On January 25, 2024, the U.S. District Court for the Eastern District of Michigan dealt another blow to automotive supply contracts that purport to be requirements contracts but in fact leave the quantity to be purchased to the discretion of the Buyer.
In Ultra Mfg. U.S.A. Inc. v. ER Wagner Mfg. Co., 2024 U.S. Dist. LEXIS 13560, Judge George Caram Steeh held that the buyer’s agreement to purchase “some portion or all of buyer’s requirements” is not a sufficient quantity term to satisfy the statute of frauds. Steeh held that this imprecise quantity term is insufficient under the Michigan Supreme Court’s 2023 decision in MSSC, Inc. v. Airboss Flexible Prods. Co. and denied the buyer’s request for injunctive relief forcing the supplier to supply at the contract price. The contract’s statement that “this is a requirements contract” did not change the result – which was that the contract was not a requirements contract, meaning the seller was not required to continue to supply parts at the contract’s price.
Purchasers of automotive components should realize that a contract purportedly allowing them to buy “any quantity” they want from a supplier may mean the supplier is not obligated to sell them any parts at any price. Wolfson Bolton Kochis attorneys have extensive experience in automotive supply chain matters, both in litigating supply questions and in drafting client terms and conditions of purchase, to avoid issues like those presented in this recent federal case.