacturer is willing to consider it, the Parties may negotiate additional fees, changeover charges, and any cost-sharing for the upgrade. Nothing in this Section obligates Manufacturer to upgrade its equipment or the Parties to reach agreement.
All rates, fees, markups, minimum batch size, credit limit, and the Volume Commitment are set forth in the Pricing Sheet, which is issued separately and referenced in each Sales Order. Pricing is negotiated on a per-customer basis and is not contained in these Terms. In the event of conflict between the Pricing Sheet and a Sales Order as to a rate, the Pricing Sheet governs unless the Sales Order expressly states otherwise and is signed by both Parties.
The Price consists of the production service fee, Excise Tax, material costs, packaging services, applicable surcharges and changeover fees, freight, pallet charges, and applicable taxes, each as set forth in the Pricing Sheet.
Unless modified in the Sales Order:
Any balance invoiced after release is due within thirty (30) calendar days of invoice. Late payments incur a service charge of one and one-half percent (1.5%) per month, or the maximum rate permitted by applicable law if lower, accruing from the thirty-first (31st) calendar day after the invoice date. Customer shall reimburse Manufacturer’s reasonable costs of collection, including attorneys’ fees.
Manufacturer may apply any payment received from, or credit accruing to, Customer against any item of account or indebtedness owed by Customer, regardless of Customer’s designation.
Because Manufacturer incurs Excise Tax liability upon Taxable Removal, no Product will be removed from the Facility until all amounts owed for that Product, including Excise Tax, have been paid in full in cleared funds. This requirement is not subject to waiver by course of dealing, and Manufacturer’s failure to enforce it on any occasion is not a waiver as to any other.
Manufacturer extends credit up to the limit stated on the Pricing Sheet. Customer requesting credit above that limit shall submit a credit application or letter of credit. Manufacturer may reduce or withdraw credit at any time on written notice.
Downtime caused by Customer — including late materials, late approvals, late formula or label submissions, and changes after the Freeze Date — is charged at the rate on the Pricing Sheet.
Warehousing. Finished Products not shipped within fifteen (15) calendar days of the requested packaging date, or of the date the Products were ready to ship, whichever is later, for reasons attributable to Customer, accrue the warehousing and handling fee on the Pricing Sheet, assessed on the first day of each month and prorated for partial months. If Products remain unshipped sixty (60) calendar days after that date, Manufacturer may, on seven (7) calendar days’ written notice, either (i) warehouse the Products offsite and invoice the additional warehousing and transportation costs, or (ii) sell the Products to a licensed person or dispose of them at Customer’s expense, including destruction costs. Customer remains liable for the Price. Sale proceeds, if any, are applied against Customer’s outstanding balance.
Tank Residency. Where Products are held in fermenters or brite tanks more than seven (7) calendar days past the planned batch completion or requested packaging date due to Customer’s failure to timely provide materials or approvals, the tank residency fee on the Pricing Sheet accrues per barrel based on actual or estimated tax-determined volume. If Products remain unpackaged for those reasons twenty-one (21) calendar days past that date, Manufacturer may, on forty-eight (48) hours’ written notice, dump or dispose of the Products at Customer’s expense, with Customer remaining liable for the Price.
No warehousing or tank residency fee accrues where the delay results from Manufacturer’s negligence, mistake, failure to perform, or other cause within Manufacturer’s reasonable control.
Restocking. Any shipment returned to Manufacturer through no fault of Manufacturer and requiring unloading and restocking incurs the restocking fee on the Pricing Sheet, subject to Section 6.10.
Customer grants Manufacturer a security interest in, and Manufacturer shall have a possessory lien upon, all Customer-supplied materials, work in process, and finished Products in Manufacturer’s possession, to secure all amounts owed. Customer authorizes Manufacturer to file UCC financing statements evidencing this interest. If any amount remains unpaid more than thirty (30) calendar days after the due date, Manufacturer may, after ten (10) calendar days’ written notice, sell or otherwise dispose of such goods and apply the proceeds against amounts owed, without prejudice to any other remedy.
