QUALITY PRODUCTS & CONCEPTS COMPANY V NAGEL PRECISION INC
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STATE OF MICHIGAN
COURT OF APPEALS
QUALITY PRODUCTS AND CONCEPTS
COMPANY,
UNPUBLISHED
March 21, 2000
Plaintiff-Appellant,
v
No. 207538
Wayne Circuit Court
LC No. 96-612160 CK
NAGEL PRECISION, INC.,
Defendant-Appellee.
Before: White, P.J., and Hood and Jansen, JJ.
PER CURIAM.
Plaintiff appeals as of right from the circuit court’s order granting defendant’s motion for
summary disposition pursuant to MCR 2.116(C)(10) in this contract dispute. We reverse.
I
Plaintiff corporation is a former sales representative of defendant corporation, a manufacturer of
large industrial machinery. Plaintiff argues that a question of fact remained whether defendant’s silent
acquiescence in plaintiff’s procurement of business from Giddings & Lewis and E
x-Cell-O1 and the
existence of written documents related thereto constituted a “quantum meruit/procuring cause claim, an
implied contract, a waiver, a modification and/or a subsequent agreement entitling plaintiff to
commissions.” We agree that plaintiff presented sufficient evidence to survive a motion for summary
disposition.
A motion for summary disposition under MCR 2.116(C)(10) tests the factual support for a
claim and is reviewed de novo. Smith v Globe Life Ins Co, 460 Mich 446, 454; 597 NW2d 28
(1999). The court must consider the pleadings, affidavits, depositions, admissions and other
documentary evidence in the light most favorable to the nonmovant. Id. at 454, quoting Quinto v
Cross & Peters Co, 451 Mich 358, 362-363; 547 NW2d 314 (1996). The movant has the initial
burden of supporting its position by affidavits, depositions, admissions, or other documentary evidence;
the burden then shifts to the nonmovant to establish that a genuine issue of disputed fact exists. Id. at
455. If the nonmovant fails to present documentary evidence establishing the existence of a material
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factual dispute, the motion is properly granted. Id. We review the circuit court’s determination to deny
plaintiff’s motion for reconsideration for abuse of discretion. Cason v Auto Owners Ins Co, 181 Mich
App 600, 609; 450 NW2d 6 (1989).
II
The facts viewed in a light most favorable to plaintiff are that the parties orally agreed in 1990
that plaintiff would provide sales representation for defendant and receive a commission on sales within
its assigned area. On August 1, 1993, the parties entered into a written sales representative agreement,
which stated that plaintiff “hereby accepts such appointment subject to the terms and conditions set
forth herein and expressly acknowledges that its Territory is both limited and nonexclusive.” The
agreement provided that either party could terminate the agreement for any or no reason with ninety
days written notice. An exhibit incorporated into the written agreement stated that plaintiff’s territory
comprised “all engine, axle, brake and drum plants in the State of Michigan,” and additionally named a
number of companies located outside of Michigan. The agreement excluded from plaintiff’s territory “all
House Accounts and: All Transmission plants and other machine tool suppliers (turn key operations).”
The agreement also stated:
Nagel reserves the right during the term of this Agreement to identify certain accounts
within the Territory as “House Accounts.” House Accounts include, but are not limited
to, customers with whom Nagel has or is developing a direct selling relationship.
There are no House Accounts at the present time.
In 1994, with the knowledge of Rolf Bochsler, defendant’s vice-president and chief operating
officer, Kenneth Barton, plaintiff’s principal, began to work with Chrysler Corporation to procure
business from Giddings & Lewis and Ex-Cell-O. Pursuant to the written agreement, plaintiff submitted
written status reports to Bochsler in 1994 and the first few months of 1995. Plaintiff appended to its
response to defendant’s motion for summary disposition copies of several such reports that indicated
that Ex-Cell-O and Giddings & Lewis had been quoted prices and/or were ordering parts from
defendant. These reports included “P.O. Status Reports” in chart form, which were dated June 1,
1994, October 1, 1994, and December 1, 1994, and in which plaintiff listed Giddings & Lewis 3.3 and
3.9 liter machines, and stated pertinent to the Giddings & Lewis orders a commission percentage figure
and expected commission of $63,000 for each machine. Plaintiff also submitted below purchase orders
Giddings & Lewis sent directly to defendant dated from May 19, 1994 to December 5, 1994, all of
which stated “confirming to Ken Barton,” and specified delivery dates on the 3.3 liter machine of
February 28, 1995 and of March 31, 1995 on the 3.9 liter machine.3 Plaintiff also submitted below a
copy of a handwritten note from Barton to Bochsler dated July 18, 1994, in which Barton stated that
QPAC’s accountant was requesting an updated commission report, and listed the orders plaintiff’s
records showed, which included Giddings & Lewis orders for one 3.3 liter and one 3.9 liter honing
machine.
