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Sally Beauty v. Nexxus
From wikilawschool.net. Wiki Law School does not provide legal advice. For educational purposes only.
| Sally Beauty v. Nexxus | |
| Court | 7th Circuit |
|---|---|
| Citation | 801 F.2d 1001 |
| Date decided | September 26, 1986 |
Facts
- Nexxus Products Co. = "Nexxus" = hair-care products producer = a company owned by Unilever in 2024 = a supplier
- In 1979, Best Barber and Beauty Supply Company ("Best") agreed to be the exclusive distributor of hair products of Nexxus in Texas
- Sally Beauty Co. = "Sally" = a subsidiary of a direct competitor of Nexxus = a distributor
- In 1981, Sally acquired Best; Sally was assigned the contracts of Best with Nexxus
- In short, Sally was distributing the products of its competitor Nexxus
- Later, Nexxus refused to allow Sally to distribute its hair products in Texas
Procedural History
- Sally sued Nexxus for breach of the exclusive-distribution contract.
- Nexxus won a summary judgment.
Issues
Can an exclusive-distribution contract be assigned to a supplier's competitor without the supplier's consent?
Arguments
Nexxus argued that while it could trust Best as a business partner, Nexxus couldn't trust Sally to distribute its products.
Holding
No. An exclusive-distribution contract can't be assigned to a competitor in the marketplace without the supplier's consent.
Judgment
Affirmed
Reasons
Judge Cudahy: Section 2-306 of the UCC compels the buyer (Sally) to use best efforts to promote the sale of goods from the supplier (Nexxus)
The law can't force Nexxus to take a huge risk of an unfavorable outcomeRule
Article 2 of the UCC applies to distribution contracts: a party agrees to distribute a product for a manufacturer
Comments
Richard Posner dissented.
Resources
