An importer entered into a partnership with another with a partnership agreement that stated that upon the desire to liquidate the partnership, the parties will work for three months to dismantle the partnership, after which the importer will be able to import exclusively certain manufacturers' products. When procedures for liquidating the partnership began, the importer took unilateral steps to take the partnership's inventory and funds and the partner sent a letter warning that he would be free from the agreement if the breaches were not fully cured. After the partnership was dissolved the partner established a company that received exclusivity from one of the manufacturers appearing under the exclusivity provision of the partnership.
The Court held that the importer's actions constituted a material breach of the partnership agreement and constitute, in practice, the emptying of the partnership from its assets and the actual prevention of the continuation of its operations during the three-month period stipulated in the agreement for carrying out the liquidation process. When the partner sent a warning letter with the requirement to cure the breaches and stated that he would otherwise be released from the agreement the agreement automatically expired and therefore the exclusivity provisions in the partnership agreement were cancelled.