DAIMLERCHRYSLER CORP V WESCO DISTRIBUTION INC
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
DAIMLERCHRYSLER CORPORATION,
FOR PUBLICATION
October 2, 2008
9:15 a.m.
Plaintiff-Appellee,
v
No. 276174
Wayne Circuit Court
LC No. 04-419323-CK
WESCO DISTRIBUTION, INC.,
Defendant/Cross-DefendantAppellant,
Advance Sheets Version
and
HIGH VOLTAGE MAINTENANCE
CORPORATION,
Defendant/Cross-Plaintiff.
Before: Murray, P.J., and Whitbeck and Talbot, JJ.
MURRAY, P.J.
Defendant, Wesco Distribution, Inc., appeals as of right the trial court’s order of
judgment for plaintiff, DaimlerChrysler Corporation (Chrysler). Wesco’s arguments on appeal
pertain to the trial court’s order granting summary disposition for Chrysler with respect to
liability. Although Wesco posits several arguments for reversal, we find one dispositive. That
is, Wesco could not be held liable to indemnify Chrysler under this contract for an injury that
occurred before the contract was formed. On this basis, we reverse and remand.
I. Facts and Proceedings
Wesco, a distributor, has a business relationship with Eaton Electrical Engineering
Services and Systems Division, which provides service and support to users of Eaton Electrical
products and supports factories with warranties and other equipment needs. Eaton uses
distributors like Wesco as intermediaries when performing electrical work for customers like
Chrysler. In general, Eaton prepares a quotation for the work to be performed and submits it to
Wesco. Wesco then applies a markup and supplies the quotation to the customer. If Wesco and
-1-
Eaton are awarded the job, Wesco then receives a purchase order from the customer and sends it
to Eaton, which performs the work.
On July 23, 2002, Jay Karnik and Jack Hemmert of Chrysler called Mark Stephens, a
field services engineer for Eaton, and asked him to come to Chrysler’s plant in Newark,
Delaware, to look at some damaged electrical equipment contained in a capacitor bank and
prepare a quotation for the work that would be required to repair it. When Stephens arrived at
the plant, two or three High Voltage Maintenance Corporation (HVMC) employees were
working on electrical equipment near the damaged capacitator bank. After Stephens finished
gathering the information necessary to formulate a quotation for the repairs, Hemmert asked
Stephens if he could borrow a phase rotation meter. Stephens retrieved the meter from his van
and handed it to Hemmert. Stephens eventually sought to retrieve his meter. The Chrysler
employees were about to use the meter, but one of them handed the meter to Stephens instead
because it was “[his] device.” One of the HVMC employees, who were standing next to
Stephens, touched two of the leads to the transformer. Stephens then touched the third lead to
the transformer, and pushed the button. The equipment then exploded.
According to Dale Schmidt, a district manager for Eaton, Eaton was not able to use the
information Stephens collected on that day because his notes were lost or destroyed during the
accident. Schmidt and Jimi Jones, an Eaton employee responsible for direct sales, ultimately
returned to the Delaware facility and “started from scratch,” recollecting the information, and
reformulating the quotation. In determining the extent of the damage, they “probably” also used
some photographs that Stephens had taken of the equipment on July 23, 2002. The work of
Schmidt and Jones resulted in an August 2, 2002, quotation from Eaton to Wesco, which Wesco
used to formulate the quotation that it submitted to Chrysler, also on August 2, 2002. Wesco’s
quotation describes the work to be performed as “LABOR AND MATERIAL TO COMPLETE
SERVICE WORK AND A 5KV METAL ENCLOSED CAPACITATOR BANK” and quotes
the prices as $17,461, or $21,649 with optional overtime hours.
