LITIGATION 6: The terms of the agreement prevails over the course of performance.

This case arises from a contract dispute between plaintiff and defendant. The parties dispute not whether defendant is contractually obligated to pay plaintiff for certain purchases it made from plaintiff, but rather when that payment was due.

In the 10 years preceding this lawsuit, defendant purchased numerous technology products from plaintiff. Defendant’s purchases from plaintiff were commemorated through purchase orders and corresponding invoices. The purchase orders and invoices identified the products purchased and the price, and each invoice indicated that the payment term was net 45, which the parties agree means 45 days, and also included the statement that a service charge at the rate of 1.5% per month (18% per annum) will be charged on all accounts past due. Any account over 60 days from the date of invoice will be automatically placed on credit hold. But according to defendant, this provision of the parties’ agreement was never enforced.

According to defendant, plaintiff would send defendant an invoice when delivering the goods to defendant, and defendant would pay plaintiff after defendant performed an account reconciliation process, which would take anywhere from 67 days to 390 days from the date the invoice was issued. Defendant contends that despite the contract language, plaintiff never considered such payments late and never placed a credit hold on defendant regardless of when defendant paid.

The parties do not dispute that between July 13, 2016, and January 30, 2017, defendant purchased numerous products from plaintiff. According to plaintiff’s complaint, the amount of defendant’s purchases from plaintiff during this period was $490,039.94. Plaintiff contends that although it sent defendant a balance statement reflecting the transactions between July 13, 2016, and January 30, 2017, defendant failed to pay plaintiff.

Plaintiff initiated action against defendant, alleging breach of contract, account stated, and unjust enrichment. Plaintiff moved for summary disposition under MCR 2.116(C)(10), arguing that there was no genuine issue of material fact regarding defendant’s failure to pay plaintiff.

The trial court determined that under the UCC, the express terms of the parties’ agreements prevailed over the course of their performance and course of dealing. Although a course of performance may show that parties have waived a specific contractual term under MCL 440.1303(6), the statute does not similarly provide that a course of dealing may demonstrate waiver.

Although the parties may have developed a course of dealing over their 10-year business relationship in which defendant never tendered payment within 45 days from the issuance of an invoice, MCL 440.1303(5)(a) nonetheless dictates that the 45-day payment term prevails over any course of dealing. Any modification of that term must satisfy the statute of frauds. MCL 440.2209(3). Here, no such written modification exists, and the statute of frauds therefore bars defendant’s argument that plaintiff modified the 45-day payment term.

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