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ICYMI: Michigan Business Beat | Robert Hamor, Foster Swift – Airboss Decision Impact Decades Long Practices

December 8, 2023

Michigan Business Network

Chris Holman welcomes back Robert Hamor, Shareholder, Foster Swift Collins & Smith PC, Southfield, MI, with 6 branches across Michigan.

Watch Robert and Chris discuss the Michigan Supreme Court decision that may affect contract drafting between suppliers and buyers, in the YouTube video shared below:

Chris, and Robert review several points in this discussion:

Robert, welcome back, What is this AirBoss case we are hearing about?

How are companies dealing with the impact of AirBoss?

What industries are primarily impacted by AirBoss?

The Michigan Supreme Court issued a decision this summer which may impact decades-long customs and practices in many industries-including the auto industry-with respect to “release contracts” associated with part purchases. Because many of these types of release contracts did not include a specific quantity of parts (or otherwise identify the contract as a “requirements” contract) at the time of contracting, instead deferring to a common practice of issuing “releases” in the future, Michigan’s Supreme Court ruled that the agreement did not obligate the seller to supply the necessary parts on an ongoing basis. Instead, if the seller chose to accept the “release”, a contract was formed, and the relevant terms and conditions would apply. The practical effect of this is that the seller could refuse to provide the necessary parts under the pre-determined pricing and contractual arrangements. This ruling can upend decades-long supply chains if the relevant agreements do not comport with this new ruling.

On July 11, 2023, the Michigan Supreme Court issued a significant opinion in MSSC, Inc. v. AirBoss Flexible Products Co., that alters the contractual agreements between parties using “release” contracts-agreements where parties fix price and terms for goods but are silent as to quantity (instead deferring to separate releases in the future as to quantities to be shipped). These types of “release” contracts are very common in the automotive and manufacturing industries and may undermine decades of contractual relationships.

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