Fisher and Williams Detail Cannabis Contract Ruling for Law360

Shook Partner Makai Fisher and Associate Matt Williams have authored an article for Law360 explaining a California appellate decision that could have “wide-ranging impacts on any cannabis businesses more than a few years old.”

The decision centers on a contract executed before commercial cannabis entities were legal under California law. “Thus, the contracts were entered into when the underlying object — selling recreational marijuana — was illegal, and ‘where the object or the consideration of the agreement is illegal — 'the entire contract is void,'’” Fisher and Williams explain. “Importantly, the court reaffirmed that the proper time to assess the illegality of a contract is when the contract was executed — here, 2014, when marijuana was illegal — and not at the time of the lawsuit.”

“Undoubtedly, Metsch will not be the last word on the issue. It is easy to imagine another court retroactively applying laws legalizing marijuana and validating previously invalid contracts. Indeed, by choosing not to publish its decision, the appellate court left the door open for other courts, or even the same court, to come to a different result the next time this issue arises.”