Agency – Liability of Principal for Termination of Agents Employment

In the summer of 1949, appellant entered into an oral contract for an indefinite time with the appellee whereby the former was granted an exclusive wholesale distributorship of appellee’s farm and garden equipment. A four-year period followed in which appellant increased the number of dealers in appellee’s product from four or five in 1949 to over one hundred in 1953. In the latter part of 1952 appellant contemplated an enlargement of its facilities which would require it to enter upon a fifteen-year lease. Since the lessor desired some assurances as to the duration of appellant’s franchise, appellant wrote to appellee asking for such assurance and setting forth the intended lease arrangement. In its reply, appellee gave no definite assurance of the permanency of the distributorship arrangement, but did express its belief in a continuation of the relationship. Appellant executed the lease. In September 1953 appellant undertook to sell equipment that appellee considered to be in competition with its products. The distributorship contract was canceled, and appellee took over the territory and distributed its products through many of the dealerships that had been established by the appellant. Appellee sued to collect on an open account, and appellant counterclaimed for damages for unlawful cancellation of its contract. A jury awarded appellant damages, but the district court rendered judgment n.o.v. for the appellee. On appeal, held, reversed and remanded for jury determination. The manufacturer may not terminate the agreement at will, even though the contract contains no provision for its termination, but must retain the agent in employment for a reasonable period of time. Allied Equipment Co. v. Weber Engineered Products, (4th Cir. 1956) 237 F. (2d) 879.