Metz Beverage Co. v. Wyoming Beverages, Inc.
2002 WY 21, 46 U.C.C. Rep. Serv. 2d (West) 955, 39 P.3d 1051 (2002)
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Rule of Law:
Under the Uniform Commercial Code, an oral contract for the sale of goods that is indefinite in duration is not terminable at will as a matter of law if the parties' course of dealing and communications create a genuine issue of material fact that they had 'otherwise agreed' to a for-cause termination provision.
Facts:
- In 1967, Metz Beverage Company (Metz) and Wyoming Beverages, Inc. (Wyoming Beverage) entered into an oral agreement of indefinite duration for Metz to distribute Pepsi products in northeast Wyoming.
- The business relationship was profitable and amicable for approximately 30 years.
- Between 1990 and 1994, the parties unsuccessfully attempted to negotiate a written contract; Metz sought a long-term agreement terminable only for cause, while Wyoming Beverage proposed a short-term, renewable contract.
- During the 1990s negotiations, Forrest Clay of Wyoming Beverage sent several letters to Metz expressing dissatisfaction with performance and stating that failure to correct specific problems would result in termination of the oral agreement.
- In May 1996, Buster Metz, who had originally formed the agreement, passed away.
- On June 12, 1997, Wyoming Beverage sent a letter to Metz stating its belief that the oral agreement was terminable at will and giving notice of termination effective October 1, 1997.
- In October 1997, Wyoming Beverage terminated the agreement and took over direct distribution of its products in the territory previously served by Metz.
Procedural Posture:
- Wyoming Beverage filed a declaratory action in the district court (trial court) seeking a resolution of its business relationship with Metz.
- Metz filed a counterclaim against Wyoming Beverage, asserting claims for breach of contract, fraud, and unjust enrichment.
- The district court granted Wyoming Beverage's motion for summary judgment, dismissing Metz's claims for breach of contract, fraud, and unjust enrichment.
- Metz, as the appellant, appealed the district court's order granting summary judgment to the Wyoming Supreme Court, with Wyoming Beverage as the appellee.
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Issue:
Under Wyoming's version of the UCC, § 34.1-2-309, is an oral distributorship agreement of indefinite duration terminable at will as a matter of law, or can a genuine issue of material fact be raised that the parties had 'otherwise agreed' to a for-cause termination provision through their course of dealing and communications?
Opinions:
Majority - Brooks, District Judge.
No. An oral distributorship agreement of indefinite duration is not terminable at will as a matter of law where there is sufficient evidence to create a factual question for the jury as to whether the parties had 'otherwise agreed' that termination could only be for cause. The court reversed summary judgment on the breach of contract claim, finding that a genuine issue of material fact existed regarding the contract's termination terms. Wyoming Beverage's letters conditioning termination on Metz's failure to improve performance created a reasonable inference that the agreement was terminable only for cause. This inference was further supported by draft agreements containing notice and cure provisions and by testimony admissible under the Dead Man's Statute. However, the court affirmed summary judgment for Wyoming Beverage on the fraud and unjust enrichment claims. The fraud claim failed because the letter cited by Metz was a qualified expression of desire, not a fraudulent misrepresentation, and was made three years before termination. The unjust enrichment claim failed because Metz could only recover for the loss of its business goodwill if it proved an enforceable contract existed, making the claim dependent on the success of the breach of contract claim.
Analysis:
This decision clarifies the scope of the 'unless otherwise agreed' exception to the UCC's default rule that contracts of indefinite duration are terminable at will. The court established that an agreement for 'for-cause' termination need not be explicit and can be inferred from the parties' entire course of dealing, including correspondence and even unexecuted draft agreements. This ruling makes it more difficult for a party to a long-term, informal distributorship to terminate the relationship without cause by simply invoking the at-will default rule. It empowers the terminated party to use the history of the relationship as evidence to get to a jury on the question of whether an implied for-cause term existed, thereby increasing the legal risk for the terminating party.
