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.
No Texas case addresses whether a distribution agreement is a contract for the sale of goods, but the rule in the majority of jurisdictions is that distributorships (both exclusive and non-exclusive) are to be treated as sale of goods contracts under the UCC.View Full Point of Law
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.