Automotive News discussed the changing nature of supply chain contracting in this week’s article “Suppliers, seeking price concessions, get rare leverage in contract talks.”
The article discussed Warner’s Michigan Supreme Court victory on behalf of client, AirBoss Flexible Products Co., in what was called a “key opinion” to clarify uncertainty over terms and conditions, especially as related to supply quantities. Because of the court ruling, customers in Michigan must now either state a specific number of parts that they intend to purchase or specifically say what percentage of parts they will buy over the course of the contract. The decision only applies to contracts that fall under Michigan law, but it could also prove "persuasive and influential" outside the state, according to Automotive News.
"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," said Adam Ratliff, a partner in the Detroit office of Warner Norcross + Judd. “The Michigan Supreme Court signaled that it is not holding assumptions like that anymore.”
To be sure, not all suppliers will find themselves with new leverage over their customers. However, Ratliff suggested that the decision could help rebalance the power dynamics between suppliers and customers.
"It doesn't matter how big [the companies] are or how small they are," Ratliff said. "All that matters is just what actually makes it into the contract."
Automotive News subscribers can read the complete story here.
To learn more about the recent AirBoss case, click here.
Ratliff focuses his practice on complex and high-stakes matters, advising clients at all stages of business and contractual disputes ─ from pre-litigation planning through trial or arbitration and on appeal. His experience in the automotive supply chain includes counseling clients on emerging supply disputes, having both successfully obtained and defended against emergency injunctions.
Warner’s Automotive Industry Group
With deep roots in the heart of the U.S. automotive industry, Warner’s Automotive Industry Group provides proactive, timely and cutting-edge advice to suppliers throughout Michigan, North America and around the globe. Firm attorneys stand ready to assist suppliers assessing their current contracts and terms to implement this new change to Michigan law.