What to do if I signed a contract 2 1/2 years ago as a distributor for a company with the clause that it would automatically renew every 6 months?

I have had several issues with them sending faulty product and not providing information I need to sell their product. They are now claiming that I misrepresented the product and have terminated the agreement effective immediately and now want all of my contact and prospective leads info as stated in the contract. How much recourse do they really have? Do I have? They have made the email address I had through them unavailable to me – most of my correspondence with clients is there. They are also holding me responsible for a balance due (this was a defective product).

Asked on May 21, 2012 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Contracts are enforceable against both parties; also, all contracts have what is known an "implied covenant of good faith and fair dealing," which obligates the parties to a contract to not try to impair the other's ability to fulfill or benefit from the contract. Therefore, if they were providing you with defective product, that could easily be their breach of the actual contract (you are not getting saleable product) and of the implied covenant. Accordingly, if they provided you defective products, they likely cannot terminate your contract and you may be entitled to compensation.

On the other hand, if the product was in fact saleable but you claimed to customers  it was not, that could be your breach of the agreement, entitling them to terminate and exercise and rights or remedies the contract gives them for breach.

Therefore, the exact facts, and also the precise language of the contract, is critical to determining your and the company's respective rights. There is no way to answer your question in the abstract; you need to consult with an attorney with business litigation or dispute experience, who can review the situation and contract in depth with you, so as to determine what rights and recourse you may have.


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