Opinion
No. 345512
02-11-2020
CADILLAC RUBBER & PLASTICS, INC., doing business as Avon Automotive, and Avon Automotive Holdings, Inc., Plaintiffs-Appellants, v. TUBULAR METAL SYSTEMS, LLC, Defendant-Appellee.
Miller Johnson (by Patrick M. Jaicomo and Christopher J. Schneider, Grand Rapids) for Cadillac Rubber & Plastics, Inc., doing business as Avon Automotive, and Avon Automotive Holdings, Inc. McDonald Hopkins PLC, Bloomfield Hills (by Timothy J. Lowe and Mark W. Steiner ) for Tubular Metal Systems, LLC.
Miller Johnson (by Patrick M. Jaicomo and Christopher J. Schneider, Grand Rapids) for Cadillac Rubber & Plastics, Inc., doing business as Avon Automotive, and Avon Automotive Holdings, Inc.
McDonald Hopkins PLC, Bloomfield Hills (by Timothy J. Lowe and Mark W. Steiner ) for Tubular Metal Systems, LLC.
Before: Fort Hood, P.J., and Sawyer and Shapiro, JJ.
Sawyer, J.
Plaintiffs (collectively referred to as "Avon") appeal from an order of the circuit court granting summary disposition in favor of defendant under MCL 2.116(I)(2) (opposing party, rather than moving party, entitled to immediate judgment). We affirm.
Avon is a supplier of automotive parts, supplying hoses to defendant (Tubular), which in turn uses the hoses in producing parts for General Motors. Tubular issued two blanket purchase orders to Avon, one in 2012 and the other in 2016. Both purchase orders provided that Tubular would release material requirements each week. The orders further incorporated by reference Tubular's terms and conditions of purchase, which were posted online. Paragraph 4(b) of those terms and conditions is particularly relevant to this case, stating:
If the face of the Order ... specifies the quantities as ... "blanket order", ... then, in consideration for ten US dollars (US$10.00), the payment of which shall be made by Buyer upon the termination or non-renewal of this Order, Seller grants to Buyer an irrevocable option during the term of this Order to purchase Supplies in such quantities as determined by Buyer and identified as firm orders in material authorization releases, manifests, broadcasts or similar releases ("Material Authorization Releases") that are transmitted to Seller during the term
of this Order ... provided that Buyer shall purchase no less than one piece or unit of each of the Supplies and no more than one hundred percent (100%) of Buyer's requirements for the Supplies. All references herein to "this Order" shall include any Material Authorization Releases....
Additionally, ¶ 2 of the terms and conditions stated that the contract was "for the life of the program initiated by Buyer's Customer," identifying General Motors’ Epsilon program as the relevant program.
Beginning with the 2012 purchase order, Tubular issued weekly material authorization releases to Avon, listing the quantity of parts needed and a reasonable forecast of future requirements. Avon fulfilled those releases with the required parts. In 2018, Avon filed this action seeking declaratory judgment and damages for breach of contract. Under the purchase orders and Tubular's terms and conditions, Tubular is only obligated to purchase the quantity of parts set forth in its material authorization releases. According to Avon, "[t]his ‘per releases’ quantity term creates a series of spot-buy (also called fixed-quantity) contracts, not a requirements contract." Therefore, Avon asserted that it had the right to accept or reject each material authorization release issued by Tubular. Avon further claimed that the "irrevocable option" allegedly created by ¶ 4(b) of Tubular's terms and conditions "is invalid and/or not binding on Avon because it is on Tubular's form and Avon did not separately sign the portion of the form that contains the alleged firm offer. MCL 440.2205." Avon requested a judgment declaring that the blanket purchase orders are not requirements contracts, the alleged "irrevocable option" in Tubular's terms is invalid or unenforceable, and Avon has the right to reject any material authorization release that Avon has not yet accepted. Avon also asserted that Tubular had breached the parties’ contracts by requiring Avon to supply Tubular's requirements of the parts.
Simultaneously with filing this action, Avon moved for summary disposition under MCR 2.116(C)(9) and (10). Avon argued that it was entitled to a declaratory judgment as a matter of law, that Tubular's terms and conditions do not create a requirements contract, and that the alleged irrevocable option in Tubular's terms and conditions is invalid. Tubular filed a response to Avon's motion and requested summary disposition in favor of Tubular under MCR 2.116(I)(2). Tubular argued that an enforceable requirements contract existed between the parties in light of the blanket purchase orders, Tubular's terms and conditions, the material authorization releases, and the parties’ ongoing relationship since 2012. Tubular further argued that an enforceable option contract existed.
