## Facts

- CP Clare, an electrical-components manufacturer, retained Industrial Representatives, Inc. (IRI), an independent sales representative, in 1991 to solicit orders in northern Illinois and eastern Wisconsin.
- The agreement had no fixed term and allowed termination on notice; it also provided that IRI would receive commissions on products ordered before termination and delivered within the next 90 days.
- Over the relationship, sales in IRI’s territory increased substantially, reaching more than $6 million annually by 1994.
- In fall 1994, CP Clare decided to move sales promotion in-house and terminated IRI with 42 days’ notice (more than the contract’s 30-day requirement).
- CP Clare paid commissions required by the contract, including the 90-day post-termination commission period for pre-termination orders.
- IRI sued, alleging CP Clare opportunistically captured goodwill and future sales created by IRI’s efforts, and sought additional commissions extending through 1999 and punitive damages.
- The district court dismissed the complaint under Rule 12(b)(6), and IRI appealed.

## Issues

1. Whether Illinois’s implied duty of good faith and fair dealing limits termination of an indefinite-duration, at-will sales-representative contract when the principal complies with express notice and commission terms but allegedly terminates “opportunistically.”
2. Whether a claim lies under the Illinois Sales Representative Act when the principal paid all commissions due under the contract, including the contract’s post-termination commission provision.

## Decision

- The Seventh Circuit affirmed the Rule 12(b)(6) dismissal.
- Because the contract was of indefinite duration, Illinois law permitted termination for any or no reason absent a contractual limitation.
- The implied duty of good faith and fair dealing could not be used to negate or alter express contract terms governing termination and post-termination commissions.
- IRI failed to state a claim under the Illinois Sales Representative Act because CP Clare paid all commissions required by the parties’ agreement; the statute did not impose additional continuing commissions beyond the contract.

## Legal Principles

- Under Illinois law, a contract with no fixed term is terminable at will by either party, absent an express restriction.
- Illinois’s implied duty of good faith and fair dealing functions as a default rule to fill contractual gaps; it does not override or contradict terms the parties expressly included.
- A party does not breach good faith by acting in its own economic interest within the contract’s bounds, including exercising an express right to terminate an at-will relationship.
- The Illinois Sales Representative Act provides remedies for nonpayment of commissions due; it enforces the parties’ commission agreement rather than creating new commission obligations beyond the contract.

## Conclusion

The court held that a terminated sales representative cannot use the implied duty of good faith or the Illinois Sales Representative Act to convert an at-will, indefinite-duration contract into a long-term entitlement to future commissions where the principal complied with the agreement’s termination and commission provisions.


Industrial Representatives, Inc. v. CP Clare Corp., 74 F.3d 128 (7th Cir. 1996)