A garage door manufacturer and a garage door distributor entered into an oral exclusive distribution agreement, but the manufacturer terminated without advance notice when sales declined. The trial court entered a motion for summary judgment on the grounds that the agreement was not for the sale of goods and there was no expectation of reasonable notice.
Rules of law
A contract which is primarily about the sale of goods is a sale of goods contract. Under U.C.C. §2-309, termination of a contract of indefinite duration requires reasonable notification unless the parties otherwise agree.
The manufacturer argued that the agreement was a distribution arrangement rather than a goods contract, and so the U.C.C. should not apply. It argued that under the common law an agreement of indefinite duration can be terminated at will by either party.
The distributor argued that the contract was for the sale of goods and argued that under a sale of goods contract they were entitled to reasonable notice.
The Kentucky Court of Appeals ruled that the Uniform Commercial Code clearly applied to a case where the essential arrangement was the sale of goods even though the agreement could be termed a “distribution” arrangement. It ruled that the trial court erred in granting summary judgment on the question of reasonable notice.