Following a hearing, the trial court issued a written opinion and granted summary disposition in favor of Tubular. Avon now appeals, and we affirm.
This Court provided the applicable standard of review for summary disposition under MCR 2.116(I)(2) in Lockwood v. Ellington Twp. , 323 Mich. App. 392, 400-401, 917 N.W.2d 413 (2018) :
We review a trial court's decision regarding a motion for summary disposition de novo. Lowrey v. LMPS & LMPJ, Inc. , 500 Mich. 1, 5-6, 890 N.W.2d 344 (2016). A motion for summary disposition brought under MCR 2.116(C)(10) "tests the factual sufficiency of the complaint," Shinn v. Mich. Assigned Claims Facility , 314 Mich. App. 765, 768, 887 N.W.2d 635 (2016), and should be granted when "there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law," West v. Gen. Motors Corp. , 469 Mich. 177, 183, 665 N.W.2d 468 (2003).
"The moving party has the initial burden to support its claim for summary disposition by affidavits, depositions, admissions, or other documentary evidence." McCoig Materials, LLC v. Galui Constr., Inc. , 295 Mich. App. 684, 693, 818 N.W.2d 410 (2012). The court must consider all of the admissible evidence in a light most favorable to the nonmoving party. Liparoto Constr., Inc. v. Gen. Shale Brick, Inc. , 284 Mich. App. 25, 29, 772 N.W.2d 801 (2009). However, the party opposing summary disposition under MCR 2.116(C)(10) "may not rely on mere allegations or denials in pleadings, but must go beyond the pleadings to set forth specific facts showing that a genuine issue of material fact exists." Oliver v. Smith , 269 Mich. App. 560, 564, 715 N.W.2d 314 (2006) (quotation marks and citation omitted). "A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." Bahri v. IDS Prop. Cas. Ins. Co. , 308 Mich. App. 420, 423, 864 N.W.2d 609 (2014) (quotation marks and citation omitted).
If, after careful review of the evidence, it appears to the trial court that there is no genuine issue of material fact and the opposing party is entitled to judgment as a matter of law, then summary disposition is properly granted under MCR 2.116(I)(2). Holland v. Consumers Energy Co. , 308 Mich. App. 675, 681-682, 866 N.W.2d 871 (2015), aff'd Coldwater v. Consumers Energy Co. , 500 Mich. 158 (2017).
Additionally, the proper interpretation of a contract is a question of law which we also review de novo. Schmalfeldt v. North Pointe Ins. Co. , 469 Mich. 422, 426, 670 N.W.2d 651 (2003). "If the contractual language is unambiguous, courts must interpret and enforce the contract as written, because an unambiguous contract reflects the parties’ intent as a matter of law." In re Smith Trust , 480 Mich. 19, 24, 745 N.W.2d 754 (2008).
Avon first argues that the trial court erred by rejecting Avon's argument that the firm offer contained in Tubular's terms and conditions is not enforceable because Avon had not separately signed that document as required by MCL 440.2205. We disagree.
MCL 440.2205 provides:
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed 3 months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
We agree with the trial court that the separate-signature requirement only applies when no consideration is given for the firm offer. The language clearly and unambiguously establishes a limitation on the length of time that an offer may be considered irrevocable if the firm offer is not supported by consideration—for the stated time, or a reasonable time if there is no stated time, but not for more than three months. In this case, the firm offer was supported by consideration, specifically $10. Therefore, this provision does not apply.
This interpretation of the statutory text is supported by the official comments to UCC § 2-205, upon which MCL 440.2205 is modeled. Comment 1 states, "This section is intended to modify the former rule which required that ‘firm offers’ be sustained by consideration in order to bind, and to require instead that they must merely be characterized as such and expressed in signed writings." MCL 440.2205, comment 1. Comment 3 provides:
We recognize that the comments are not binding. This Court has explained:
Although the official comments do not have the force of law, they are useful aids to interpretation and construction of the UCC. Further, the comments were intended to promote uniformity in the interpretation of the UCC. Therefore, it is appropriate for this Court to consider the official comments when interpreting Michigan's UCC. [Prime Fin. Servs. LLC v. Vinton , 279 Mich. App. 245, 260 n. 6, 761 N.W.2d 694 (2008).]
