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On October 29, 2025, the Michigan Supreme Court agreed to hear a case, FCA v. Kamax, to clarify what promises are needed to create a binding requirements contract. This question has roiled the automotive supply chain since July 2023, when the Michigan Supreme Court decided the Airboss case, which called into question whether contract provisions commonly used by many buyers in the supply chain create a requirements contract.
As businesses in the automotive supply chain know, this question matters because long-term, fixed-price requirements contracts are the principal industry contract model. If a contract is a requirements contract, suppliers generally are required to supply the parts, even if doing so is unprofitable due to input cost increases, tariffs, low volumes and a host of other factors not anticipated when the price was first set. Conversely, when no requirements contract exists, a buyer is at risk of not having a contractually bound supplier for the parts it needs.
Airboss held that a contract in which the seller promised to supply all requirements for which it received a release but the buyer promised only to pay for goods if it chose to issue a release did not create a requirements contract. Instead, the contract was a "release-by-release contract" in which the supplier's only obligation was to satisfy the releases it chose to accept, with the supplier remaining free to reject any or all releases.
Unsurprisingly, given the commercial importance of whether a contract was a requirements contract or a release-by-release contract, Airboss triggered a flurry of supply-chain litigation over whether various contract provisions created a requirements contract. That litigation has resulted in decisions in which Michigan state and federal courts have reached different, and sometimes irreconcilable, results. Simply stated, courts disagree about what, under Airboss, is required to create a requirements contract. These disagreements have left buyers, sellers, and their respective lawyers uncertain as to parties' obligations and risks under many industry contracts.
By agreeing to review Kamax, the Michigan Supreme Court will have an opportunity to clarify the meaning of Airboss and the law of requirements contracting in Michigan. Kamax directly involves the question of whether FCA's standard contract promise to purchase "approximately 65-100%" of its requirements from the seller creates a requirements contract. But the Court also ordered the parties to address a second and related question: whether an earlier Michigan Court of Appeals case, Cadillac Rubber, which held that a contract in which the buyer promised to purchase between 1 part and 100% of its requirements from the seller created a requirements contract, is still good law. The decision on the enforceability of the FCA contract provision is of particular importance to FCA suppliers, but the decision on the continued viability of Cadillac Rubber may impact even more suppliers for several reasons, including that the 1-100% language addressed in Cadillac Rubber is contained in the standard purchasing terms of many tiered suppliers.
It is not possible to predict when or how Kamax will be resolved. Likewise, it is not possible to predict whether it will be decided on narrow grounds, focusing on the enforceability of the specific FCA contract language, or broader grounds that will resolve much (probably not all) of the uncertainty in the law. Butzel has been closely monitoring these issues since, and long before, Airboss was decided, has issued numerous Client Alerts and conducted webinars as developments warranted, and it will continue to do so.
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