Leibel v. Raynor Manufacturing Co

Brief Fact Summary. Appellant Liebel, entered into a verbal dealership agreement with Appellee Raynor Manufacturing Co. The agreement did not address duration. Appellee terminated the agreement after two years.

Synopsis of Rule of Law. Where there is a relationship of manufacturer-supplier and dealer-distributor, reasonable notice of intent to terminate an ongoing verbal agreement is required under the UCC.

Facts. Appellee entered into a verbal agreement to give Appellant an exclusive dealer-distributorship for Appellee’s garage doors. Appellee was to provide garage doors, operators, and parts to Appellant at the factory distributor price. Appellant agreed to sell, install and service only Appellee’s products. The agreement covered an area extending to a fifty mile radius from Lexington, Kentucky. Appellant borrowed a substantial amount of money to begin the business. After two years, sales of Appellee’s products appeared to be decreasing. Appellee notified the defendant that the relationship was terminated. In addition, Appellant learned there was a new dealer-distributor in the area and that any future purchases Appellee’s products would have to be made through the new dealer-distributor.

Issue. Was Appellant entitled to reasonable notice of Appellee’s intention to terminate the verbal agreement?

Held. Yes. Appellant was entitled to reasonable notice of Appellee’s intention to terminate the verbal agreement.
Transactions involving goods and merchandise fall under Article II of the UCC. The court finds that distributorships fall under Article II of the UCC.
Article II of the UCC requires that reasonable notice be given if the agreement is for an infinite duration. The Court interprets reasonable notice as relating to “the circumstances under which notice is given and the extent of advance warning” not the method by which notice is given. The Court holds that Appellee was required to give Appellant reasonable notice of intent to terminate.

Discussion. In the present case, the Court holds that the verbal dealership agreement for infinite duration required reasonable notice of intent to terminate the agreement.