Law for Business 12th Edition by James Barnes,Terry Dworkin,Eric Richards

Exercise 3

CP Clare, a manufacturer of electrical components, engaged Industrial Representatives, Inc. (IRI) in April 1991 to solicit orders for its products. By fall 1994, CP Clare's sales in IRI's territory exceeded $6 million annually, a tenfold increase since IRI's engagement. CP Clare decided to take promotion in-house and sent IRI a letter terminating the agency at the end of October 1994. CP Clare gave IRI 42 days' notice (their agency agreement required only 30). The contract contained a further obligation: CP Clare had to pay IRI a commission for all products ordered before the termination date that were delivered in the next 90 days. CP Clare kept this promise. However, IRI believed it had not been paid enough for the work it did in boosting CP Clare's sales. IRI argued that the termination violated public policy because CP Clare was trying to take "opportunistic advantage" of the goodwill IRI's services created for CP Clare's products. In short, IRI felt that it had made a substantial investment in the product sales and that the anticipated future sales were now like an annuity that CP Clare wrongfully decided to capture. Has CP Clare unlawfully terminated the agency relationship?