Any sale or transfer of Product under this Section shall be made only to a person licensed to receive alcoholic beverages under applicable federal and state law, and shall comply with 27 CFR Part 25 and the Illinois Liquor Control Act of 1934, 235 ILCS 5/1-1 et seq. Manufacturer may destroy Product rather than sell it where lawful sale is impracticable, and Customer shall bear the cost of destruction and any non-recoverable Excise Tax.
Materials or Products remaining in Manufacturer’s possession more than ninety (90) calendar days after completion or termination of the applicable Sales Order, following fifteen (15) calendar days’ written notice, shall be deemed abandoned and may be sold to a licensed person, donated where lawful, or destroyed at Customer’s expense.
If Customer fails to pay any undisputed amount when due, if Manufacturer reasonably determines that Customer’s creditworthiness has materially deteriorated, or if any license or permit required under Section 7.1 lapses, is suspended, or is revoked, Manufacturer may, upon written notice and without liability or breach: (i) suspend performance under any or all Sales Orders, including production, release of finished goods, and storage or logistics services; (ii) require prepayment or other adequate assurance; and (iii) revise payment terms on future Sales Orders. Any resulting delay is a Customer-caused delay under Section 6.6. Manufacturer may set off any amounts owed by Customer against any amounts owed to Customer.
Manufacturer’s right to receive payment is not subject to any right of setoff, counterclaim, recoupment, or defense that Customer’s distributor may have against Customer or that Customer may have against its distributor.
Fees on the Pricing Sheet increase annually, effective on each anniversary of the Effective Date, by the annual rate of the then-current Producer Price Index published by the U.S. Bureau of Labor Statistics.
In addition, Manufacturer may increase the production service fee at any time on ninety (90) days’ prior written notice. Any such increase is prospective only; Sales Orders accepted before the effective date of the increase are completed and invoiced at the prior rate.
Manufacturer may also pass through, on written notice with supporting documentation, any increase in its direct costs resulting from (i) new or increased tariffs, duties, or import surcharges; (ii) new or increased taxes, excise, or regulatory fees applicable to the Products, including any change to excise tax rates or to the availability of reduced rates; (iii) changes in applicable law requiring modification to specifications, testing, labeling, or process; or (iv) documented increases in Manufacturer-supplied raw or packaging material costs exceeding five percent (5%) between Sales Order acceptance and production.
Any other change to the Pricing Sheet requires written agreement of both Parties.
The Parties acknowledge the prohibition on consignment sales at 27 U.S.C. 205(d) and 27 CFR Part 11. No Sales Order creates any right of return, and Manufacturer will not accept the return of, or issue credit for, any Product after removal from the Facility except where a return is expressly permitted by 27 CFR Part 11 — including returns of defective Products, Products damaged in transit, and Products subject to a recall or a discontinued product or brand exception — and is separately documented. Any provision of a Sales Order or Pricing Sheet purporting to grant a general right of return is void.
Customer shall obtain and maintain at its sole cost, and shall provide Manufacturer with copies of, all federal and state licenses, permits, and registrations required for Customer to take possession of, hold, sell, or distribute the Products, including as applicable:
Customer shall notify Manufacturer in writing within two (2) business days of any lapse, suspension, revocation, or adverse action affecting any such license or permit.
Customer shall secure at its sole cost, and is solely responsible for:
Manufacturer shall maintain its Brewer’s Notice under 27 CFR Part 25, its Illinois brewer licensing under 235 ILCS 5/5-1, and its other required facility licenses and certifications, and shall maintain the records and file the reports and returns required of a Brewer of Record.
Each Party shall comply with 27 U.S.C. 205 and the regulations at 27 CFR Parts 6 (tied house), 8 (exclusive outlet), 10 (commercial bribery), and 11 (consignment sales), and with the corresponding provisions of the Illinois Liquor Control Act. Neither Party shall provide, and neither Party shall request that the other provide, any thing of value to a retailer, or any service, credit, or accommodation that would constitute an inducement under those provisions.
