Sally Beauty Co. v. Nexxus Products Co

Brief Fact Summary.

The Plaintiff, Sally Beauty Co. (Plaintiff) sued the Defendant, Nexxus Products Co. (Defendant), for breach of contract and the Defendant argued that the assignment of the contract to the Plaintiff was invalid.

Synopsis of Rule of Law.

A duty of performance under an exclusive distributorship may not be delegated to a competitor in the marketplace without the obligee’s consent.

Facts.

The Plaintiff acquired the Best Barber Beauty & Supply Company (Best). Both firms were distributors of hair care and beauty products. The Plaintiff succeeded to Best’s rights and interests in all of Best’s contracts. One such contract was with the Defendant. Said contract made Best an exclusive distributor in a certain market. The Defendant thereafter renounced its obligations under the contract when Best was merged into the Plaintiff. The Plaintiff was a wholly owned subsidiary of a direct competitor of the Defendant, Alberto-Culver company. The Plaintiff subsequently sued for breach of contract.

Issue.

Is Best’s duty of performance under the distribution agreement delegable?

Held.

No. Under a personal services agreement, a duty is per se nondelegable. Specifically, a duty of performance under an exclusive distributorship may not be delegated to a competitor in the marketplace without the obligee’s consent. The Plaintiff is a subsidiary of a competitor of the Defendant. Despite the Plaintiff’s representation of the use of “best efforts” to promote the Defendant’s products, the Defendant should not be forced to accept performance of the distributorship agreement by the Plaintiff. Therefore, the contract was not assignable without the Defendant’s consent.

Dissent.

It is a common practice in business for manufacturers to sell their competitors’ brands. Therefore, it is unlikely that harm will be done to the defendant.

Discussion.

A contract for an exclusive distributorship cannot be delegated to a competitor without the obligee’s consent.