Our Supreme Court has emphasized that because the official comments to the UCC do not have the force of law, "a reviewing court should focus first on the plain language of the statute in question, and when the language of the statute is unambiguous, it must be enforced as written." Fisher Sand & Gravel Co. v. Neal A. Sweebe, Inc. , 494 Mich. 543, 560, 837 N.W.2d 244 (2013). In Fisher Sand & Gravel Co. , our Supreme Court concluded that this Court had erroneously relied on an official comment to the UCC. Id. With this in mind, we refer to the official comments to this UCC provision only to reinforce and buttress our conclusion, which is based upon an analysis of the statutory language.
This section is intended to apply to current "firm" offers and not to long term options, and an outside time limit of three months during which such offers remain irrevocable has been set. The three month period during which firm offers remain irrevocable under this section need not be stated by days or by date. If the offer states that it is "guaranteed" or "firm" until the happening of a contingency which will occur within the three month period, it will remain irrevocable until that event. A promise made for a longer period will operate under this section to bind the offeror
only for the first three months of the period but may of course be renewed. If supported by consideration it may continue for as long as the parties specify. This section deals only with the offer which is not supported by consideration. [ MCL 440.2205, comment 3 (emphasis added).]
In addition to the nonbinding comments, our conclusion is further supported by persuasive precedent from other jurisdictions. See, e.g., In re Modern Dairy of Champaign, Inc. , 171 F.3d 1106, 1110 (7th Cir. 1999) ; in E. A. Coronis Assocs. v. M. Gordon Constr. Co. , 90 N.J. Super. 69, 73, 216 A.2d 246 (App. Div., 1966) ( UCC § 2-205 was designed to reverse the common-law rule that "an offer not supported by consideration could be revoked at any time prior to acceptance"); Realty Dev., Inc. v. Kosydar , 322 N.E.2d 328, 332 (Ohio App., 1974) ("In order to constitute a firm offer to sell, irrevocable and unnecessary to be founded on consideration , the quotation must be a ‘signed writing’ giving assurance that it will be held open for acceptance by the purchaser.") (emphasis added).
The meaning of UCC § 2-205 has similarly been explained in a treatise as follows:
Treatises are not binding authority but may be considered persuasive. Fowler v. Doan , 261 Mich. App. 595, 601, 683 N.W.2d 682 (2004).
Under the common law of contracts, it was frequently said that an offeror can always withdraw an offer if no consideration was received for it. But under the Code, 2-205 limits the offeror's right to withdraw[.]
* * *
Section 2-205 ... enables the offeror to make a "gift" of a firm offer in the sense that the offeree need not give any consideration, such as paying for the option. Section 2-205 is intended mainly to limit the power of an offeror to withdraw a firm offer if the offeree reasonably relies on the offer's firmness.... [1 White, Summers & Hillman, Uniform Commercial Code (6th ed.), § 2:35, pp. 134-135 (quotation marks and citation omitted).]
In sum, the clear and unambiguous language of MCL 440.2205 supports the conclusion that that statute is simply inapplicable when a firm offer is supported by consideration. This interpretation is further supported by various persuasive authorities. And Avon makes no argument challenging the adequacy or existence of consideration in this case. Specifically, consideration of $10 was provided for in the agreement. Avon next argues that, even if there was an enforceable firm offer, this agreement did not create a requirements contract, but rather a "spot buy" contract. Like the trial court, we reject this argument.
And, as the trial court noted, courts do not typically inquire into the sufficiency of consideration. See Gen. Motors Corp. v. Dep't of Treasury , 466 Mich. 231, 239, 644 N.W.2d 734 (2002) ("Courts do not generally inquire into the sufficiency of consideration. It has been said a cent or a pepper corn, in legal estimation, would constitute a valuable consideration.") (quotation marks, citations, and brackets omitted).
MCL 440.2306(1) provides for requirements contracts as follows:
A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
Comment 2 for this provision explains, in relevant part:
Under this Article, a contract for output or requirements is not too indefinite since it is held to mean the actual good faith output or requirements of the particular party. Nor does such a contract lack mutuality of obligation since, under this section, the party who will determine quantity is required to operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure.... [ MCL 440.2306, comment 2.]