2
In early 1995, defendant proposed modifying the parties’ written agreement. Barton testified at
deposition that in February of that year Bochsler advised him for the first time4 that defendant would not
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pay commissions on the Giddings & Lewis and Ex-Cell-O business. Bochsler testified at deposition
that he tried to modify the parties’ agreement in 1995 not because he was dissatisfied with plaintiff’s
services, but because plaintiff’s workload was too large to handle. Barton then requested an accounting
of orders for which he had allegedly earned a commission.
By letter dated March 8, 1995, Bochsler terminated plaintiff’s contract effective June 6, 1995.
Defendant provided plaintiff an accounting in October 1995, stating that no commission was due on the
Giddings & Lewis business because it was a turnkey operation and a machine tool supplier, and
excluded from plaintiff’s territory under the written agreement.
Plaintiff filed its three-count complaint in March 1996, alleging breach of contract, “Oral
contract, implied/express contract/modification quantum meruit-unjust enrichment,” and requesting
declaratory relief.
The circuit court’s opinion granting defendant’s motion for summary disposition stated in
pertinent part:
. . . . For purposes of this motion the court must look at the facts in a light most
favorable to plaintiff. Therefore, the court will accept as true that defendant knew about
plaintiff’s efforts to procure sales with the machine tool suppliers and that defendant
never objected to plaintiff’s efforts.
Plaintiff seeks quantum meruit relief, alleging that defendant impliedly consented to
modify the written agreement and/or waived the requirement that modifications be in
writing by failing to object to plaintiff’s actions or notify plaintiff that there would be no
commission. Plaintiff relies on the case of Klas v Pearce Hardware & Furniture Co,
202 Mich 334, 339-340 (1918), where the court held that defendant impliedly waived
the requirement that a modification be in writing when he was benefitted [sic] by
plaintiff’s services and was aware of and authorized changes or deviations to the
written contract. (Emphasis added).
The facts of the case at bar are distinguishable from the facts in Klas. When asked to
put the request for extra work in writing as required by the written contract, the
defendant in Klas replied that “there was no necessity of going back to the contract on
that point, that they were not children, they were willing to pay for any work they would
order.” Id at 336.
In the case at bar, there is no evidence that defendant did anything to encourage or
authorize plaintiff to seek sales outside of the express territory found in the written
contract. Plaintiff unilaterally attempted to modify the written sales agreement by
soliciting sales from suppliers outside of the territory expressly defined in the agreement.
Plaintiff alleges that defendant encouraged them to continue seeking the Giddings &
Lewis and Ex-Cell-O sales, however, plaintiff has presented no evidence to support this
allegation. While there is evidence that defendant had knowledge of plaintiff’s efforts,
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there is no evidence that defendant encouraged plaintiff or mutually consented to extend
the sales agreement to machine tool suppliers. The mere fact that defendant knew of
plaintiff’s activities and did not object to them is not enough to constitute a waiver of the
written modification requirement. The court finds no question of fact for the jury to
decide. Therefore, defendant’s motion for summary disposition is hereby GRANTED.
Plaintiff’s motion for reconsideration argued that the circuit court’s opinion overlooked that a
question of fact remained whether defendant’s silent acquiescence and/or silent encouragement of
plaintiff’s procurement of the Giddings & Lewis and Ex-Cell-O business gave rise t an implied
o
contract. Plaintiff also argued that waiver could be shown by circumstance or by a course of acts and
conduct, that waiver is a mixed question of law and fact and that it was for the jury to determine
whether the facts of the case constituted waiver as defined by the court. The circuit court denied
plaintiff’s motion for reconsideration. This appeal ensued.
III
Plaintiff does not dispute that the written agreement expressly excluded machine tool suppliers
or that Giddings & Lewis and Ex-Cell-O were machine tool suppliers. Further, there is no evidence in
the record that the parties expressly agreed orally or in writing to modify the written agreement.
Nevertheless, we conclude there were genuine issues remaining on the issues of waiver and contract
implied in law.