Customer is solely responsible for its relationships with wholesalers and distributors, including compliance with the Illinois Beer Industry Fair Dealing Act, 815 ILCS 720/1 et seq., and any comparable franchise statute in any other state. All distribution agreements and distributor appointments shall be executed by Customer in its own name and create no distribution relationship or franchise right between Manufacturer and any distributor, notwithstanding that Manufacturer is the Brewer of Record. Except to the extent arising from Manufacturer’s negligence or willful misconduct, Customer shall indemnify Manufacturer for any franchise termination claim, compensation, cost, expense, or attorneys’ fee incurred by Manufacturer in connection with Customer’s distribution arrangements.
Manufacturer has no duty or obligation with respect to marketing, sales, or promotion of the Products to distributors, retailers, or consumers. Manufacturer bears no responsibility and shall receive no bill-backs for Product samples or for any Product that codes out, exceeds its shelf life, or is destroyed for those reasons.
Customer retains all rights to its trademarks, trade names, recipes, formulations, artwork, and other intellectual property, and all goodwill arising from Manufacturer’s use of Customer’s marks inures exclusively to Customer. Customer grants Manufacturer a limited, non-exclusive, non-transferable, revocable license to use Customer’s marks solely as necessary to produce, label, and package the Products and to obtain COLAs, formula approvals, and state registrations during the term of the applicable Sales Order. Manufacturer shall cease use upon expiration or termination.
Manufacturer retains all rights to its production processes, technical knowledge, recipes, formulas, procedures, SOPs, and manufacturing know-how, all of which are confidential and constitute trade secrets. Customer shall not use them in its own business or disclose them, except where such information is already known to Customer, is or becomes public without breach, is rightfully received from a third party without restriction, or is independently developed without reference to Manufacturer’s information.
Except as required by FDA or TTB, Customer shall not use Manufacturer’s trademarks without Manufacturer’s prior written consent. Where required by FDA or TTB, Customer shall use them only to the minimal extent necessary.
Any modification or improvement to Customer’s recipe or formula itself — meaning the identity, quantity, or proportion of ingredients in the finished Product — made during the course of production (“Recipe Improvements”) shall be the sole and exclusive property of Customer, and Manufacturer assigns any rights it may have in such Recipe Improvements to Customer.
For the avoidance of doubt, Recipe Improvements do not include, and Manufacturer retains sole ownership of, all process parameters, scale-up methodologies, equipment settings and configurations, processing sequences, sanitation and changeover protocols, quality control methods, and manufacturing know-how developed or applied by Manufacturer, whether or not developed in connection with Customer’s Products. Manufacturer retains a perpetual, irrevocable, royalty-free right to apply such general knowledge and know-how in its operations for any customer. COLAs and formula approvals issued to Manufacturer remain Manufacturer’s property and are not transferable.
Where the Parties engage in research and development of new or revised recipes, they shall agree in advance and in writing on any development fees and on the ownership of resulting intellectual property.
Neither Party shall use the other’s marks, recipes, or Products for any actual or implied co-branded promotion, collaboration, marketing, or endorsement without the other’s prior written consent, and neither Party shall disparage the other or the Products.
Manufacturer represents that it holds and will maintain its Brewer’s Notice and Illinois licensing; that it will follow good manufacturing practices; and that Products will, as of release, conform to feasible specifications and to the approved formula, be of merchantable quality, and be fit for human consumption. These warranties do not apply to failures arising from Customer-supplied materials, Customer’s recipes, processes, specifications, or SOPs, technically infeasible specifications, equipment differences under Section 2.4, acts of Customer, or handling, shipping, or storage after delivery.
Customer warrants that it holds all licenses required under Section 7.1; that it possesses all rights to the trademarks and artwork associated with the Products and that they do not infringe third-party rights; that its specifications comply with all laws; that its materials are safe and lawful for use in an alcoholic beverage; that its labels and marketing comply with regulations; and that it will not sell or transfer any Product to any person not licensed to receive it.
