Michigan Supreme Court Overrules Longstanding Interpretation Of "Blanket" Purchase Orders For Supply Contracts

• Published date: 14 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Court Procedure, Trials & Appeals & Compensation
• Law Firm: Foley & Lardner
• Author: Ms Vanessa Miller, Nicholas Ellis, Irina Kashcheyeva, Leah Imbrogno, Raymond J. McVeigh and Anna H. Cumming

For many years, Michigan has consistently interpreted "blanket" purchase orders as binding requirements contracts that could bind suppliers (and buyers) for many years - frequently, for the life of a particular OEM or buyer program. However, on July 11, 2023, the Michigan Supreme Court issued an opinion in MSSC, Inc. v. Airboss Flexible Prods. Co., which reshapes Michigan's jurisprudence on requirements contracts and gives many parties in the supply chain a powerful argument against enforcement of "blanket" purchase orders that lack a definite quantity term.

The MSSC case raised the question of whether the word "blanket" in a purchase order, without more, satisfies the statute of frauds requirement that a contract for the sale of goods must contain a written quantity term. As a general rule, where a purported contract fails to provide a written quantity term, the statute of frauds renders that contract unenforceable. Prior to the Michigan Supreme Court's ruling yesterday, the Michigan Court of Appeals had relied on prior Michigan case law - such as GreatNorthern¹ and Cadillac Rubber²-in holding that the word "blanket" in a purchase order constituted a quantity term, thus satisfying the statute of frauds. Reading the provisions of the purchase order and written terms and conditions together as one, the lower court found that the contract at issue in MSSC satisfied Michigan's statute of frauds requirement for a written quantity term. The Michigan Court of Appeals affirmed.

In yesterday's opinion, the Michigan Supreme Court reversed the Court of Appeals, finding that the word "blanket," on its own, fails to state a quantity term necessary to satisfy the statute of frauds. Expressly overruling Great Northern, the court found that for a requirements contract to satisfy the statute of frauds, the quantity of goods must be stated in writing with greater specificity. However, the Michigan Supreme Court expressly declined to address Cadillac Rubber, which held that a promise to provide "a quantity between one part and 100%" of the buyer's requirements satisfied the statute of frauds.

Under the MSSC holding, it is no longer sufficient to rely on general terms such as "blanket order" to satisfy the statute of frauds. If a party wants an enforceable requirements contract, the party must say so in its contract by specifying at least some amount of product it is required to purchase or sell. In MSSC, because the "blanket" purchase order lacked an essential quantity...