Sally Beauty v. Nexxus

• 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

• Sally sued Nexxus for breach of the exclusive-distribution contract.
• Nexxus won a summary judgment.

Can an exclusive-distribution contract be assigned to a supplier's competitor without the supplier's consent?

Nexxus argued that while it could trust Best as a business partner, Nexxus couldn't trust Sally to distribute its products.

No. An exclusive-distribution contract can't be assigned to a competitor in the marketplace without the supplier's consent.

Affirmed

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 outcome

Article 2 of the UCC applies to distribution contracts: a party agrees to distribute a product for a manufacturer

Richard Posner dissented.