Firwood Mfg. Co., Inc. v. General Tire, Inc.
| Decision Date | 16 September 1996 |
| Docket Number | No. 95-1969,95-1969 |
| Parties | 30 UCC Rep.Serv.2d 789 FIRWOOD MANUFACTURING COMPANY, INC., Plaintiff-Appellee, v. GENERAL TIRE, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Stephen D. Winter (argued), Zora E. Johnson (briefed), Dykema & Gossett, Detroit, MI, for Plaintiff-Appellee.
Stephen F. Wasinger, Daniel G. Helton (argued and briefed), Honigman, Miller, Schwartz & Cohn, Detroit, MI, for Defendant-Appellant.
Before: KENNEDY, WELLFORD, and SILER, Circuit Judges.
KENNEDY, J., delivered the opinion of the court, in which SILER, J., joined. WELLFORD, J., (pp. 173-174), delivered a separate opinion concurring in part and dissenting in part.
Defendant General Tire, Inc. appeals the District Court's denial of its motions for judgment as a matter of law, a new trial, and remittitur following a jury verdict in this diversity action awarding plaintiff Firwood Manufacturing Company, Inc. $187,513 in resale damages and $100,476 in interest in this breach of contract dispute. General Tire argues that it was entitled to judgment as a matter of law because Firwood did not prove its damages under Mich. Comp. Laws Ann. § 440.2706 (West 1994); that the District Court should have granted a new trial because the jury was given an erroneous and prejudicial instruction regarding contract formation; and that it was entitled to remittitur of the interest portion of damages because sellers are entitled to receive incidental, but not consequential, damages and interest is a consequential damage. For the following reasons, we AFFIRM the liability award but REVERSE the award of interest.
This dispute arises from a contract between Firwood and General Tire in which General Tire allegedly agreed to purchase fifty-five model 1225 post-cure inflators (PCIs), thirty-thousand dollar machines used by General Tire in its manufacturing process.
Following lengthy negotiations between representatives from each company, on October 9, 1989 Firwood transmitted the following offer letter:
Quantity pricing based on a minimum of (55) units to be purchased through 1990 will apply initially. Should General not purchase at least (55) units by December 31, 1990, pricing will revert to the exact quantity purchased per the attached price schedule. If this be the case, Firwood will submit a corrected invoice no later than January 15, 1991 for the difference in price based on actual quantity purchased.
For quantities beyond 1990 we suggest using a mutually agreeable index for capital equipment alongwith verified labor increase to establish 1991 price levels.
[ ]
After your review of this letter we would appreciate receiving your letter of intent outlining your agreement with the above and your anticipated purchase dates for the remaining units.
Firwood's manufacturer's representative, Thomas Kane, testified that this document was Firwood's offer to manufacture a minimum of fifty-five PCIs for General Tire. Additionally, Kane testified, this October 9 letter was not just a price schedule under which Firwood agreed to manufacture whatever number of PCIs General purchased, at pricing levels that depended on the quantity ordered.
Kane testified that he personally delivered the offer letter to James Headley, General Tire's Senior Buyer, on October 9 and that Headley orally agreed to purchase fifty-five units and promised to send the requested letter of intent to confirm General Tire's acceptance. On October 10, General Tire issued two written purchase orders to Firwood in which it revised prior orders to reflect the new price of $31,216 per PCI--the price level available for purchases of a minimum of fifty-five units--and encouraged Firwood to have all fifty-five PCIs available for delivery.
On the strength of Headley's oral agreement and General Tire's new purchase orders reflecting the fifty-five unit price, Firwood began ordering parts for the PCIs. Between November 1989 and April 1990, General Tire released sixteen additional purchase orders that reflected the fifty-five minimum purchase price of $31,216.
In February 1990, James Headley, General Tire's Senior Buyer, sent Firwood the letter of intent sought in the October 9 offer letter. Headley wrote:
This letter will serve as our intent to purchase approximately fifty five (55) Firewood [sic] Model 1225 Post Cure Inflators over the next fifteen months.
We have purchased six units on our orders TF 25942 and TF 25943. The balance will be ordered during 1990 approximately as follows:
Mayfield 22 3rd Quarter
Barrie 21 1st Quarter
Charlotte 6 1st Quarter
The conditions of pricing will be as outlined in your letter of October 9, 1989.