On August 8, 2002, Chrysler issued a purchase order to Wesco, which describes the work
to be performed as follows: “PROVIDE ALL LABOR, MATERIAL AND SUPERVISION TO
SERVICE, TROUBLE SHOOT AND REPAIR (1) 5KV, METAL ENCLOSED
CAPACITATOR BANK.” It also refers to Wesco’s August 2, 2002, quotation, and lists the
same $17,461 price. The purchase order includes an indemnification clause, which provides, in
part: “Seller . . . shall protect, defend, hold harmless, and indemnify DaimlerChrysler from and
against any and all loss . . . arising out of or related to the performance of any work in connection
with this contract.” On September 26, 2002, Wesco issued Chrysler an invoice, in the amount of
$17,461, for the repair of the capacitator bank, which Chrysler paid without objection on October
30, 2002.
In 2003, Stephens filed a personal injury action against Chrysler and HVMC in a
Pennsylvania state court. Chrysler sought indemnification from Wesco and HVMC. They
apparently refused, and Chrysler filed this action. As part of a settlement agreement between
Stephens, HVMC, and Chrysler, Chrysler agreed to dismiss its claims against HVMC, and the
trial court entered an order to that effect. Wesco filed a motion for summary disposition
pursuant to MCR 2.116(C)(8) and (C)(10). The trial court, pursuant to MCR 2.116(I)(2), instead
granted summary disposition for Chrysler with respect to liability, and thereafter entered
-2-
judgment for Chrysler, awarding it $941,894.81, which included the $750,000 settlement that
Chrysler paid to Stephens, attorney fees, litigation expenses, and prejudgment interest on those
amounts.
II. Analysis
We review a trial court’s decision on a motion for summary disposition de novo. Rose v
Nat’l Auction Group, 466 Mich 453, 461; 646 NW2d 455 (2002). Although Wesco brought its
motion for summary disposition under both MCR 2.116(C)(8) and (C)(10), the trial court
decided the motion under MCR 2.116(C)(10) because it considered documentary evidence
submitted by the parties. When reviewing a decision on a motion for summary disposition
pursuant to MCR 2.116(C)(10), we consider “the affidavits, pleadings, depositions, admissions,
and other documentary evidence submitted by the parties in the light most favorable to the party
opposing the motion.” Rose, supra at 461. Summary disposition is appropriate “if there is no
genuine issue regarding any material fact and the moving party is entitled to judgment as a
matter of law.” In addition, under MCR 2.116(I)(2), summary disposition in favor of the
opposing party is properly granted if the Court determines that that party, rather than the moving
party, is entitled to judgment. MCR 2.116(I)(2); Sharper Image Corp v Dep’t of Treasury, 216
Mich App 698, 701; 550 NW2d 596 (1996). We also review de novo, as questions of law, issues
concerning the interpretation of a contract. DaimlerChrysler Corp v G-Tech Professional
Staffing, Inc, 260 Mich App 183, 184-185; 678 NW2d 647 (2003).
Before addressing the indemnity issue, we first dispatch with Wesco’s argument that the
August 8, 2002, purchase order was not the final contract. Wesco bases much of its argument on
an analysis of the parties’ exchange of documents under the Uniform Commercial Code-Sales
(UCC), MCL 440.2101 et seq. However, the UCC does not apply in this case because the
primary purpose of the contract was the provision of services, rather than goods, and the UCC
applies to transactions in goods. MCL 440.2102; Neibarger v Universal Cooperatives, Inc, 439
Mich 512, 536-537; 486 NW2d 612 (1992); Farm Bureau Mut Ins Co v Combustion Research
Corp, 255 Mich App 715, 723; 662 NW2d 439 (2003). Here, Wesco’s quotation of August 2,
2002, and Chrysler’s August 8, 2002, purchase order make it clear that a service—repair of the
capacitator bank—was the primary purpose of the parties’ contract, and the provision of
necessary materials was incidental to the repairs. Therefore, this contract dispute is governed by
the common law, rather than the UCC.
