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Michigan Court of Appeals Holds “Exclusive” Contract Unenforceable

The Michigan Court of Appeals recently held that a contract purporting to grant a party exclusive rights to transport motor fuel was unenforceable. In Armada Oil Company LLC d/b/a AOG Trucking v. Barrick Enterprises, Inc., (No. 321636, September 22, 2015), a motor fuel hauling company claimed it entered into a written contract with a wholesale distributor to serve as the "exclusive fuel hauler" for certain supply agreements. The hauler further claimed that the parties agreed to split the resulting profits. The Court of Appeals held that even if it accepted the hauler's claims as true and assumed there was a meeting of the minds on the material terms, the contract was unenforceable for lack of consideration. Specifically, the agreement did not require the fuel hauler to do anything. "Plaintiff incurred no obligation or legal detriment that was bargained for and exchanged for defendant's alleged promises . . . . Because plaintiff made no legally enforceable promise to defendant, defendant would have no cause of action for breach of contract against plaintiff." The case is a reminder that parties must closely examine contracts that grant "exclusive" rights to ensure there is mutuality of obligation.

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