A
A written contract may be varied by a subsequent parol agreement unless forbidden by the
statute of frauds, even though the original contract provides that it is not to be changed except by written
agreement. Morley Bros v Construction Co, 266 Mich 52, 55; 253 NW 213 (1934); see also 17A
Am Jur 2d, Contracts, § 524, p 540, which states in pertinent part:
Although a simple contract completely reduced to writing cannot be contradicted,
changed, or modified by parol evidence of what was said and done by the parties at the
time it was made, nevertheless, by the rules of the common law, it is competent for the
parties to a simple contract in writing, before any breach of its provisions, altogether to
waive, dissolve, or abandon it, or to add to, change, or modify it, or vary or qualify its
terms, and thus to make it a new one. The reason for this is that simple contracts,
whether written or otherwise, are, in the absence of a statute changing the rule, of the
same dignity in contemplation of law, and therefore the written contract may be
changed, modified, or waived in whole or in part by a subsequent one, express, written,
oral, or implied. Accordingly, extrinsic evidence may be relied on to establish that the
parties had modified their agreement after its execution.
***
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. . . . It is also competent for the parties to a contract to vary its terms by a subsequent
course of dealing.
Regarding waiver, in Klas v Hardware & Furniture Co, 202 Mich 334, 339-340; 168 NW 425
(1918), the Supreme Court addressed the question whether the defendant had expressly or impliedly
waived a condition in the parties’ written contract providing that written permission was required to do
extra work, and whether waiver was a question for the jury:
The law has been stated as follows:
“Waiver is a matter of fact to be shown by the evidence. It may be shown by express
declarations, or by acts and declarations manifesting an intent and purpose not to claim
the supposed advantage; or it may be shown by a course of acts and conduct, and
in some cases will be implied therefrom. It may also be shown by so neglecting
and failing to act as to induce a belief that there is an intention or purpose to
waive. Proof of express words is not necessary, but the waiver m be shown by
ay
circumstances or by a course of acts and conduct which amounts to an estoppel.” 40
Cyc. p. 267.
“Waiver is a mixed question of law and fact. It is the duty of the court to charge and
define the law applicable to waiver, but it is the province of the jury to say whether the
facts of the particular case constitute waiver as defined by the court.” 40 Cyc. p. 270.
“A provision in the contract that all extra work shall be ordered by the architect in
writing may be waived by the parties, the q
uestion whether there has been such a
waiver usually being one of fact, depending on the facts and the circumstances of the
particular case. Thus such waiver may be implied where the order and the extra
work are known to the owner, or where the extra work is orally ordered by the
owner or called for by the agent in the plans and specifications; or the owner by his
conduct may be estopped from setting up such provision as a defense.” 9 Corpus Juris,
p. 846.
See also, 17A Am Jur 2d, supra, § 656, stating in pertinent part:
. . . . An implied waiver exists when there is either an unexpressed intention to waive,
which may be clearly inferred from the circumstances, or no such intention in fact to
waive, but conduct which misleads one of the parties into a reasonable belief
that a provision of the contract has been waived.
We conclude that plaintiff presented sufficient evidence below to raise a genuine issue of fact
whether defendant’s alleged silence in the face of Barton’s activity and reporting constituted a waiver.
The circuit court’s interpretation of Klas was unduly restrictive; plaintiff did not need to show that
defendant expressly encouraged or authorized sales outside plaintiff’s territory.
B
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The circuit court did not address the contract implied in law theory, which plaintiff had briefed
below. Regarding implied contracts, 5A Michigan Civil Jurisprudence, Contracts, § 273, p 368, states
in pertinent part:
There are two kinds of implied contracts; one implied in fact, and the other implied in
law. The first does not exist unless the minds of the parties meet, by reason of
words or conduct. The second is quasi or constructive, and does not5 require a
meeting of minds, but is imposed by fiction of law, to enable justice to be accomplished,
even if no contract was intended. In order to afford the remedy demanded by exact
justice and adjust that remedy to a cause of action, the law sometimes indulges in the
fiction of a quasi or constructive contract, with an implied obligation to pay for benefits
received. . . . [See also Auburn v Brown, 60 Mich App 258, 263; 230 NW2d 385
(1975); Detroit v Highland Park, 326 Mich 78, 100; 39 NW2d 325 (1949); 42 CJS
§§ 3, 4, Implied and Constructive Contracts, pp 5-7.6]
“The process of imposing a ‘contract-in-law’ to prevent unjust enrichment is an activity which should be
approached with some caution.” In re McCallum Estate, 153 Mich App 328, 335; 395 NW2d 258
(1986). Such a claim has as essential elements:
. . . (1) receipt of a benefit by the defendant from the plaintiff and (2) which benefit it is
inequitable that the defendant retain. Even where a person has received a benefit from
another, he is liable to pay therefor only if the circumstances of its receipt or retention
are such that, as between the two persons, it is unjust for him to retain it. [Barber v
SMH (US) Inc, 202 Mich App 366, 375; 509 NW2d 791 (1993). See also In re
Lewis Estate, 168 Mich App 70, 74; 423 NW2d 600 (1988).]
