Practice Updates

Federal Court Finds that OEM Purchase Order Does Not Necessarily Govern Parties’ Contract

The U.S. Eastern District of Michigan recently held that an automotive OEM’s purchase order did not, as a matter of law, govern the parties’ supply contract.   In Synergen Inc. v. FCA US LLC, case no. 16-cv-11842 (E.D. Mich. March 23, 2020), FCA US LLC had issued a request for quotation to a prospective supplier, Nartron Corporation.  Nartron responded with a detailed quotation that expressly rejected FCA’s future purchase orders.  FCA subsequently issued a purchase order that incorporated FCA’s general terms and conditions, which expressly rejected any additional or different terms.  Litigation later ensued, and FCA filed a motion for partial summary judgment declaring that its terms and conditions constitute the governing contract.  However, the Court held that it could not, as a matter of law, find that FCA’s terms and conditions controlled.  Among other things, the Court stated that a reasonable jury could conclude that the quote was the relevant offer and that the purchase order was an acceptance of that order.  The Court noted that a quotation could represent an offer “if it is sufficiently detailed and it reasonably appear(s) . . . that assent to that quotation is all that is needed to ripen the offer into a contract.”  Unlike other cases in which the quotation was a mere invitation to negotiate, the quotation at issue did not ask FCA to contact Nartron for further negotiations and instead included payment terms and a detailed schedule for performance.  The Court further stated that, even if the purchase order was a counteroffer, summary judgment would still be inappropriate because FCA had not established as a matter of law that Nartron assented to the differing terms by providing goods.  The Court noted that “assent” is a question for the trier of fact under Michigan law. 

It is important to note that this decision does not bar FCA from prevailing at trial; it only means that the Court could not find for FCA as a matter of law.  The decision is a relative outlier among cases addressing purchase orders and quotations, but it is a reminder to suppliers and legal practitioners alike that a quotation may be a relevant factor when construing the contract.  

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