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the parties concerning this Initial Award and supersedes all earlier discussions, agreements and
representations regarding this Initial Award.”
Druckzentrum sought to get around the merger clause with an argument that the contract could not in
fact be treated as the entire agreement because it explicitly referenced certain extrinsic materials. This
led to the court’s ruling that a contract’s express incorporation by reference of certain material implied that
other, unmentioned extrinsic agreements were not part of the contract.
Moreover, the court said the alleged exclusivity term was allegedly “one of the key benefits of the
deal” and “[i]f the parties truly contemplated that Motorola was making such a critical
promise, they certainly would have included it in the written contract.” Accordingly,
evidence of the alleged exclusivity promise was properly excluded under § 2-202 of the
Uniform Commercial Code (810 ILCS 5/2-202) and comments thereto.

Druckzentrum next argued that the contract was ambiguous, but the court said it
was not ambiguous on the points at issue. “[C]ontractual ambiguity may allow
consideration of extrinsic evidence to clarify those portions of the contract that are
unclear,” it said. “But it does not warrant a conclusion that the contract is not fully
integrated such that evidence of prior agreements can be used to import entirely new
terms” (court’s emphasis).
The court then dealt with the argument that Motorola had breached the contract by consolidating
operations in China. Noting that the contract only promised a good-faith effort to purchase 2% of
Motorola’s printing from the German firm, the court said bad faith occurs when “a provision [is] invoked
dishonestly to achieve a purpose contrary to that for which the contract had been made.” Finding no
evidence of such bad faith by Motorola, the court rejected the claim of a breach of the good-faith effort
clause.
Druckzentrum next argued there had been fraud in the inducement because during the price-
negotiation stage Motorola issued updated forecasts in a format different from earlier sales projections,
and the format change made comparison difficult. The court said the duty to disclose newly acquired
information does not include a duty to use exactly the same format for the disclosure.
Seller’s Duties Under Exclusive Contract Limited

The best-efforts obligation implied in an otherwise-silent exclusive-distributorship contract apparently
does not require the supplier to “police all his distributors in order to make sure that none of them sell in
any territory in which the supplier has created an exclusive distributorship”, according to a recent Seventh
Circuit Court of Appeals opinion.

The observation in TMG Kreations, LLC v. Seltzer, 771 F.3d 1006 (7th Cir. 2014), is arguable dicta
because the court ultimately ruled that the objecting party had failed its burden of proving an implicit term
limiting non-Japanese distributors from reselling in Japan. However, look for it to be cited as controlling
because if the common-law duty extended to resales it presumably would have constituted an “implicit
term” under the later portion of the opinion.

Brenda\SharpThinking\#126.pdf
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