Unreported / Non-Citable
Background
Quick Dispense and Nestlé Professional entered a three-year distribution agreement covering products, customers, territory, payments, reporting, and equipment. Nestlé timely gave notice that it would not renew and would sell directly after expiration. Quick Dispense nevertheless alleged that the parties formed an implied contract to renew because Nestlé kept selling product through Quick Dispense dispensers and Quick Dispense continued servicing its equipment.
After several amended complaints, the federal district court dismissed the implied-contract claim without leave to amend. Quick Dispense argued that the parties’ post-expiration conduct and a later Nestlé letter objectively showed continuation of the full distribution relationship.
The Court’s Holding
The Ninth Circuit affirmed. A contract implied in fact still requires mutual agreement and an intent to promise, shown through objective conduct. Continuing only isolated parts of a broad expired arrangement did not plausibly show agreement to renew all of its many obligations. The complaint did not allege continued ordering, weekly payments, sales incentives, or the extensive reporting the written deal required.
Conduct alleged to violate the expired agreement also did not demonstrate assent to renew it. And Nestlé’s later letter invoked a provision that expressly survived termination for one year, so reliance on that surviving term did not acknowledge renewal. Without facts supporting the existence of an implied contract, the breach claim failed.
Key Takeaways
- An implied renewal requires conduct objectively showing agreement to continue the contract, not merely a residual business relationship.
- Courts compare post-expiration performance with the agreement’s full set of material duties.
- Alleged breaches of an expired agreement ordinarily do not prove assent to renew it.
- Enforcement of an express survival clause is evidence that the old contract expired, not necessarily that it continued.
Why It Matters
California companies that keep doing business after a contract ends should document whether they are operating under a short transition, surviving clauses, or a renewed agreement. Parties claiming implied renewal need detailed allegations showing bilateral performance of material terms. A few continuing activities will rarely recreate a complex distribution contract wholesale.