## Facts

- Corenswet, Inc. (Corenswet) was an intermediate distributor of appliances manufactured by Amana Refrigeration, Inc. (Amana).
- The parties’ relationship was governed by a written distributorship agreement.
- The agreement allowed either party to terminate the distributorship “at any time for any reason” on ten days’ notice.
- From 1969 through 1976, the relationship was successful and profitable.
- In 1976, Amana began negotiating with another distributor and did not disclose those negotiations to Corenswet.
- Amana notified Corenswet that it was terminating the distributorship and gave no reason, relying on the agreement’s termination clause.
- Corenswet sued Amana in federal district court seeking damages for breach of contract and contending the termination was wrongful because it was arbitrary (with Iowa law and the U.C.C. duty of good faith invoked as limits on termination).
- The district court found Amana’s termination “arbitrary” and issued a preliminary injunction preventing termination.
- Amana appealed the preliminary injunction.

## Issues

1. Whether an express contract term allowing either party to terminate a distributorship “at any time for any reason” on ten days’ notice may be exercised without showing cause, or whether the U.C.C. obligation of good faith limits such a termination.
2. Whether the district court properly issued a preliminary injunction barring termination when the agreement contained an unqualified termination clause.

## Decision

- The Fifth Circuit reversed the preliminary injunction.
- The court held that where the parties expressly agreed that either could terminate “at any time for any reason” on ten days’ notice, the agreement permitted termination without cause.
- The court rejected the view that the U.C.C. obligation of good faith converts an express at-will termination clause into a requirement of “good cause” or otherwise bars termination simply because it is “arbitrary.”
- Because Corenswet’s claim depended on reading a cause requirement into an unqualified termination right, Corenswet failed to show a likelihood of success warranting preliminary injunctive relief.

## Legal Principles

- When a contract unambiguously grants either party the right to terminate “at any time for any reason” upon stated notice, courts generally enforce that allocation of termination risk as written.
- The U.C.C. obligation of good faith in performance and enforcement does not, by itself, add a “good cause” condition that contradicts an express at-will termination provision.
- A preliminary injunction is improper when the movant’s theory requires rewriting a clear contract term and therefore does not demonstrate a sufficient likelihood of success on the merits.

## Conclusion

The Fifth Circuit held that Amana could rely on the distributorship agreement’s express term allowing termination “at any time for any reason” on ten days’ notice, and that the U.C.C. duty of good faith did not impose a “good cause” requirement inconsistent with that language; accordingly, the court reversed the preliminary injunction that had barred Amana from terminating Corenswet.


Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129 (1979)