Applying the common law, the trial court correctly held that the August 8, 2002,
purchase order constituted a counteroffer, which Wesco accepted by its performance. “Before a
contract can be completed, there must be an offer and acceptance. Unless an acceptance is
unambiguous and in strict conformance with the offer, no contract is formed.” Kloian v
Domino’s Pizza, LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006) (quotation marks and
citation omitted.) “Further, a contract requires mutual assent or a meeting of the minds on all the
essential terms.” Id. at 453. Wesco’s August 2, 2002, quotation provided:
This quotation constitutes an offer to sell which offer expressly limits
acceptance to the terms of this offer on the back of this quotation. This offer shall
be firm for a period of fifteen (15) days from the date of this offer. Subject to
Buyer’s credit worthiness, the return of this form with a Purchase Order number
-3-
or any other reasonable manner of acceptance will be sufficient to form an
agreement on the terms and conditions on the back of or attached to this
quotation.
“An offer is defined as the manifestation of willingness to enter into a bargain, so made as to
justify another person in understanding that his assent to that bargain is invited and will conclude
it.” Kloian, supra at 453 (quotation marks and citation omitted). Wesco’s quotation constituted
an offer because it expressed Wesco’s willingness to enter into an agreement and invited
Chrysler’s assent.
Chrysler responded with a purchase order that mirrors the key terms of Wesco’s offer:
listing the services to be performed, as well as the price, and referring to Wesco’s quotation.
However, the purchase order also states, “SELLER AGREES TO SELL AND DELIVER THE
GOODS OR SERVICES IN ACCORDANCE WITH THE TERMS AND CONDITIONS
CONTAINED IN THE ORDER.” Clause # 054 of the purchase order, which requires Wesco to
indemnify Chrysler, conflicts with a provision in Wesco’s terms and conditions requiring
Chrysler to indemnify Wesco. Because an acceptance must be in strict compliance with the offer
in order for an agreement to be formed, no contract was formed at this point. Kloian, supra at
452-453. Rather, Chrysler’s purchase order constituted a rejection of Wesco’s offer, and instead
was a counteroffer. Harper Bldg Co v Kaplan, 332 Mich 651, 655; 52 NW2d 536 (1952); see
also 2 Williston, Contracts (4th ed), § 6.11, pp 110-117 (“[B]ecause the offeror is entitled to
receive what it is it has bargained for, if any provision is added to which the offeror did not
assent, the consequence is not merely that the addition is not binding and that no contract is
formed, but that the offer is rejected, and that the offeree’s power of acceptance is thereafter
terminated.”).
Wesco accepted this counteroffer by performing the contract work. See Sanchez v Eagle
Alloy, Inc, 254 Mich App 651, 666; 658 NW2d 510 (2003) (“A meeting of the minds can be
found from performance and acquiescence in that performance.”); Williston, § 6.25, pp 331-341,
350-357 (noting that the drafters of the Restatement Second take the position that, absent a
contrary indication in the offer, the offeree will be entitled to accept either by promising to
perform or by rendering performance). Therefore, Chrysler’s August 8, 2002, purchase order
constitutes the agreement between the parties. Wesco’s subsequent issuance of an invoice
containing different terms and conditions, despite its inclusion of a conditional assent clause, had
no effect on the parties’ preexisting agreement.1
Although the trial court correctly held that the August 8, 2002, purchase order constituted
the contract, we believe it erred by ruling that the terms of the indemnity clause of that contract
applied to an act and injury occurring before August 8, 2002.
1
Wesco’s reliance on Power Press Sales Co v MSI Battle Creek Stamping, 238 Mich App 173;
604 NW2d 772 (1999), is misplaced, as that case addressed issues under the UCC, which is
inapplicable to this case.
-4-
“This Court construes indemnity contracts in the same manner it construes contracts
generally.” Badiee v Brighton Area Schools, 265 Mich App 343, 351; 695 NW2d 521 (2005).
“An unambiguous contract must be enforced according to its terms.” Id. (quotation marks and
citation omitted). “If indemnity contracts are ambiguous, the trier of fact must determine the
intent of the parties.” Id. “While it is true that indemnity contracts are construed strictly against
the party who drafts them and against the indemnitee,” id. at 352 (quotation marks and citation
omitted), that principle only applies if the contract is ambiguous. G-Tech Professional Staffing,
Inc, supra at 187. Whether a contract is ambiguous is a question of law for the court to decide.