Plaintiff argued and defendant did not dispute that it usually takes a substantial amount of time,
i.e., years, for a manufacturer’s representative to develop sales of the types of products defendant
supplier manufactures, and that once a customer accepts a quote, the supplier is virtually assured of
eventually obtaining the order and having the opportunity to continue to supply the customer. Plaintiff
presented evidence below that throughout 1994 and early 1995 it submitted to defendant ongoing status
reports reflecting purchase orders it had procured, including from Giddings & Lewis and Ex-Cell-O,
and that defendant had received from Giddings & Lewis a number of written purchase orders for
business procured by Barton that stated “confirming to Ken Barton”. Defendant does not dispute that it
had knowledge in 1994 that plaintiff was calling on these businesses and procured their business, nor
does defendant dispute that plaintiff’s ongoing written status reports set forth a commission percentage
figure and sum plaintiff anticipated being paid for commission on the honing machine orders. Barton
testified that Boschler did not inform him that defendant did not intend to pay the commissions until
February 1995. This evidence is sufficient to raise a genuine issue of fact whether a contract implied in
law arose, i.e., whether plaintiff’s procurement of business from Giddings & Lewis and Ex-Cell-O
benefited defendant, and whether it is unjust that defendant retain the benefit without compensating
plaintiff.7
-6
Although an implied in law contract cannot be enforced while there is an express contract
covering the same subject matter in force between the parties. Scholz v Montgomey Ward & Co, Inc,
437 Mich 83, 93; 468 NW2d 845 (1991), the express contract here is clearly confined to the parties’
duties and obligations with respect to a particular territory8 The contract does not purport to set forth
the duties and obligations of the parties with respect to the sales at issue.
To the extent the circuit court’s order dismissed claims based on waiver and a contract implied
in law, we reverse and remand for further proceedings consistent with this opinion. We do not retain
jurisdiction.
/s/ Helene N. White
/s/ Harold Hood
/s/ Kathleen Jansen
1
Plaintiff’s response to defendant’s motion for summary disposition stated that, with the exceptions of
Giddings & Lewis and Ex-Cell-O, plaintiff stipulated to dismiss its claim for commissions on all orders
defendant had not accepted prior to June 6, 1995, the effective date of termination of the parties’
written agreement, provided that an accounting was made to verify the commissions due and that the
orders were in fact and in good faith legitimately accepted substantially subsequent to June 6, 1995.
Plaintiff noted that its stipulation had “no effect on Plaintiff’s entitlement to commissions on orders
Defendant previously agreed to pay pursuant to its correspondence dated October 6, 1995 and
February 22, 1996.”
2
In support of its response to defendant’s motion, plaintiff attached excerpts of deposition testimony of
Rolf Bochsler, defendant’s vice president and chief operating officer, in which Bochsler stated that
between the effective date of the parties’ written agreement, and the date he terminated the agreement,
he was aware that plaintiff was calling on Giddings & Lewis and Ex-Cell-O, and that during that time
frame, he and Barton had a number of discussions regarding engine machines that Giddings & Lewis
and Ex-Cell-O were going to build for Chrysler. Bochsler further testified at deposition that Barton
periodically provided him with various documents concerning the status of orders, including “P.O.
Status Reports,” “Quotation Status Reports,” and “R & D Status Reports.” Bochsler claims that
during this period he told Barton that commissions would not be paid on the Giddings & Lewis
business. Barton claims that Bochsler first informed him that commssions w
3
The purchase orders and supplemental purchase orders were for a Nagel honing machine for the 3.9
liter Chrysler Corporation V cylinder block, and honing machine for the 3.3 liter. Also attached to
-6
plaintiff’s response to defendant’s motion was a letter from Giddings & Lewis to defendant which stated
“Attn: Ken Barton.” Giddings & Lewis’ letter also stated that it was placing the purchase order for the
3.9 liter honing machines on hold (P.O. FF021823). The Giddings & Lewis order for the 3.3 liter
honing machine was the subject of supplemental purchase orders dated November 23 and December 5,
1994 (FF021814) which stated: “NOTE: 23 Nov 94 addition of $72,700.00 new total
$2,031,920.00 due to following changes . . . “
-7
4
Bochsler asserts, however, that he consistently told Barton that he would not be paid commissions on
the Giddings & Lewis and Ex-Cell-O business.
