Ruling Gives Suppliers an Edge in Contracts
The Michigan Supreme Court rules buyers must more clearly specify what they intend to buy from suppliers in their contracts.
Ruling puts suppliers in better position to ask for a price increase or change contract terms.
IMAGE: Pixabay
The Michigan Supreme Court ruled in MSSC Inc. v. AirBoss Flexible Products Co. that buyers must be explicit in contracts in saying what they intend to buy from a seller, according to Automotive News.
That's good news for contracts between auto suppliers and their customers, which are often intentionally vague, the article noted. Now customers in Michigan must now either:
State a specific number of parts that they intend to purchase, or
State what percentage of parts they will buy over the course of the contract.
The ruling in a dispute between Tier 1 and Tier 2 suppliers comes at a time when many auto suppliers grapple with the financial burden of increased costs, erratic vehicle assembly schedules, and labor-related challenges.
The Michigan Supreme Court decision may give suppliers an edge in negotiating with customers. The AirBoss ruling allows suppliers to inform customers they will cease shipping components if they discover that a contract is no longer enforceable. This puts the supplier in a position to ask for a price increase or change contract terms.
Attorneys told Automotive News they believe the decision, while only applicable to Michigan contracts, could have persuasive and influential effects outside the state.
According to Adam Ratliff, a partner at Warner Norcross + Judd, this decision may rebalance the power dynamics between suppliers and customers.
"It's fair to say there's been a trend toward customer-friendly decisions—an assumption that the customer's view of the contract is the prevailing one, primarily driven by the biggest players in the industry—the OEMs and the large Tier 1s," Ratliff told Automotive News.
Originally posted on Auto Dealer Today
More Industry
Autos More Appealing
Consumers gave new cars better scores again this year for design, performance and more as mass-market brands kept gaining on premium lineups, JD Power found in an annual poll.
Read More →
Used EVs Defy Overall Market
While the used-car market saw three months of price declines or stagnation, the used EV segment did the opposite – rising for three straight months.
Read More →
Gone to the Dogs
A Stellantis brand decided to have some fun with one of its SUVs’ design to address growing emphasis on family pets.
Read More →
OEM Poll Sees Industry Evolution
Kerrigan Advisors’ survey of automakers finds that tariffs, technology, network tightening and other factors are poised to reshape auto retail.
Read More →
Luxe N.C. Dealerships Change Hands
A collection of Italian and English brand franchises were handed off to the owner’s friend in the business and include the Carolinas’ only Ferrari retail stores.
Read More →
Exposure Drives Interest in Chinese Cars
At a recent demonstration, consumers had the chance to ride in a Chinese-branded vehicle, a firsthand experience that improved their perceptions and purchase intent.
Read More →
Automotive Consumers Sink Further in Debt
Most financing metrics hit records in the second quarter as more buyers locked themselves into long terms and high monthly payments.
Read More →
Agent Advocate
Rob Mancuso, who comes from a long line of auto dealers, values general agents’ place in the industry and makes a case for them taking an even bigger seat at the table.
Read More →
Driving Under Distraction
Though consumers gave higher marks to new vehicles in JD Power’s most recent initial-quality poll, high-tech interference worsened, pointing to craving for simplicity.
Read More →
Affordable New Cars a Thing of the Past
More than one out of five new vehicles sell for more than $60,000, according to Edmunds. That's up 7% compared to prepandemic 2019.
Read More →