Where Products are determined not to be of merchantable quality or not fit for their intended purpose:
Customer shall inspect all Products promptly upon delivery. Claims for shortages, patent damage, or shipment discrepancies must be reported within ten (10) calendar days after receipt at Customer’s or its designated distributor’s facility. Claims for latent defects — including contamination, oxidation, carbonation faults, seam or package integrity defects, and shelf-stability issues not reasonably discoverable on ordinary inspection — may be submitted within thirty (30) calendar days after discovery, provided the claim is made within the applicable shelf life of the Product or within one hundred eighty (180) days after shipment, whichever is earlier.
Product for which timely notice is not given is deemed accepted, and Customer waives all claims with respect to it. Notice shall identify affected lot codes, quantity, and the nature of the non-conformance, and Customer shall preserve and make available representative samples.
Manufacturer shall approve or disapprove a claim within fifteen (15) calendar days of receipt.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTION 9.1, PRODUCTS ARE PROVIDED “AS-IS” AND MANUFACTURER MAKES NO, AND HEREBY EXPRESSLY DISCLAIMS, ALL OTHER WARRANTIES OR REPRESENTATIONS AS TO PRODUCTS, INCLUDING WITHOUT LIMITATION WARRANTIES OF TITLE, NON-INFRINGEMENT, SUITABILITY AND MERCHANTABILITY, DESIGN OR FITNESS FOR ANY SPECIFIC OR PARTICULAR PURPOSE.
OTHER THAN WITH RESPECT TO A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ITS INDEMNIFICATION OBLIGATIONS UNDER SECTION 10, OR BREACH OF CONFIDENTIALITY, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST PROFITS OR COST OF COVER), PUNITIVE, OR SPECIAL DAMAGES.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AND EXCLUDING INDEMNIFICATION OBLIGATIONS FOR THIRD-PARTY CLAIMS AND BREACHES OF CONFIDENTIALITY, EACH PARTY’S TOTAL AGGREGATE LIABILITY ARISING OUT OF OR RELATING TO ANY SPECIFIC SALES ORDER SHALL NOT EXCEED THE TOTAL AMOUNTS PAID OR PAYABLE BY CUSTOMER TO MANUFACTURER UNDER THAT SALES ORDER. Customer’s obligations to reimburse Excise Tax under Section 6.4 and to pay the Shortfall Fee under Section 3.5 are excluded from this limitation.
“Recall” means any recall, market withdrawal, stock recovery, or safety-related correction of Product, whether mandated by a governmental authority or undertaken voluntarily by either Party.
Each Party shall notify the other in writing within twenty-four (24) hours of becoming aware of any fact reasonably likely to give rise to a Recall. Because Manufacturer is the Brewer of Record and is identified on the label, Manufacturer shall control all communications with TTB and the Illinois Liquor Control Commission and shall have joint approval rights over any public communication identifying the Products or the Facility. Customer shall control commercial and logistical execution and communications with its wholesalers and retailers, subject to those approval rights.
Customer shall bear all costs of any Recall, except to the extent the Recall arises directly from Manufacturer’s gross negligence or willful misconduct (a “Manufacturer-Caused Recall”). For a Manufacturer-Caused Recall, Manufacturer shall bear the direct costs in proportion to its responsibility, limited to: (1) fees paid by Customer to Manufacturer for the affected lot(s); (2) the documented cost of Customer-supplied materials consumed in the affected lot(s); (3) third-party retrieval, freight, and destruction costs for the affected lot(s); and (4) required regulatory notification costs. This Section is the Parties’ sole and exclusive allocation of Recall costs and governs notwithstanding Section 10.
Manufacturer’s aggregate liability for any Manufacturer-Caused Recall shall not exceed the greater of (i) the limitation in Section 9.5 or (ii) the proceeds actually recovered under Manufacturer’s applicable insurance. In no event shall Manufacturer be liable for lost profits, lost sales, loss of shelf space, listing or slotting fees, or damage to brand or goodwill.