In March 1990, Kane wrote to Headley to confirm Firwood's agreement to change from Schrader-Bellows valves to MacValves on the twenty-one PCIs destined for the Barrie plant in the first quarter of 1990, on two conditions: that Firwood be allowed to use Schrader valves on the twenty-two PCIs destined for the Mayfield plant and that General Tire pay an additional $150 per unit for the Barrie PCIs.
By April 1990, General Tire had purchased twenty-two PCIs from Firwood under the contract. General Tire closed its Barrie plant soon thereafter.
On April 11, 1991, Firwood wrote General Tire to remind it of its obligation to purchase fifty-five PCIs. Firwood informed General Tire that the thirty-three remaining PCIs were in the following stages of production: eight units, 100 percent complete; five units, 95 percent complete; and twenty units, 65 percent complete.
After learning that General Tire did not intend to complete the purchase of the remaining thirty-three PCIs at issue in this dispute, Firwood began looking for alternative buyers. Firwood contacted every major tire company in the United States. General Tire also sought alternative buyers for the PCIs. After three years of searching for alternative buyers, during which it sold a few machines, Firwood was ultimately able to sell the balance of the thirty-three PCIs intended for General Tire, but at a price below that called for in the contract with General Tire.
While looking for buyers, Firwood filled some of its ongoing orders for spare parts with parts that already had been installed in the thirty-three PCIs intended for General Tire. Although the PCIs themselves were specially made for General Tire, the parts taken from the General Tire PCIs and sold as spare parts were fungible parts regularly sold in Firwood's spare parts business.
Following a jury trial, the jury awarded Firwood $287,989 in damages, of which $187,513 represented the difference between resale price and contract price, and $100,476 represented interest. Following trial, General Tire filed a motion seeking judgment as a matter of law, a new trial, or remittitur. The District Court denied General Tire's post-trial motions, and this appeal followed.
General Tire offers three arguments on appeal: that the District Court erred in denying its motion for a new trial when a jury instruction erroneously allowed the jury to conclude that General Tire's February letter of intent constituted its acceptance of Firwood's offer; that Firwood did not prove its damages under § 2706 of the U.C.C. when the replacement PCIs it resold contained parts not identified to the contract at the time of the breach and when the resales occurred three years after the breach; and that Firwood is not entitled to interest as an element of its damages because interest is a consequential damage and the U.C.C. allows sellers to recover incidental, but not consequential, damages.
General Tire first argues that the District Court erred in denying its motion for a new trial. General Tire argues that the Court's jury instruction on contract formation, which allowed the jury to find that General Tire's February 28, 1990 letter of intent constituted its acceptance of Firwood's October 9, 1989 offer, was erroneous and prejudicial because all parties agree that General accepted Firwood's offer orally on October 9. General Tire argues that since its February letter of intent adds new terms to the already orally accepted contract, those new terms do not become part of their contractual obligations. More specifically, General Tire claims that the October 9 offer did not entail a guaranteed minimum purchase of fifty-five PCIs; rather, it simply offered a sliding-scale price guide for different quantities. Since General accepted the October 9 offer orally that same day, General was only agreeing to abide by the price schedule, not a minimum purchase of fifty-five units. Therefore, to the extent its February letter of intent did agree to commit General to purchase fifty-five PCIs--a proposition General Tire strongly contests--it was invalid under Michigan case law that prevents parties from engaging in a battle of forms with differing terms following an oral agreement.
We review the District Court's denial of General Tire's motion for a new trial for abuse of discretion. Francis v. Clark Equip. Co., 993 F.2d 545, 552 (6th Cir.1993). "A party is not entitled to a new trial based upon alleged deficiencies in the jury instructions unless the instructions, taken as a whole, are misleading or give an inadequate understanding of the law." Bowman v. Koch Transfer Co., 862 F.2d 1257, 1263 (6th Cir.1988).
The District Court gave the jury the following instruction:
Members of the jury, unless otherwise unambiguously indicated by the language of [sic] circumstances, an offer to make a contract is to be construed as one which invites acceptance in any manner and by any medium reasonable in the circumstances. An offer may be accepted and a contract formed by means of a letter of intent, even if an acceptance--even if the acceptance states terms additional to or different from those offered or agreed upon, it is sufficient toconstitute an acceptance under the law, unless...
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