Requirements contracts need not be exclusive. In Gen. Motors Corp. v. Paramount Metal Prods. Co. , 90 F. Supp. 2d 861, 873 (E.D. Mich., 2000), the court convincingly concluded that " MCL 440.2306 expresses a legislative intent to enforce both exclusive and non-exclusive requirements contracts." The court noted that " MCL 440.2306(2) [ ] applies a standard to ‘exclusive dealing’ that is not applicable to the class of output requirements referred to in MCL 440.2306(1)." Gen. Motors Corp. , 90 F. Supp. 2d at 873. The court stated that "[t]he statute and official comments simply do not support [the defendant's] assertion that all requirements contracts are exclusive requirements contracts; a requirements contract may exist where all or some of the purchaser's requirements are purchased from the seller." Id. at 874.
MCL 440.2306(2) provides:
A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
A requirements-contract arrangement very similar to what exists here was addressed in Johnson Controls, Inc. v. TRW Vehicle Safety Sys., Inc. , 491 F. Supp. 2d 707 (E.D. Mich., 2007). In Johnson Controls , the plaintiffs (referred to collectively as "JCI") issued purchase orders to the defendant (referred to as "TRW") for various parts for a one-year period. Id. at 709.
The purchase orders stated the specific price of each part but did not state the quantity. This was because JCI's need for parts depended on General Motor's [sic] production schedule. Accordingly, when JCI had a need for parts it would issue a material release to TRW, requesting that TRW ship a specified number of parts. JCI followed this practice, which is standard in the automotive industry and known as a just-in-time supply system, in order to maintain a minimum inventory. [ Id. ]
The court in Johnson Controls explained that such automotive supply
contracts are typically entered into with little or no negotiation and are primarily made up of carefully drafted boilerplate language. As in this case, the purchaser
will issue a purchase order for a period of time at a fixed price that incorporates Global Terms. General Motors, for example, enters into roughly one million procurement contracts every year, at a total amount in excess of $80 billion – all governed by a single contract form containing thirty-one paragraphs[.] [ Id. at 709 n. 2 (quotation marks and citation omitted).]
In Johnson Controls , JCI's purchase orders incorporated JCI's Global Terms of Purchase, which contained language substantively identical in all relevant respects to the pertinent language in Tubular's terms and conditions in the instant case. See id. at 710. In particular, JCI's Global Terms provided that, in consideration for $10,
Seller grants to Buyer an irrevocable option during the term of the Order to purchase Supplies in such quantities as determined by Buyer and identified as firm orders in material authorization releases, manifests, broadcasts, or similar releases ("Material Releases") that are transmitted to Seller during the term of the Order, and Seller will supply all such Supplies at the price and other terms specified in the Order; provided that the Buyer may purchase no less than a minimum quantity of at least one piece or unit of each of the Supplies and no more than 100% of Buyer's requirements for the Supplies.... [ Id. ]
In addressing an argument that JCI's purchase orders did not satisfy the statute of frauds, MCL 440.2201(1), the court in Johnson Controls noted that the UCC "specifically contemplates contracts with indefinite quantity terms. See [MCL] 440.2306 (defining quantity in output or requirements contracts as actual good faith output or requirements)." Johnson Controls , 491 F. Supp. 2d at 717. The court observed that the purchase orders in that case referred to JCI's material releases, which were issued periodically to specify the exact quantities of parts needed. Id. Such references in the purchase orders have "some nexus to the notion of amount or quantity in light of the customary practice in the automotive industry of using just-in-time supply chains and material releases." Id. The court explained that
MCL 440.2201(1) states:
Except as otherwise provided in this section, a contract for the sale of goods for the price of $1,000.00 or more is not enforceable by way of action or defense unless there is a writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subsection beyond the quantity of goods shown in the writing.
the quantity could be construed as simply referencing the amount of supplies indicated in the material releases. The releases are incorporated into the purchase orders via the Global Terms and JCI is not obligated to purchase anything that exceeds the amounts stated in the material releases. On the other hand, the fact that the Global Terms referenced an option to purchase goods at a fixed price so long as JCI's orders were within a specific range of amounts could indicate that JCI was to purchase its requirements. That this may have been a requirements contract seems reasonable in light of the practice among automotive suppliers to enter into long-term, just-in-time production arrangements that rely on a fixed price and a variable quantity, and provide flexibility to adjust to changing commercial conditions. [ Id. at 718 (citation omitted).]
The court thus concluded that the statute of frauds was satisfied. Id.
