Three Neighbours, One Distribution Territory, and an Email They Regretted

The situation

Before they called our office, Wael had already sent a reply to the manufacturer's regional manager pushing back on the termination notice line by line, arguing that the volume figures had only ever come up in conversation and were never something the three of them had agreed to as binding. It felt like the right response at the time. It was not. The email, written quickly and defensively, made several claims about what had and had not been discussed that did not match records the three of them had generated themselves months earlier, and by the time they realized that, the email had already been read by the manufacturer's regional counsel.

Wael, a chiropractor, and Bassam, an optometrist, were neighbours in Kitchener who had gone into a distribution territory together several years earlier as a side investment, bringing in a third neighbour, Obi, to help manage day-to-day operations while the other two kept their practices running. The territory covered a mid-sized product line sold to independent retailers across the region, and the three of them had built it into a steady, if modest, source of income on top of their professional work, splitting the profits three ways after Obi's time was compensated separately as the one actually running the operation.

The manufacturer's regional office sent formal notice that it intended to terminate the distribution agreement, citing a pattern of missed quarterly volume targets over the preceding year. The written agreement itself set out general performance expectations but did not attach specific numeric targets as a schedule. Those numbers, it turned out, had been introduced later, in a series of calls and emails between Obi and the manufacturer's account manager, and treated informally by both sides as the benchmark going forward, without either side ever circling back to put the arrangement into a signed amendment.

The three of them were frustrated for a straightforward reason: they did not believe the numeric targets had ever become part of the actual contract, and they were right that the written agreement did not incorporate them formally. What they had not accounted for was that their own records, taken together, told a more complicated story than the one Wael's email had tried to tell, and that the manufacturer's file on the account already contained most of what would have contradicted them.

The legal question

The core legal question was whether informal targets, discussed by email and phone but never signed as a formal amendment to the distribution agreement, could still support a termination for underperformance. A written commercial agreement generally cannot be varied just because one party mentions new numbers in an email and the other party does not object at the time. But that principle cuts both ways, and it does not mean informal communications are irrelevant.

The manufacturer's position was that the parties had, through their conduct over more than a year, effectively agreed to treat the discussed targets as the operative standard, even without a formal written amendment. Courts do sometimes recognize that a course of dealing between commercial parties can modify how a contract is understood to operate, particularly where one side has relied on that understanding and acted accordingly. Whether that had happened here depended heavily on what the actual record of communications showed, not on what either side now remembered or wanted it to show.

This is where the file became harder than it first looked. Wael's email to the manufacturer had asserted that the targets were never discussed as anything other than aspirational. Obi's own emails from the previous year, however, referred to the targets in terms that sounded like acknowledgment and even included a message apologizing for a missed quarter and proposing a recovery plan for the next one. That kind of language, written in the ordinary course of business long before any dispute existed, carries real weight, because it reflects what the parties actually understood at the time rather than what they now wish they had understood.

The legal question was not simply whether the targets were contractually binding in the strict sense. It was whether the three of them, through Obi's course of dealing with the manufacturer, had said and done enough to make an informal target functionally enforceable as the standard the manufacturer could terminate against, regardless of what the signed agreement said on paper.

What we did

1. Pulled every communication involving the three clients and the manufacturer, not just the recent ones. Before forming any view on strategy, we needed the full record going back to when the territory was first assigned, including the emails Obi had sent apologizing for missed quarters, because those documents would surface in any dispute regardless of whether we found them first.
2. Assessed Wael's email honestly rather than defending it. We told the three of them plainly that the email overstated their position in a way the record did not support, and that continuing to argue that line risked damaging their credibility on the parts of the dispute where they were actually right, which is a common and avoidable mistake when a client responds to a legal notice before getting advice.
3. Reviewed the written distribution agreement clause by clause. The agreement's actual termination provisions required a level of formality for amending performance standards that the manufacturer's informal target-setting had not followed, which gave us a genuine textual argument independent of the awkward emails and independent of anything Wael had already said to the regional manager. That argument became the anchor for the whole negotiation, because it did not depend on anyone's memory of a phone call.
4. Drew a clear line between acknowledging a target and agreeing to be bound by it. We built the response around the distinction between Obi expressing regret about a missed number in a business relationship, which is ordinary and expected, and the three clients formally accepting that number as an enforceable contractual standard, which the written agreement never recorded and which no signed amendment ever confirmed.
5. Sent a corrective response withdrawing the overstated claims. Rather than let Wael's initial email stand as the clients' position, we sent a follow-up that acknowledged the informal discussions had occurred while maintaining, on the strength of the agreement's own amendment requirements, that they had never been formally incorporated into the enforceable terms of the contract. Correcting the record early mattered more than it might have looked, since an uncorrected overstatement tends to harden into the position a court assumes you actually hold.
6. Modelled the manufacturer's likely litigation exposure alongside the clients'. We walked the three of them through what a termination fight would actually cost on both sides, including the manufacturer's own risk in relying on an informal target it had never bothered to formalize, to frame the negotiation around mutual interest rather than only the clients' fear of losing the territory.
7. Proposed a written amendment going forward instead of contesting the past. Recognizing that a drawn-out fight over what had already happened served no one, we proposed formally documenting agreed targets for the coming year, which gave the manufacturer the certainty it wanted without requiring an admission about the prior period from any of the three clients. That forward-looking framing turned an adversarial notice into an ordinary contract negotiation both sides could live with.
8. Negotiated directly with the manufacturer's regional counsel before any claim was filed. Getting ahead of formal proceedings meant the dispute could be resolved as a contract negotiation rather than as litigation, which mattered given the exposure a termination and any related claim could have created for all three clients individually, not just for the territory as a business, and it kept legal costs to a fraction of what a contested claim would have run.

The outcome

The manufacturer did not proceed with the termination. Instead, the parties signed a short written amendment setting out specific quarterly targets for the coming year, along with a defined process for reviewing performance before any future termination could be considered. That written amendment was the piece that had been missing from the relationship from the start, and its absence was what had allowed the dispute to happen in the first place, since neither side had ever been forced to say precisely what they expected of the other in a document both had signed.

Reaching that point meant the three clients gave up the argument they had originally wanted to make, that the targets had never mattered at all. The record did not support that position, and pressing it would likely have weakened their credibility on the argument that did have real force, which was that no formal amendment process had ever been followed. Accepting written targets going forward was, in effect, a concession that some standard should apply, in exchange for the manufacturer dropping the termination entirely and agreeing that the prior year's shortfall would not be held against the territory going forward.

Because the matter was resolved before any statement of claim was filed, the three clients avoided the cost and disruption of formal litigation entirely, along with the risk that a drawn-out dispute over the missed targets could have exposed each of them, individually, to further claims tied to the territory's ongoing operations. Wael's initial email never became part of a formal record beyond the correspondence itself, which meant it did not end up shaping how a court would eventually see the case.

The distribution territory continued under clearer terms than it had operated on before, which left Wael, Bassam, and Obi in a stronger position than the one they were in when the termination notice first arrived. Obi, who managed the account day to day, now has a defined annual review process to work from instead of an informal understanding that could be reinterpreted whenever the relationship became strained, which has already made the following year's performance conversations noticeably less tense.

What you can learn from this