Acemco, Incorporated V. Ryerson Tull Coil Processing Case Study

Businesses world wide structure their operations on agreements to conduct day to day operations. As a result, questions and disputes arise daily. For this reason, “every state has a statute that stipulates what types of contracts must be in writing” (Fundamentals of Business Law P196). These statutes are called the “Statutes of Frauds”.
“The actual name of the Statute of Frauds is confusing because it does not actually apply to fraud” (Fundamentals of Business Law P197). Specifically, this statute determines which type of contracts must be in writing. In other words, the “Statute of Frauds” refers to the requirement that certain kinds of contracts be made in writing and signed. Traditionally, the Statute of Frauds requires a written contract
signed by the contracting parties in the following circumstances: contracts involving land, contracts that cannot be performed within one year from the day it is signed, contracts that promise to repay debt or a duty owed to others, marriage contracts, and contracts for the sale of goods above a certain value. Also, the statute requires the writing to name the parties, subject matter, consideration, and quantity. In addition, it is important to realize that a written contract does not have to be a single document. Several types of documents can form a contract or writing if they are physically attached. For example, memos, e-mails, and sales slips stuffed into an envelope could be interpreted as a written contract if the items reference each other.
According to our text, the Uniform Commercial Code (UCC) is the prudent and widely recognized code that contains Statutes of Frauds provisions requiring written forms of contracts. Section 2-201 of the UCC spells out the provisions that require writing for the sale of goods at or more than five hundred dollars, this dollar amount has reportedly been in the law for 40 years. Part 2 of Article 2 of the Uniform Commercial Code is generally known in the legal profession as the Statute of Frauds, and originally enacted by the English Parliament in 1677. Currently, Article 2 of the UCC has been adopted by Michigan and all other states, except Louisiana. In addition, Section 440.2201, of the Michigan Uniform Commercial Code act 174 of 1962, “states that a contract for the sale of goods for a price of $1000 or more is generally not enforceable unless there is a written contract” (3). In short, “the Uniform Commercial Code was enacted by states to promote maximum flexibility in commercial transactions, and at the same time, provide the framework of law on which parties could depend” (Barton P25).
Through research conducted for this individual paper, significant issues in the current business world have surfaced. Specifically, long-term supply contracts for quantities, and pricing terms over the life of the contract. For example, an automotive supplier under a long term contract to provide parts to Ford for an SUV for the life of the part or vehicle. Clearly, the current economy, and the difficult task of predicting production demands based on vehicle sales, is driving suppliers to the courts to challenge the agreements. In the article, “The Enforceability of Requirements Contracts in the Automotive Industry” by Bishoff and Miller. “One issue that has gained considerable attention recently is the validity of open quantity requirements contracts under Michigan law”.
Basically, the supplier argues that the agreement is invalid because the writing does not name “fixed and specific identifiable quantities” like a specific numerical quantity, or that the agreement uses “ambiguous quantity terms”. Although, the UCC statute is satisfied when a quantity term is written, an argument is brought to the court for a ruling on whether the term in the contract qualifies as a quantity term and, if so, whether that term supports mutuality of obligation.
According to the Michigan Business Journal, “Michigan law is not well-settled on the enforceability with regards to ambiguous quantity terms” (P20). For example, the author lists case law findings that have “scrutinized written language, and found that more is required to support a finding of mutuality of obligation” (P20).
Research for this individual paper revealed a Michigan court case of particular interest that sticks out among the other cases researched.
In particular, the matter of Acemco, Incorporated v. Ryerson Tull Coil Processing. This case involved a contract dispute between a buyer and seller of steel for automotive parts, and the argument over the perceived lack of “mutuality” and an enforceable “quantity term”. The disagreement was over the language stating “that the buyer agrees to purchase quantities of product from the seller, as the buyer may specify in purchase orders, with an estimated total volume listed in pounds”. The case began in the Muskegon Circuit Court in July, 2006. An appeal was filed and on January 15, 2008 and the Michigan Court of Appeals held that the agreement was unenforceable because it lacked a “specifically stated quantity” and that the contract language is “ambiguous”. In September, 2008, the Michigan Supreme Court reversed the decision of the Court of Appeals. The Supreme Court found that the agreement “unambiguously provides a quantity term” referring to the estimated volume listed in pounds. However, Justice Kelly found ambiguous subject language within the agreement, leaving it up to a jury to resolve the ambiguity through parol
evidence.
In conclusion, it seems logical to avoid confusing quantity terms in written agreements, make sure that a quantity term satisfies the writing requirements of the Statute of Frauds and, be specific enough to support mutuality of obligation.