5
Plaintiff’s memorandum of law in support of its response to defendant’s motion for summary
disposition quoted this provision but excluded the word “not.”
6
The law as stated in Michigan Civil Jurisprudence, supra, is in accord with the analysis of implied
contract theories set forth at 42 CJS §§ 3, 4, Implied and Constructive Contracts, pp 5-7:
A “contract implied in fact,” or an implied contract in the proper sense, arises where the
intention of the parties is not expressed, but an agreement in fact, creating an obligation,
is implied or presumed from their acts, or, as it has been otherwise stated, where there
are circumstances which, according to the ordinary course of dealing and the common
understanding of men, show a mutual intent to contract.
The implication of a mutual agreement must be a reasonable deduction from all the
circumstances and relations of the parties, a contract cannot be implied in fact where the
facts are inconsistent with its existence, and a contract or agreement may not be implied
contrary to the intention or understandings of the parties.
A contract implied in fact does not describe a legal relationship different from that
created by an express contract, and it has been said that an implied-in-fact requires the
same elements as an express contract, i.e., mutual assent, offer, acceptance, and
consideration, differing from an express contract only insofar as it is proved by
circumstantial evidence rather than by express written or oral terms.
The elements of an implied in fact agreement call for a factual determination and can be
adjudicated only on an ad hoc basis, by taking into consideration the peculiar facts
presented by the individual case.
§ 4. Constructive or Quasi Contracts
***
Contracts implied in law or quasi contracts, also called constructive contracts, are
inferred by law as a matter of reason and justice from the acts and conduct of the
parties and circumstances surrounding the transactions, and are imposed for the
purpose of bringing about justice without reference to the intentions of the parties.
A contract implied in law is an equitable principle that is totally unrelated to traditional
concepts of contract law. It is, rather a remedy imposed by the court, and has been
said to be nothing more than a legal fiction, an equitable vehicle for obtaining a just
result.
-8
A quasi contract is not a contractual obligation in the true sense because there is no
agreement; it is an obligation that does not require privity, and that will be imposed by
law even though it is clear that no promise was ever made or intended. Indeed, such an
obligation is sometimes even imposed against a clear expression of intent, and one may
become an obligor without ever consenting to the creation of the obligation.
Generally, the creation of a quasi contract requires a lawful act, a benefit conferred on
defendant by plaintiff, an appreciation by defendant of the benefit, and the acceptance
and retention by defendant of the benefit under circumstances such that it would be
inequitable for him to retain the benefit without payment for its value. An obligation is
imposed by law to promote justice and to prevent fraud or wrongdoing. A quasi
contract is implied by law in order to remedy the wrongful enrichment of one party at
the expense of another, and is designed to restore the aggrieved party to his former
position by the return of the thing delivered or the money expended.
***
On the other hand, the court properly resorts to quasi contract only in the absence of an
express contract or a contract implied in fact. Additionally, there is no general rule that
a recipient of a benefit must pay for the benefit irrespective of circumstances. To
recover under the theory of implied contract, plaintiff is usually required to establish that
defendant impliedly or expressly requested the benefits conferred. . .
Relief will be denied if plaintiff did not contemplate a fee in consideration of the benefit
or if defendant could not reasonably believe plaintiff expected a fee. . . .
Although a quasi contract is different from an implied in fact or express contract, it is
enforceable by an action ex contractu.
7
Plaintiff also argued below that the sales representatives’ commissions act (SRCA), MCL 600.2961
et seq.; MSA 27A.2961 et seq. applied, but does not make that argument on appeal.
8
The agreement recites that Nagler, in need of the services of a representative in the territory, and
QPAC, being willing and able to provide the services, agree that QPAC is appointed the authorized
sales representative in the territory, and accepts the appointment subject to the terms and conditions of
the contract. QPAC agrees to use its best efforts within the territory, and Nagel agrees to pay as
payment in full for QPAC’s services under the contract certain commissions for orders procured and
delivered within the territory. The agreement purports to provide the entire agreement of the parties
“relative to the subject matter hereof.”
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