Manufacturer shall pursue any available Excise Tax credit, refund, or relief on recalled Product returned to the Facility or destroyed, and shall credit Customer with amounts actually recovered net of costs. Non-recoverable Excise Tax remains Customer’s obligation except in a Manufacturer-Caused Recall.
Each Party shall cooperate in root cause investigation and provide production records, environmental monitoring data, and retained samples reasonably required. Neither Party shall attribute fault to the other in any public communication prior to completion of root cause analysis.
Customer shall defend, indemnify, and hold harmless Manufacturer from all claims, losses, damages, liabilities, penalties, fines, costs, and reasonable attorneys’ fees arising from: (a) trademark or other IP infringement, unfair competition, or interference with a contract to which Customer is a party; (b) Customer’s recipes, specifications, formulations, processes, or SOPs, including risks associated with Products that are short-shelf-life, not inherently shelf-stable, low-alcohol, or contain live cultures or residual fermentables; (c) ingredients or materials supplied, sourced, or required by Customer; (d) false, illegal, or improper advertising, formulation, or labeling of the Products, including FDA label compliance under Section 8.3(b); (e) Customer’s marketing, distribution, or sales practices and those of its distributors, including any state franchise law claim; (f) Customer’s licensing status; (g) temperature handling after delivery; (h) post-delivery distribution, sale, or service of the Products, including any claim under a dram shop or alcohol liability statute; and (i) breach of any Customer representation, warranty, or covenant.
This indemnity includes Manufacturer’s cost for any Products or materials that must be destroyed or that become unsaleable or unusable as a result. Customer has no indemnification obligation to the extent a claim arises from or is contributed to by Manufacturer’s negligence, gross misconduct, or breach of these Terms.
Manufacturer shall defend, indemnify, and hold harmless Customer from third-party claims arising solely from (i) Manufacturer’s failure to produce the Products in accordance with Customer’s specifications and processes, subject to Sections 2.4 and 9.1; (ii) Manufacturer’s gross negligence or willful misconduct; or (iii) Manufacturer’s violation of law in its operation of the Facility as Brewer of Record. Manufacturer’s aggregate obligation under this Section shall not exceed the limits of its applicable insurance coverage and shall be reduced by any amounts recovered by Customer under such insurance. Manufacturer has no obligation to the extent a claim arises from Customer-supplied materials, Customer’s specifications, Customer’s labeling content, Customer’s marketing, or Customer’s acts or omissions. Recall costs are governed exclusively by Section 9.6.
The indemnified Party shall give prompt written notice of any claim (failure to do so relieving the indemnifying Party only to the extent prejudiced), cooperate fully at the indemnifying Party’s expense, and give the indemnifying Party sole control of defense and settlement, provided any settlement includes a complete release of the indemnified Party without payment or obligation on its part.
Each Party shall maintain, at its own expense:
Each Party shall name the other as an additional insured on its general liability and products liability policies and shall deliver certificates of insurance no later than fifteen (15) days prior to the first requested ship date and upon each renewal. Each policy shall require not less than ten (10) days’ prior notice of cancellation or expiration.
Title to Products remains with Manufacturer until Taxable Removal or other lawful removal from the Facility as provided in Section 2.2(b). Upon payment in full under Section 6.3 and lawful removal, title and risk of loss pass to Customer FOB the Facility, regardless of which Party arranges the carrier.
Manufacturer will ship to Customer’s licensed facility or to a single designated licensed distributor or warehouse. Manufacturer will not ship to more than one location, and will not act as Customer’s logistics provider or warehouse, without prior written agreement. Customer may arrange and pay for its own freight, in which case shipment must be made within seven (7) calendar days after the order is finalized and available; otherwise Manufacturer may arrange shipping and add the cost to the invoice.
Manufacturer shall release Product only to Customer or to a carrier or consignee that Customer certifies in writing is licensed to receive alcoholic beverages in the destination jurisdiction. Manufacturer may refuse release where it reasonably believes release would violate federal or state law, and such refusal is not a breach. Manufacturer shall not sell Products to any person other than as designated by Customer, subject to Sections 6.6 and 6.7.
