Lowe’s wins in supplier contract dispute

Afederal court in North Carolina has ruled in favor of LG Sourcing, the offshore sourcing division of Lowe’s, in a dispute over a canceled contract that left a supplier holding large quantities of laminate flooring.

A summary of the decision, published in the North Carolina Lawyers Weekly, explained that the contract between Berry Flooring NV and LG Sourcing Inc. was based on a “master standard buying agreement” (MSBA), originally signed in 2005, that automatically renewed annually unless it was canceled by either party. The contract did call for a 60 days notice of cancellation, however.

In April 2008, Lowe’s notified Berry Flooring that it would be terminating the contract as of June 1, 2008. The manufacturer had already purchased large quantities of the materials needed to make laminate flooring for Lowe’s, factoring in timely delivery and the time needed to ship the product from Chinese factories to the United States. Because of this, the supplier did not routinely work with purchase orders from Lowe’s.

When Lowe’s canceled the MSBA, Berry Flooring was left with finished laminate flooring with “Lowe’s-specific designs,” according to the court summary, as well as large quantities of other component materials that could not be reused in other flooring lines.

The U.S. District Court, Western District ruled that, although Lowe’s did not give the required 60 days notice, the MSBA did not require the retailer to buy any particular amount of laminate flooring during a given year. In fact, the MSBA did not require the defendant to buy any flooring at all.

“The MSBA is too indefinite to be enforced as a contract unless and until these missing terms (price and quantity) are supplied by a purchase order,” the court wrote.

Lowe’s motion to dismiss Berry Flooring’s breach of contract claim was granted.