Coates v Bastian Bros, Inc, 276 Mich App 498, 503; 741 NW2d 539 (2007).
In arguing that the indemnification provision cannot be applied retroactively, Wesco
correctly notes the general rule that a contract “cannot be construed to operate retrospectively,”
In re Slack Estate, 202 Mich App 627, 629; 509 NW2d 861 (1993), unless, of course, the parties
expressly provide so in their agreement. See Hyatt v The Grover & Baker Sewing Machine Co,
41 Mich 225, 227; 1 NW 1037 (1879) (holding that surety contract would only apply
prospectively unless the contract specified differently); Brockway v Petted, 79 Mich 620, 626; 45
NW 61 (1890) (surety contract only applies to future events unless otherwise provided in
contract); Watson Wyatt Corp v SBC Holdings, Inc, 438 F Supp 2d 746, 750-751 (ED Mich,
2006) (applying Michigan law), rev’d in part on other grounds 513 F3d 646 (CA 6, 2008). These
decisions are entirely consistent with the principle that it is the contract language freely agreed to
by the parties that controls. Rory v Continental Ins Co, 473 Mich 457, 468; 703 NW2d 23
(2005). Thus, we again turn to the indemnity language chosen by the parties.2
The indemnification provision in Chrysler’s purchase order provides, “Seller . . . shall
protect, defend, hold harmless, and indemnify DaimlerChrysler from and against any and all loss
. . . arising out of or related to the performance of any work in connection with this contract.”
This plain and unambiguous language makes clear that indemnification applies only to any loss
that is related to work performed in connection with the August 8, 2002, contract. That contract
required labor and material to be supplied for repair of the capacitor bank, and all of that work
was started and completed after August 8, 2002. Obviously, the Stephens injury occurred well
before the contract was formed (indeed, even before an offer was even made), and was not
related to the work performed on the capacitor bank. Consequently, Stephens’s injury was not
covered by the indemnity clause.
2
Although neither relevant nor necessary to our decision under Michigan law, we note in passing
that the rule in Michigan is consistent with that in several other states. See, e.g., Pena v Chateau
Woodmere Corp, 304 AD2d 442, 443-444; 759 NYS 2d 451 (2003) (indemnity provision does
not apply to injury that occurred before effective date of contract unless explicitly stated);
Service Merchandise Co v Hunter Fan Co, 274 Ga App 290, 296-297; 617 SE2d 235 (2005)
(same conclusion under Georgia law), and Servco Pacific Inc v Dods, 193 F Supp 2d 1183, 1193
(D Hawaii, 2002) (Hawaiin law).
-5-
DaimlerChrysler relies on G-Tech Professional Staffing, Inc, supra, as well as several
unpublished, non-precedental decisions,3 in support of its argument that the indemnity clause
covered Stephens’s precontract injury. But all G-Tech recognized is that the words “related” and
“connecting” within an indemnity provision required an expansive reading of what was “related”
or “connected” to the work performed under the contract. See G-Tech Professional Staffing Inc,
supra at 186-187.4 That conclusion, however, does not assist us in resolving the issue presented
here. It is one thing to decide whether an injury occurring during the term of the contract falls
within the contract’s coverage language, but it is quite another to decide whether a party has
agreed to indemnify another for an injury that occurred before the indemnity provision was
agreed upon. Hence, unlike in G-Tech, where the Court was addressing whether a postcontract
injury was related to the work performed under the contract, we must look to whether the parties
provided language that shows an intent to require indemnification for precontract activity. As
we have explained, there is no such language, and Stephen’s precontract injury is not covered by
the indemnity provision.
Reversed and remanded for entry of a judgment in favor of Wesco. We do not retain
jurisdiction.
/s/ Christopher M. Murray
/s/ William C. Whitbeck
/s/ Michael J. Talbot
3
See MCR 7.215(C)(1).
4
We also point out that the injury caused in G-Tech occurred after formation of the contract.
See id. at 187.
-6-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.