Customer’s sole recourse for loss or damage in transit or after delivery is against the carrier. Customer shall insure its inventory of the Products, and such coverage shall provide that the insurer has no salvage rights to the Products.
These Terms become effective on Customer’s acceptance of its first Sales Order and continue for an initial period of twelve (12) months (the “Initial Term”), renewing automatically for successive twelve (12) month periods (each a “Renewal Term”, and together with the Initial Term, the “Term”) unless terminated as provided below.
Either Party may terminate these Terms without cause on not less than ninety (90) days’ prior written notice, subject to the following:
(a) Customer. Customer’s notice of termination without cause is effective only upon the later of (i) expiration of the ninety (90) day notice period and (ii) satisfaction of the Volume Commitment for the then-current Term. Customer may elect to terminate on the ninety (90) day notice period alone by paying the Shortfall Fee under Section 3.5, calculated as of the proposed termination date, which shall be due and payable on or before that date.
(b) Manufacturer. Where Manufacturer terminates without cause, the Volume Commitment for the then-current Term is prorated to the termination date and no Shortfall Fee is payable for the unexpired portion.
Either Party may terminate immediately on written notice upon:
Manufacturer may additionally terminate immediately, without a cure period, upon (i) the lapse, suspension, or revocation of any license or permit required of Customer under Section 7.1, or (ii) any act or omission of Customer that places Manufacturer’s Brewer’s Notice or Illinois licensing at risk.
Manufacturer may terminate on ninety (90) days’ written notice upon the occurrence of, or substantial risk of, cross-contamination of Manufacturer’s other production arising from Customer’s Products, in Manufacturer’s sole reasonable judgment under Section 4.6.
Where Manufacturer terminates for cause, the Shortfall Fee for the then-current Term becomes immediately due, and Manufacturer may retain any deposits and prepayments and apply them against amounts owed, unreimbursed procurement and materials costs, reserved and unrecoverable production capacity, Excise Tax incurred, and other damages. The Parties acknowledge that Manufacturer’s actual damages from a reserved production slot are difficult to determine with precision and agree that retention of the production deposit is a reasonable estimate of such damages and not a penalty.
Termination for cause is without limitation of any other remedy available to the non-defaulting Party.
Upon completion or termination:
Each Party shall maintain the confidentiality of the other’s proprietary information, including recipes, formulae, specifications, procedures, customer lists, pricing, and marketing materials, shall use it only as necessary to perform under these Terms, and shall not disclose it to any other person. Obligations survive completion of any Sales Order for two (2) years, except trade secrets, which remain protected indefinitely.
These obligations do not apply to information that is or becomes public without breach, was known to the receiving Party at the time of receipt, or is received from a third party without restriction. Nothing in this Section restricts a disclosure required by TTB, the Illinois Liquor Control Commission, or any other regulatory authority. In the event of breach, the injured Party may obtain injunctive relief in addition to damages.
For two (2) years following completion of any Sales Order, neither Party shall solicit for employment any employee of the other Party involved in the performance of such Sales Order without prior written consent.
Neither Party shall be liable for any delay or failure to perform (other than payment obligations) caused by events beyond its reasonable control, including acts of God, fire, flood, severe weather, epidemic or pandemic, labor disruption, utility or municipal water interruption, equipment failure not caused by lack of maintenance, supply chain disruption, carrier failure, cyberattack, war, terrorism, sabotage, judicial action, or governmental action, including suspension of Manufacturer’s Brewer’s Notice or licensing for reasons not attributable to Manufacturer’s willful misconduct. The affected Party shall give prompt notice and use commercially reasonable efforts to resume performance.
Manufacturer may reschedule affected production to the next commercially reasonable available slot and may allocate available capacity, raw materials, utilities, and reduced-rate Excise Tax barrels among its customers in any commercially reasonable manner. If a force majeure event continues more than sixty (60) calendar days, either Party may terminate the affected Sales Order without liability, subject to payment for work performed and materials procured. The Volume Commitment is equitably adjusted for any period of force majeure affecting Manufacturer’s ability to produce.