In the present case, the evidence indisputably establishes that the parties have a requirements contract. Tubular issued two purchase orders, one in 2012 and another one in 2016, that incorporated its terms and conditions. The purchase orders both noted, "MATERIAL REQUIREMENT WILL BE RELEASED WEEKLY." Tubular's terms and conditions likewise provided for the issuance of material authorization releases under which Tubular was obligated to purchase from Avon a quantity between one part and 100% of Tubular's requirements. The fact that Tubular was not required by the terms and conditions to purchase 100% of its requirements from Avon is not dispositive. As noted, a requirements contract need not be exclusive to be enforceable. Johnson Controls , 491 F. Supp. 2d at 720 ; Gen. Motors Corp. , 90 F. Supp. 2d at 873. We find these federal precedents persuasive and we choose to follow them.
Avon cites an unpublished lower federal court opinion concluding that "Michigan law is not well settled as to whether a requirements contract must be exclusive, i.e., whether all requirements must be purchased from the supplier and all needs of a given type directed to that supplier by the purchaser." GRM Corp. v. Miniature Precision Components, Inc. , unpublished opinion of the United States District Court for the Eastern District of Michigan, issued January 8, 2008 (Case No. 06-15231-BC), p. 9, 2008 WL 82224. The court in GRM Corp. stated that, apart from two arguably conflicting unpublished opinions of this Court, "little attention has yet been provided by the Michigan courts as to whether a requirements contract must be exclusive." Id. This Court is not bound by unpublished opinions of lower federal courts. Bartlett Investments, Inc. v. Certain Underwriters at Lloyd's London , 319 Mich. App. 54, 60 n. 2, 899 N.W.2d 761 (2017). Nor is this Court bound by unpublished opinions of this Court. MCR 7.215(C)(1). As stated above, we find persuasive the analyses in Johnson Controls , 491 F. Supp. 2d at 720, and Gen. Motors Corp. , 90 F. Supp. 2d at 873, concluding that under Michigan law, a requirements contract need not be exclusive to be enforceable. And to the extent that the GRM court was correct that Michigan law is not well settled on this point, with the publication of this opinion it now is.
It is undisputed that the parties have performed consistently with the contractual documents since 2012. Tubular has regularly issued material authorization releases setting forth the quantity of parts needed as well as a reasonable forecast of future requirements, and Avon has fulfilled those releases by providing the required parts. Avon does not claim or present evidence that Tubular has failed to comply with its obligation under MCL 440.2306(1) to act in good faith in determining its requirements.
In sum, the trial court correctly determined that the pertinent documents, including the purchase orders, Tubular's terms and conditions, and the material authorization releases, when considered together, established the existence of a requirements contract as a matter of law. The trial court properly granted summary disposition to Tubular.
Affirmed. Tubular may tax costs.
Fort Hood, P.J., concurred with Sawyer, J.
Shapiro, J. (concurring in part and dissenting in part).
I concur in the majority's conclusion that a separate, signed document was not required to create a valid irrevocable option because there was consideration for that option. However, I respectfully dissent from the majority's affirmance of the conclusion that, as a matter of law, the written agreement created a "requirements contract." I conclude that the contract language itself does not unambiguously create a requirements contract and that its status should be determined after discovery and with consideration of parol evidence.
The majority relies largely on Johnson Controls, Inc. v. TRW Vehicle Safety Sys., Inc. , 491 F. Supp. 2d 707 (E.D. Mich., 2007), and Gen. Motors Corp. v. Paramount Metal Prods. Co. , 90 F. Supp. 2d 861 (E.D. Mich., 2000). In my view, neither of those cases supports the trial court's decision that the contract can only be read as a requirements contract. Neither case concluded that the agreement in question was a requirements contract as a matter of law. To the contrary, they each found that there was an ambiguity regarding the nature of the contract and concluded that it was a question of fact to be determined after consideration of parol evidence and the parties’ past practices and dealings. See Johnson Controls , 491 F. Supp. 2d at 719-720 ; Gen. Motors Corp. , 90 F. Supp. 2d at 873.
The majority contends that Johnson Controls held that a term of "a minimum quantity of at least one piece or unit of each of the Supplies and no more than 100% of Buyer's requirements for the Supplies" meets the requirements of the UCC. I disagree with this reading of the case. Johnson Controls held that the terms were sufficient to establish a contract that did not violate the statute of frauds. Johnson Controls , 491 F. Supp. 2d at 718. However, as noted, the court remanded the case for a factual finding to determine whether "the parties’ past dealings and current course of performance ... indicate that a requirements contract was intended." Id. at 720. See also Metal One America, Inc. v. Ctr. Mfg., Inc. , unpublished opinion of the United States District Court for the Western District of Michigan, issued July 14, 2005 (Case No. 1:04-CV-431), 2005 WL 1657128 (relying on the parties’ course of performance and past dealings to find that a requirements contract existed). Similarly, in General Motors , the court held that a supply contract need not be exclusive in order to constitute a requirements contract, but it did not rule on whether the agreement at issue was a requirements contract, stating:
Construing the pleadings and evidence in a light most favorable to the plaintiffs [the non-moving buyer], it remains possible for the plaintiffs to develop a record at
trial demonstrating that the various purchase orders are in fact enforceable requirements contracts. [ Gen. Motors Corp. , 90 F. Supp. 2d at 873.]
