Sales and Leases | 97
d. Exclusive Dealings The parties may enter a lawful agreement for exclusive dealing concerning the kind of goods that are the subject of the contract. These exclusive-dealings arrangements oftentimes involve the buyer purchasing the product exclusively from the seller for resale to third parties, acting as something of an exclusive agent. Unless otherwise agreed, any exclusive-dealing agreement requires (1) the seller to employ her best efforts to furnish the goods and (2) the buyer to use his best efforts to promote the goods’ further sale. The term best efforts means reasonable diligence . These obligations are in addition to, and distinct from, the general duty of good faith. [U.C.C. § 2-306(2), cmt. 5 (1951).] Example : A natural-gas producer contracted with a pipeline company. Under the contract, the producer would send the company all the producer’s natural gas. The company, in turn, would process the gas, sell it to third parties, and pay the producer its share of the revenues. The contract was an exclusive-dealing arrangement because the company had the sole right to process and sell the producer’s gas. Soon after, the company started receiving a good deal more gas than it had facilities to process. So, it started diverting all the producer’s gas to other pipeline companies for processing, though it diverted only a portion of other producers’ gas. The other pipeline companies defaulted on their payment obligation, causing the producer to lose revenue. On similar facts, an appellate court upheld a jury’s finding that the company did not use best efforts (reasonable diligence) to process and sell the producer’s gas. [ Adapted from Aquila S.W. Pipeline, Inc. v. Harmony Exploration, Inc. , 48 S.W.3d 225 (Tex. Ct. App. 2001).] 3. Delivery in Lots Unless otherwise agreed, the seller must tender all goods that the contract calls for in a single delivery, and only when all goods are tendered in one delivery is payment due. However, the circumstances may give either party the right to make or demand delivery in multiple lots. If so, and if the price can be apportioned, then the price can be demanded for each lot even without agreement to that effect. [U.C.C. § 2-307 (1951); 2 Hawkland UCC Series § 2-307:2, Westlaw (database updated June 2021).]
a. Buyer’s Rights if Delivery in a Single Lot Is Required but Not Made
If delivery in a single lot is required, but the seller delivers only a part or portion of the contemplated goods, then the buyer may generally reject the delivery due to nonconformity with the contract—subject to the seller’s right to cure. Or, the buyer may withhold payment until all goods are delivered. However, if the circumstances give either party the right to make or demand delivery in multiple lots, then the buyer of course cannot reject a partial delivery just because it consists of fewer than all the contemplated goods.
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