From Airboss to Kamax: Michigan Court of Appeals Reaffirms Enforceability of Flexible Quantity Terms in Supply Contracts

The Michigan Court of Appeals' recently published decision in FCA US LLC v. Kamax Inc. provides Michigan’s automotive supply chain with further clarity on the enforceability of flexible quantity terms in long-term supply agreements. In Kamax, the Court of Appeals reaffirmed that requirements contracts using percentage-based quantity terms—such as “approximately 65%–100%”—can satisfy the Uniform Commercial Code’s (“UCC”) statute of frauds. The decision reinforces precedent from Cadillac Rubber & Plastics, Inc. v. Tubular Metal Systems, LLC and distinguishes the Michigan Supreme Court’s ruling in MSSC, Inc. v. Airboss Flexible Products Co., in which the underlying contract had no such quantity term.  

Background: Long-standing Supply Relationship Under Scrutiny
FCA and Kamax had a long-standing supplier relationship governed by global terms and individual purchase orders, which committed FCA to purchase “approximately 65%–100% of [their] requirements” for each part, effective “through the life of the program.”  When Kamax sought to impose unilateral price increases and threatened to cease deliveries, FCA sued for breach of contract and secured a preliminary injunction to maintain supply continuity. Kamax moved to dissolve the injunction, arguing that the percentage-based language lacked the definiteness required under Airboss and was unenforceable under MCL 440.2201(1).

Court of Appeals: Flexible Quantity Terms Enforceable
The Court of Appeals rejected Kamax’s argument and upheld the injunction, holding that a buyer’s promise to purchase a specified percentage of its needs constitutes a sufficiently definite quantity under MCL 440.2201(1). Unlike in Airboss, the Kamax purchase orders had an explicit quantity commitment—albeit as a range—and the consistent course of dealing between the parties demonstrated that Kamax was FCA’s exclusive supplier for the relevant parts. The court emphasized that such course-of-performance evidence reinforces the existence of an enforceable requirements contract.

Conclusion
The Kamax opinion confirms that Michigan courts will enforce percentage-based requirements contracts when the quantity term is reasonably certain and supported by the parties’ conduct. As supply chain tensions persist, clarity in contract language remains not just a legal safeguard—but a business imperative. Automotive suppliers and OEMs should regularly assess their contracting practices to ensure that supply terms align with legal standards and operational realities.

Key Takeaways for Suppliers and OEMs

• Defined Ranges Remain Valid: Commitments such as “approximately 65%–100%” can satisfy the UCC’s quantity requirement when paired with consistent performance.
• Cadillac Rubber Controls: Despite the debate following Airboss, Michigan appellate courts continue to rely on Cadillac Rubber for range-based quantity terms.
• Airboss Still Influences: While not controlling here, Airboss signals that contracts lacking any quantity term remain vulnerable.
• Audit Supply Agreements: Kamax serves as a reminder that supply agreements should be reviewed to ensure that quantity terms are precise, supported by course-of-dealing, and drafted to withstand challenge under either Airboss or Cadillac Rubber standards.

If you have questions about the implications of FCA US LLC v. Kamax Inc., please contact a member of Honigman’s Automotive and Manufacturing or Commercial Transactions practice groups, which advise OEMs, Tier 1 and Tier 2 suppliers, and aftermarket companies on supply chain contracts, litigation, and risk mitigation.