Those familiar with the supplier and buyer contracting realm will have likely heard of a "requirements contract" or a "blanket purchase order" which essentially allows parties to mutually guarantee that they will buy and sell to each other for a specific period of time, but lets the parties figure out the exact amount of a product later, often on an order-by-order basis. This approach is often favored for its reliability in knowing your supply needs are met (or you have a reliable buyer), while letting the supply move up or down based on real and variable demand. These arrangements are particularly prevalent in supply agreements in the automobile industry.
The UCC and courts have long recognized the enforceability of this type of contract, but in 2023, the Michigan Supreme Court recognized a new "release-by-release" agreement inMSSC, Inc. v. Airboss Flexible Prods. Co., 511 Mich. 176. While a requirements contract would likely be enforceable for any amount needed during the agreed upon term, a requirements contract that lacks a definite quantity term does not create an enforceable agreement but rather a release-by-release agreement that would let either party walk away from their obligations going forward under the arrangement.
Airbossspecifically found that while the actual quantity may be left unspecified in a requirements contract, thequantity term itselfmust be specific in order to satisfy the Statute of Frauds. In other words – a seller could agree to provide 75% of a buyer's needs, and figure out what 75% meant in actual product later, but the parties could not agree to supply just "some" needs without further clarification. InAirboss,the Court found the agreement at issue had no quantity term at all, only an agreement to release products.Id.at 190.
So what language actually makes up a "release-by-release" agreement? Courts in Michigan have struggled to answer this sinceAirboss. And on March 25, 2025, U.S. District Judge Jonathan J.C. Grey asked the Michigan Supreme Court to determine whether the contract language requiring Detroit Diesel Corp. to purchase "1 part to 100% of [buyer's] needs" from Martinrea Honsel Mexico SA de CV would be defined enough to be an enforceable requirements contract or if the parties could walk away citing increasing production prices.
Whether "release-by-release" agreements are enforceable will change the way parties negotiate terms in future agreements, and may lead to a host of parties moving to end unfavorable agreements, particularly in light of rising costs of production and other supply chain issues across industries as well asnew executive orders mandating higher tariffson imported automobiles and automobile parts.
The key to this confusion stems in part from the Court inAirbossnot overruling an earlier case,Cadillac Rubber & Plastics, Inc v Tubular Metal Sys, LLC, 952 N.W.2d 576 (2020), which held that a contract obligating a buyer to purchase "between one part and 100% of [buyer's] requirements" was an enforceablerequirements contract. This language did not set a defined quantity term as required byAirboss, which has led to inconsistent interpretations by Michigan courts applyingAirboss.
For example, Judge Judith E. Levy found just this past month thatAirbosswas "confusing" in finding that an agreement with terms requiring "'approximately 65%–100% of [buyer's] requirements'" could not be a "suitable quantity term" warranting an enforceable requirements contract because it was an imprecise approximation.FCA US, LLC v. MacLean-Fogg Component Sols. LLC, No. 24-11165, 2025 U.S. Dist. LEXIS 53031, at *9 (E.D. Mich. Mar. 20, 2025). And last year, Judge George Caram Steeh held inUltra Mfg. U.S.A. Inc. v. ER Wagner Mfg. Co.,that a quantity term contracting for "some portion or all of purchaser's requirements" wasnot a requirements contract, but a release-by-releaseagreement underAirboss,thus supplier ER Wagner Manufacturing Co. could walk away from the agreement. 713 F. Supp. 3d 394, 398 (E.D. Mich. 2024).
But in 2024, a Michigan state trial court rejectedAirbossand in favor of followingCadillac Rubber, which again had found an approximation of requirements (65% to 100%) was defined enough to be arequirements contractand required the parties to continue supplying and buying materials from each other.FCA US LLC v. Kamax, Inc., 2024 Mich. Cir. LEXIS 649, *13.
It remains to be seen how the Michigan Supreme Court will respond to the certified question, but it is certain that supply chain players will be watching and waiting in earnest for the answer.
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