A regional manufacturer of specialty food products based in southwestern Ontario had spent 8 years building a distribution network that extended across 5 provinces. The company began as a small-batch producer selling directly to local retailers but expanded through a combination of independent sales representatives, arm's-length distributors, and franchised retail locations that carried the company's branded products alongside complementary goods. By the time problems emerged, the network included 3 independent sales agents operating on commission in British Columbia and Alberta, 2 exclusive distributors serving Quebec and Atlantic Canada under written agreements with 5-year terms, and 12 franchised retail locations concentrated in Ontario.

The relationship with the Quebec distributor had been documented through a formal written agreement specifying exclusivity, minimum purchase volumes, and termination procedures requiring 180 days' notice. The Atlantic Canada arrangement, by contrast, had evolved from a series of purchase orders and email exchanges over 4 years without any comprehensive written contract ever being executed. One of the Alberta sales agents had been engaged through a brief letter of authorization that gave him authority to negotiate pricing and delivery terms with prospective customers but said nothing about whether he could bind the manufacturer to contracts or extend credit on its behalf.

Complications arose when a major retail chain in Alberta alleged that the sales agent had committed the manufacturer to a supply arrangement at pricing and volume terms the manufacturer had never approved. Around the same time, the Quebec distributor began missing minimum purchase targets and the manufacturer started exploring whether to terminate the relationship or transition to a different distribution model in that market. The Ontario franchise network presented its own difficulties: 2 of the franchised locations had been established before the manufacturer retained legal counsel to prepare a compliant franchise disclosure document, and 1 of those early franchisees was now raising concerns about whether the information provided before signing had met statutory requirements.

The manufacturer faced decisions about how to address the unauthorized commitments allegedly made by its Alberta agent, whether and how to terminate or restructure its Quebec and Atlantic distribution arrangements, and what exposure it might face from franchisees who had entered agreements before proper disclosure practices were in place. The documentary record was uneven—some relationships rested on detailed written contracts while others had developed through course of dealing with minimal written terms—and the manufacturer needed to understand how these different arrangements created different obligations and different risks.