These Terms are governed by the Uniform Commercial Code as enacted in Illinois and by the laws of the State of Illinois, without regard to conflict of laws principles. The United Nations Convention on Contracts for the International Sale of Goods does not apply.
The Parties shall first attempt in good faith to resolve any dispute through direct negotiation between senior executives for thirty (30) calendar days, and then through non-binding mediation administered by the American Arbitration Association. Any dispute not resolved through mediation shall be finally resolved by binding arbitration administered by the AAA under its Commercial Arbitration Rules, before a single arbitrator, seated in DuPage County, Illinois. The arbitrator’s award shall be final and may be entered in any court of competent jurisdiction. Each Party shall bear its own costs and an equal share of the arbitrator’s fees, except that the arbitrator may award costs and reasonable attorneys’ fees to the prevailing Party.
Notwithstanding the foregoing: (i) claims seeking recovery of amounts owed of less than Fifty Thousand Dollars ($50,000), including Excise Tax reimbursement under Section 6.4 and the Shortfall Fee under Section 3.5, may be brought in the state or federal courts located in DuPage County, Illinois; and (ii) either Party may seek injunctive or other equitable relief in such courts to protect its confidential information, intellectual property, or regulatory standing without first exhausting negotiation, mediation, or arbitration.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY AND TO PARTICIPATE IN ANY CLASS OR CONSOLIDATED PROCEEDING.
Neither Party may assign these Terms or any Sales Order without the other Party’s prior written consent. A change of control of Customer, or an assignment in connection with a merger or sale of substantially all assets, requires Manufacturer’s prior written consent, which shall not be unreasonably withheld; provided that Manufacturer may withhold consent where the proposed assignee is a competitor of Manufacturer, where the assignee’s creditworthiness is materially weaker than Customer’s, where the assignee does not hold the licensing required under Section 7.1, or where production for the assignee would conflict with Manufacturer’s obligations to another customer or with applicable trade practice law. Any attempted assignment in violation of this Section is void.
These Terms, the Pricing Sheet, and accepted Sales Orders constitute the entire agreement between the Parties as to their subject matter and supersede all prior agreements, understandings, and negotiations, whether oral or written.
If any provision is determined invalid or unenforceable, the remainder remains in full force. The language of these Terms is the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against either Party. Captions are for convenience only.
No waiver or modification is valid unless in writing and signed by both Parties. No waiver of a breach is a waiver of any prior or subsequent breach.
Sections 2.2(b) and (e), 3.5 (Volume Commitment and Shortfall Fee), 5.7, 6.4 (Excise Tax), 6.7 (Security Interest and Lien), 6.10 (Consignment Sales), 7.4 (Trade Practice), 7.5, 8 (Intellectual Property and Labeling), 9 (Warranties, Liability, and Recall), 10 (Indemnification), 11 (Insurance), 12.1 (Title and Release Restrictions), 12.5, 13 (Confidentiality), 14 (Non-Solicitation), 15.2, 15.3, and 15.9, together with accrued payment and tax obligations, survive the completion, expiration, or termination of any Sales Order or of these Terms.
All notices shall be in writing and delivered to the addresses specified in the applicable Sales Order by (i) personal delivery, (ii) nationally recognized overnight courier, (iii) certified mail, return receipt requested, or (iv) email with confirmation of receipt to the designated contacts identified in the Sales Order. Notice is deemed given upon personal delivery, one (1) business day after deposit with an overnight courier, three (3) business days after mailing, or upon confirmed email receipt. Routine operational communications do not constitute notice.
Customer’s acceptance of a referenced Sales Order constitutes agreement to these Terms. These Terms may be accessed electronically and are subject to periodic updates in accordance with the preamble.
Craftsmith Beverage, LLC | Version 2026.3-ALC | Effective 9.16.2026