C. C. Hauff Hardware, Inc. v. Long Mfg. Co.

• Decision Date: 30 June 1965
• Docket Number: No. 51786,51786
• Parties: , 19 A.L.R.3d 191 C. C. HAUFF HARDWARE, INC., Appellant, v. LONG MANUFACTURING COMPANY, a Corporation, Appellee.
• Court: Iowa Supreme Court

Page 276

136 N.W.2d 276

257 Iowa 1127, 19 A.L.R.3d 191

C. C. HAUFF HARDWARE, INC., Appellant, v. LONG MANUFACTURING COMPANY, a Corporation, Appellee.

No. 51786.

Supreme Court of Iowa.

June 30, 1965.

William R. Crary, Cedar Rapids, for appellant.

Doerr, Dower & Rehling, Davenport, for appellee.

LARSON, Justice.

The appellant, C. C. Hauff Hardware, Inc., hereafter referred to as Hauff, is a corporation located at Merrill, Iowa, engaged in wholesale and retail hardware and implement business. The appellee, Long Manufacturing Company, a corporation hereafter referred to as Long, is a manufacturer of farm machinery with its principal place of business in Tarboro, North Carolina.

In May, 1960, Hauff's manager and a representative of Long met to discuss Long's desire to establish a distributorship in western Iowa. Under an oral agreement, which was to continue indefinitely, Hauff was to sell and obtain dealers for Long's elevators, bale conveyors and augers, in 22 specified western Iowa counties, and was to receive the normal distributor's discount of 20/20 off the list price. Long agreed neither it nor anyone acting on its behalf would sell those products in that territory, and while Hauff did not agree to purchase any definite amount of machines or parts, Hauff understood it was to promote the merchandise, get as many retailers as possible in the territory, and service them. An $8,000.00 order for machines and parts was placed at once and there was an additional order within three months of approximately $12,000.00. During the period from May, 1960, until June 1, 1961, Hauff had obtained and sold goods to 33 dealers and expended certain amounts in promotional endeavors.

On or about June 1, 1961, Long advised Hauff that it was placing its own salesmen in the territory, would not sell to it under distributor prices except on parts necessary to make equipment on hand complete, and was at that time terminating the prior agreement.

Hauff asked Long to take back the inventory it had on hand, which it first agreed to do and then upon reconsideration refused because the parts and equipment were then obsolete. However, Long did obtain a buyer for some of the inventory and owes Hauff some $4,104.72 for same. The stock remaining in Hauff's hands consisted of repair and replacement parts only usable by Long distributors and is only of junk value otherwise.

In its action for damages Hauff alleged breach of the agreement to sell the machinery and parts at the agreed discount, breach of the agreement not to sell direct to dealers in that territory, and termination of the agreement without reasonable prior notice to Hauff. Damages were claimed for expenses of promotion and territorial development, loss of profits, and refusal to take back all the Long equipment and parts on hand June 1, 1961.

The trial court held that, although no notice of termination was given prior to termination, as a matter of law such a notice was unnecessary, that the reasonable notice requirement meant only that the contract was to exist for a reasonable length of time, that thirteen months was such a time, and that there was no liability for the alleged breach of contract. However, the court did find that, since Long in effect took back $4,104.72 worth of stock and sold it to its dealer in Minnesota, it was indebted to Hauff for that amount, not as damages but as an admitted debt.

Appellant's appeal raises the questions: (1) Did Long breach the oral exclusive distributorship contract by discontinuing the relationship with Hauff without giving Hauff prior reasonable notice thereof? (2) If so, what is the measure of damage? The answer to the first question is in the affirmative, and since appellant has abandoned its claim for loss of profits, the measure of damages must be confined to promotional expenses proven and the value of unusable stock left in Hauff's possession not repurchased by Long. Since the trial court erred in finding no liability except as to the account stated, we must reverse that finding and remand the case for further determination as to damages.

I. A distributorship agreement where the distributor is to make purchases, develop territory, and carry stock of the manufacturer for an indefinite period of time, may not be terminated without notice or fault of the distributor, and if it is so terminated, damages are recoverable for the breach. Des Moines Blue Ribbon Distrib. v. Drewrys Ltd., U.S.A., Iowa, 129 N.W.2d 731, 737, and citations. The rule in this jurisdiction, we said therein, was that when no time limitation appears in such a contract, it is regarded as terminable by either party on reasonable notice, citing Hess v. Iowa L., H. & P. Co., 207 Iowa 820, 826, 221 N.W. 194, and citations; 17A C.J.S. Contracts (1...