999 N.W.2d 335
Mich.2023Background
- MSSC (Tier‑1) and Airboss (Tier‑2) had a long supplier relationship governed by a purchase order identified as a “blanket” order plus incorporated terms; MSSC issued periodic "releases" specifying firm quantities for particular shipments.
- The blanket purchase order did not state any total quantity or any percentage/share of MSSC’s requirements that must be purchased from Airboss.
- Airboss suffered losses on several parts and notified MSSC it would stop accepting future releases unless prices were raised; MSSC sued for anticipatory breach and sought specific performance.
- Trial court granted summary disposition for MSSC, concluding the blanket order satisfied the UCC statute of frauds by operating as a requirements contract; the Court of Appeals affirmed.
- The Supreme Court reversed: it held the writings lacked the written quantity term required by the UCC, identified the agreement as a release‑by‑release contract (not a requirements contract), and overruled Great Northern Packaging to the extent it held otherwise.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the term "blanket" order alone satisfies the UCC statute of frauds (quantity term required) | "Blanket" functions as an imprecise quantity term creating a requirements contract | "Blanket" is not a quantity term; writings contain no commitment of buyer to purchase any share of requirements | "Blanket" alone is not a quantity term; Great Northern Packaging overruled to that extent |
| Whether the parties formed a requirements contract (buyer obligated to buy buyer's requirements from seller) | The blanket PO + course of dealing showed intent to form a requirements contract obligating Airboss | No written quantity/share term exists; releases bind Airboss only as to accepted releases | No requirements contract; parties entered a release‑by‑release contract governed by umbrella terms |
| Whether the UCC implied duty of good faith can supply a missing quantity term | Good‑faith duty ensures releases approximate foreseeable requirements and thus satisfies statute | Good faith cannot create the written quantity term required by the statute of frauds | Implied good faith cannot supply the written quantity term; it does not convert the agreement into a requirements contract |
| Whether the 2015 "value add" communication converted the deal into a requirements contract | That email awarded Airboss the "value add for life of the program," implying MSSC’s sourcing commitment | The language concerns pricing/value‑sharing, not sourcing; it does not obligate MSSC to buy a portion of its requirements | Court reads it as pricing/value language, not a sourcing/quantity commitment; does not create a requirements contract |
Key Cases Cited
- Great Northern Packaging, Inc. v. Gen. Tire & Rubber Co., 154 Mich App 777 (Mich. Ct. App.) (previously held "blanket order" could supply quantity term; overruled to extent inconsistent with this opinion)
- In re Frost Estate, 130 Mich App 556 (Mich. Ct. App.) (quantity term must appear in writing; parol evidence cannot supply missing quantity term)
- Lorenz Supply Co. v. American Standard, Inc., 419 Mich 610 (Mich.) (UCC §2‑201 requires quantity term in writing; distinguishing distributorship from UCC sale‑of‑goods)
- Cadillac Rubber & Plastics, Inc. v. Tubular Metal Sys., LLC, 331 Mich App 416 (Mich. Ct. App.) (illustrates a valid quantity term — “between one part and 100%” — allowing use of parol evidence; distinguished here)
- Opdyke Inv. Co. v. Norris Grain Co., 413 Mich 354 (Mich.) (umbrella agreements/purchase orders can govern later contracts; a contract to make a subsequent contract may be enforceable)