A common necessity in the distribution of goods and services is the termination of dealers. It may be due to an existing dealer not performing adequately or otherwise no longer fitting into the distribution scheme.
Termination is fraught with risks.
Regardless of the merits of the termination decision, a dealer facing termination often resists due to his sunk investment in his product line, the difficulty he may have in picking up substitute lines or his honest belief that he has faithfully performed his obligations and termination is therefore wrong, if not illegal. The courts have upheld sellers' termination of dealers for numerous reasons. A dealer may also be terminated if it fails to adhere to its supplier's distribution restrictions, such as limitations on the markets in which it sells or the competing products it may carry. Finally, apart from any unsatisfactory conduct by the dealer, a supplier may terminate dealers in order to reorganize its distribution system. For example, a supplier may no longer wish to sell through independent dealers or may simply wish to withdraw from a particular geographic market.