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Michigan Supreme Court Landmark Decision on Automotive Supply Contracts

The Michigan Supreme Court’s recent decision in MSSC, Inc. v. Airboss Flexible Prods. Co. will have a major impact on the interpretation of contracts between suppliers and customers in the auto industry. The court ruled that a “blanket” purchase order under which the customer, MSSC, would issue releases for specific quantities of parts to its supplier, Airboss, did not create a requirements contract or an obligation on the part of Airboss to accept a release. The court stated that the term “blanket” was not a quantity term, and, without more, either on the face of the purchase order or in the general terms and conditions, did not satisfy the statute of frauds to make the contract enforceable. The “blanket” order was determined to be a release-by-release contractunder which each party was only obligated to buy and sell a specific quantity of parts if the seller, Airboss, accepted a release. The releases were essentially a series of spot buy contracts that either party could “walk away from . . . once a release was fulfilled.”

Suppliers and customers should carefully review their contracts and the terms and conditions governing them to determine whether they are requirements contracts or merely release-by-release contracts, as this distinction could prove to be significant. The experienced attorneys at Wolfson Bolton Kochis PLLC stand ready and able to assist you in navigating this significant change in Michigan law. Please contact Pete Bolton at (248) 247-7104 or [email protected].

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