Michigan Court Holds Breach of Contract Claim Fails Without Signed Purchase Order

A recent decision from the Michigan Court of Appeals reaffirms an age-old adage most of learn early on: If it is something important, such as a contract, better to get it in writing. And when you are working for one of the Big Three, that writing probably should be a signed purchase order.

In Affinity Resources v. Chrysler Group, LLC, Katherine Kudla had created and founded Affinity Resources to provide equipment leasing services to other businesses. Kudla had previously worked for companies that provided equipment leasing services to other businesses. Once a company issued a request detailing what equipment was needed, where it was needed and for how long, Affinity would bid to arrange a lease of equipment in exchange for a fee. If its bid won, Affinity would arrange funding for the lease, coordinate delivery, and setup payment schedules.

In October 2008, Kudla approached Chrysler and pitched the idea that Affinity manage all of Chrysler’s equipment leasing. After some negotiating, Kudla submitted a proposed agreement but Chrysler representatives never signed the document. Meanwhile, Affinity handled default notices and a few other issues after Chrysler went into bankruptcy, although this work was done under a consulting purchase order Chrysler issued in July 2009. Around this same time, Kudla shared information about Ford’s equipment leasing procedures with Chrysler with the hope of winning business from Chrysler.

Once again, Kudla sent a final draft proposal to Chrysler, and once again Chrysler did not sign the document. Kudla testified that she knew she needed a signed purchase order from Chrysler to know that Affinity had an agreement to do the work. Chrysler representatives she was talking to told her that they would have to wait to enter a formal agreement until after the company was out of bankruptcy. However, Kudla relied on the statements of Chrysler representatives in December 2009 that they were working on getting approval for a purchase order to mean that she would be responsible for Chrysler equipment leases beginning in January 2010. However, she never heard from Chrysler again.

Affinity sued Chrysler in April 2010, alleging breach of management agreement, promissory estoppel, and unjust enrichment based on the information Kudla shared with Chrysler about Ford’s equipment leasing practices. Chrysler moved for summary judgment in June 2011, alleging there was never a meeting of the minds on a contract or purchase order. Chrysler argued that the promissory estoppel claim similarly failed because Chrysler never made a clear and definite promise to hire Affinity. Finally, there was no unjust enrichment, as Ford had shared the information with Kudla, who only learned the information in the hopes of getting business from Chrysler. The trial court, on reconsideration, agreed with Chrysler, leading Affinity to appeal.

The Court of Appeals upheld the trial court decision in an opinion issued last week. The appellate court first found that there was no breach of contract, or valid promissory estoppel claim, because there was never a “meeting of the minds,” or mutual assent, to the central terms of a contract. While employees of Chrysler had worked with Kudla on a “Statement of Work”, there was never a purchase order from Chrysler. Her statements that she expected the deal to go through were also not enough to establish that an agreement has been reached. “Although Kudla testified that she was led to believe that the deal would go through, her testimony also does not support the conclusion that Chrysler actually assented tot eh terms stated in Affinity’s Statement of Work.”

Additionally, emails Kudla sent in January 2010 asking for modifications to the potential purchase agreement show that it was her understanding there was not an agreement in place. And due to her prior experience with Chrysler, Kudla “already knew about Chrysler’s approval procedures” and she had testified at her deposition that “I knew I needed a purchase order.” Thus, Affinity’s breach of contract and promissory estoppel claims failed.

Second, the appellate court found that Affinity’s unjust enrichment claim also failed. While Chrysler received some benefit from the knowledge Kudla shared about Ford’s leasing process, it was not inequitable for Chrysler to retain that benefit. “Kudla stated that she did not expect to be directly compensated for her efforts; rather, she believed that her efforts would lead to a deal with Chrysler. She stated that she spent time gathering information from Ford and sharing it with Chrysler as part of her effort to induce it to hire Affinity to manage its leases.” In other words, Kudla “made an informed choice to gratuitously provide the information to Chrysler in the hope that it would help cement a deal between Affinity and Chrysler.” Thus, her claim for unjust enrichment failed.

The attorneys at Dalton & Tomich have extensive experience handling contract disputes between persons, business, and professional service providers in numerous courts. If you believe you have such a contact-based claim, please contact us. For the full opinion in this case, click here.