For an agreement to unambiguously create a requirements contract it is not necessary that the agreement be exclusive, but it must define a practicable estimate or range of future requirements. "A requirements or output term of a contract, although general in language, nonetheless is, if stated in the writing, specific as to quantity...." Lorenz Supply Co. v. American Standard, Inc. , 419 Mich. 610, 615, 358 N.W.2d 845 (1984) (emphasis omitted). In Plastech Engineered Prod. v. Grand Haven Plastics, Inc. , unpublished per curiam opinion of the Court of Appeals, issued March 31, 2005 (Docket No. 252532), pp. 7-9, 2005 WL 736519, our Court held that a requirements contract need not contain an estimate of needed goods when the contract provides that the buyer will use the seller's products for "100% [of the buyer's] requirements." When the buyer's requirements will all be ordered from the seller, i.e., an exclusive arrangement, such a description is sufficiently specific even though the actual amount may vary. However, when the contract is not exclusive, it should not be read as a requirements contract absent an estimate or range of anticipated future orders. See e.g., Cyril Bath Co. v. Winters Indus. , 892 F.2d 465, 467 (6th Cir. 1989) ("[A] contract to furnish only part of the buyer's requirements along with an approximate number of the identified goods is sufficient to be a requirements contract under [the] UCC."); 1 White, Summers & Hillman, Uniform Commercial Code (6th ed.), § 4:20, p. 335 ("Where an agreement does not establish exclusivity and is otherwise silent as to quantity, the agreement is treated as an open offer to sell [or buy]."). "Because section 2-306 depends on exclusivity to determine the quantity, there can be no valid requirements contract without it.... Despite the presence of another supplier, the contract may be sufficiently ‘exclusive.’ This may occur where a purchaser agrees to purchase exclusively from a seller up to a certain quantity." Id. at p. 333.
The majority does not cite any case holding that a promise to buy between 1 unit and 100% of requirements is sufficient to create a requirements contract. Such a conclusion would severely undercut the UCC's requirements that the parties act in good faith regarding an estimate of production requirements. If a contract that is nonexclusive and that also provides no estimate of future requirements is sufficient to create a requirements contract, it is difficult to see how a party's good faith could ever be challenged. In this case, the range of requirements is nothing more than "whatever we order." If that is adequate, then a buyer could sign another nonexclusive contract with another supplier who can sell more cheaply and order 99.9% of their requirements from this alternative supplier without ever breaching the contract with the first supplier. In sum, without a baseline estimate, a nonexclusive contract does not provide sufficient information to meet the requirement that the "output or requirements will approximate a reasonably foreseeable figure." MCL 440.2306, comment 2.
It is certainly possible that the past practices and dealings between the parties establish a reasonable basis from which defendant could determine what its production requirements are likely to be, taking into account good-faith variations. See White, § 4:20, p. 334 ("Exclusivity can also be established through implication, course of dealing, or extrinsic evidence."). If so, it would constitute a requirements contract. But that conclusion cannot be made on the text of the contract alone. To determine whether the agreement is a requirements contract, factual findings must be made. See Aleris Aluminum Canada L.P. v. Valeo, Inc. , 718 F. Supp. 2d 825, 832 (E.D. Mich., 2010) (holding that where the quantity term is not clearly stated, "parol evidence is admissible to show what the parties intended as to the exact quantity.") (quotation marks and citation omitted).
If parol evidence of past practice or dealings demonstrates beyond a question of fact that there was a good-faith estimate on which the seller could generally rely, I would agree that the trial court could rule on the question in a motion under MCR 2.116(C)(10). If, however, a question of fact remains, the determination is for the fact-finder.
In my view, a promise to purchase anywhere from 1 unit to 100% of needs in a nonexclusive contract does not, in and of itself, create a requirements contract consistent with the UCC. Accordingly, I would reverse the grant of summary disposition to plaintiff and remand for further proceedings.