SW Legal studies in Business

Absent Contract Term to the Contrary, Manufacturer Can Terminate Distributors at Will
Description Appeals court reversed a jury verdict in favor of a product distributor who was terminated for not meeting new sales quotas that were much higher than previous sales quotas. Since the contract did not specify how termination could occur, either party had the right to end the relationship with reasonable notice, which had been provided here.
Topic Contracts
Key Words Breach; Termination; Distributorsh
C A S E   S U M M A R Y
Facts Braun makes laundry equipment. Based on an oral agreement, WMTC was the distributor for Braun equipment in five states. Braun announced to all distributors an increase in annual minimum sales requirements. WMTC was told that its sales were way too low and had to triple the next year. In June of that year, Braun terminated WMTC's distributorship, contending that it was way behind in sales. WMTC sued Braun for wrongful termination of the distributorship agreement. The jury awarded WMTC $800,000 in damages. Braun appealed.
Decision Reversed. Since the agreement was based on oral discussions, there was an implied agreement. There was no termination date, hence the agreement could be terminated by either party once reasonable notice had been given. "The right of one party to terminate a contract of indefinite duration is subject only to the mildest restraint." There is a wrongful termination only in extraordinary circumstances, such as when one party has "acted maliciously and without reasonable business justification in ending the relationship." No such evidence was presented here. Braun had the right to change sales requirements for distributors. "Unless otherwise forbidden by statute or contract, a manufacturer is entitled to set quotas for the sales of its product. Indeed, brisk sales are the lifeline of a business enterprise." WMTC had been warned its sales were not adequate; Braun had the right to terminate the arrangement at will.
Citation WMTC, Inc. v. G.A. Braun, Inc., 247 F.3d 114 (4th Cir., 2001)

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