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A Better Partnership

Ahead of the Curve Auto Supplier Blog

February 11, 2021

Important Contract Lessons From a Lawyer Who Is Not a Cat

“I’m here live. I’m not a cat.”
 
“I can see that.”  
 
By now, many people have heard this exchange at the end of a court hearing video gone viral. The video, which captures a court hearing via Zoom, features an attorney who inadvertently left a cat filter on, turning him into a wide-eyed kitten, complete with the cat’s face moving and reacting as he speaks. As the attorney seeks help from his assistant to turn off the filter, the judge kindly reminds him that the filter was on. In the end, the attorney offers to go ahead with the hearing, saying, “I’m prepared to go forward with it. I’m here live. I’m not a cat.” 
 
Seeing the cat speaking on his screen and the attorney exclaiming that he’s actually “live” and “not a cat,” the judge simply says, “I can see that,” despite all of us seeing exactly the opposite. 
 
This is quite the legal lesson: courts see through your filters. 
 
But, the time to remove the filter is before you’re in court. When you’re about to enter into a business relationship in good times—when you agree about everything and see only a rosy future—it’s a good time to pause, think about your intentions and make sure your written agreement represents those intentions. The clearer the contract is at the outset, the less chance there is later for one side to claim the contract says what it doesn’t, or to claim a different intent that meets their needs at that time of the dispute.
 
Before you go too far, check to see if your contract reflects your true intentions, or if it has a filter. 
 
In the automotive world, most, if not all, of business is conducted through quotes and purchase orders. It is important to understand what your quote provides and what obligations the purchase order imposes. Most importantly, does it match your intent? This becomes an especially important question when supply relationships turn into supply disputes.
 
Automotive contracts are unique because most automotive contracting is assumed to be on a requirements contract basis—the buyer purchases all or some articulated percentage of its requirements for a particular part from a supplier, and the supplier agrees to supply all or some of that articulated percentage of the buyer’s requirements. Having a requirements contract in place starting with the OEM, and throughout the entire supply chain, allows all parties in the chain to limit their obligations to the requirements created by the end consumer market.
 
However, while automotive business may be intended to be conducted in this manner, not all contracts are clear as to purchase and sale obligations. For a requirements contract to be enforceable, the law requires the contract to contain language that places an obligation on the buyer to buy and on the seller to sell. Without such mutual obligations, the parties could be putting themselves into a release-by-release situation or into a simple fixed quantity contract. In other words, although they believe that what they have is a requirements contract, all they really have is a requirements contract filter. Unlike the humorous cat filter that prompted this discussion, a contract filter could have expensive consequences for your business.
 
Before you need to claim you’re “live” and “not a cat,” it’s best to check your contract to make sure it meets your intent. Warner’s Automotive Industry Group can help you “see that!”

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