I drafted a contract that included a written notice to terminate the agreement. The two of us signed the contract, but he never perfected it by buying what he said he would, also provided for in the contract. He bought about 1/2. We told him there was never any agreement because he did not live up to his end of the bargain and I entered into another agreement with someone else in the same territory.

The first guy has now hired a lawyer and the lawyer said I am liable because I treated him like a terminated dealer without ever actually terminating him (via a letter). I contend there was never any agreement because he never did what the contract specified.

Who is right?

It's my opinion that his attorney is right. The two of you had a valid contract. It was signed and had been partially completed. Since he did not complete his performance you were obligated to give him written notice that he was in default of the contract and that you were terminating the agreement.

A default in performance of a contract does not mean that the contract never existed. It merely means that the non-defaulting party has the right to terminate. The contract that you drafted provided that written notice was required in order to terminate.