Rico Industries, Inc. v. TLC Group, Inc.
6 N.E.3d 415
Ill. App. Ct.2014Background
- Rico Industries (principal) and TLC Group (sales rep) entered a written exclusive sales-representation agreement for Wal‑Mart on December 17, 2007; the agreement is brief and grants termination only by written mutual agreement.
- Rico sent a September 24, 2012 letter asserting it could unilaterally terminate because the mutual-consent clause creates a perpetual, unenforceable contract; Rico filed for declaratory relief the same day.
- TLC stopped paying commissions after the dispute and pleaded five counterclaims, including breach, accounting, quantum meruit, and claims under Arkansas and Illinois sales‑representative statutes.
- The trial court granted TLC’s section 2‑615 motion for judgment on the pleadings on Rico’s count challenging enforceability, finding the mutual‑consent clause created an objective terminating event; Rico obtained Rule 308 certification of the question for interlocutory appeal.
- The certified question asked whether a sales‑rep agreement terminable only by express written consent of both parties contains a specific objective event making its duration definite and not terminable at will.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a contract terminable only by written mutual consent is sufficiently definite (not a perpetual contract) | Rico: clause creates an indefinite/perpetual contract contrary to Illinois public policy → therefore terminable at will | TLC: mutual consent is an objective terminating event; the contract is not indefinite and is enforceable as written | No — a clause making termination contingent solely on mutual written consent does not supply an objective, ascertainable terminating event; such a contract is indefinite and terminable at will |
Key Cases Cited
- Jespersen v. Minnesota Mining & Manufacturing Co., 183 Ill. 2d 290 (1998) (Illinois Supreme Court: contracts of indefinite duration are generally terminable at will and perpetual contracts are disfavored)
- R.J.N. Corp. v. Connelly Food Products, Inc., 175 Ill. App. 3d 655 (1988) (contract language tying duration to one party’s continued performance is indefinite and thus terminable at will)
- Donahue v. Rockford Showcase & Fixture Co., 87 Ill. App. 2d 47 (1967) (agreement terminable only by mutual consent is indefinite in duration absent a separate, ascertainable condition of termination)
- Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52 (2006) (courts uphold freedom of contract; party challenging enforceability bears a heavy burden because public policy voids are narrowly applied)