Opinion ID: 76709
Heading Depth: 1
Heading Rank: 1

Heading: Breach of Contract: Pricing System

Text: At the heart of the Dealers' breach of contract claim is their allegation that Ford violated its contractual obligations to its dealers when it instituted its new pricing scheme. The Dealers contend that Ford had an obligation to sell its trucks at prices previously published to all authorized truck dealers. Ford's new pricing system, specifically the individualized Appeal-Level CPA program, allegedly violates this obligation. The Dealers also contend that faxing an individualized, transaction-specific price to one dealer, as is normal procedure during an Appeal-Level CPA negotiation, fails to meet Ford's obligation to sell its product at only pre-published prices. When the language of a contract is clear and unambiguous, then the contract is not open to construction or interpretation and must simply be enforced as written. Equitable Life Assurance Soc'y of the United States v. Poe, 143 F.3d 1013, 1016 (6th Cir.1998); Fragner v. American Community Mut. Ins. Co., 199 Mich.App. 537, 540, 502 N.W.2d 350 (1993). 4 If the contract terms are inconsistent on their face, or are reasonably and fairly susceptible to multiple understandings and meanings, however, the contract is ambiguous. Poe, 143 F.3d at 1016; Cincinnati Ins. Co. v. Federal Ins. Co., 166 F.Supp.2d 1172, 1177 (E.D.Mich.2001). The court must determine, as a matter of law, whether or not a contract is ambiguous. Steinmetz Elec. Contractors Ass'n v. Local Union No. 58, 517 F.Supp. 428, 432 (E.D.Mich.1981). Moreover, contracts should not be interpreted in a manner that renders any term or clause of that contract mere surplusage. Fireman's Fund Ins. Cos. v. Ex-Cell-O Corp., 702 F.Supp. 1317, 1325 (E.D.Mich.1988); Associated Truck Lines, Inc. v. Baer, 346 Mich. 106, 110, 77 N.W.2d 384 (1956) (Every word in the agreement must be taken to have been used for a purpose, and no word should be rejected as mere surplusage if the court can discover any reasonable purpose thereof which can be gathered from the whole instrument.). A simple disagreement between the parties as to the meaning of contractual terms, however, does not render a contract ambiguous. Poe, 143 F.3d at 1016. Paragraph 10 governs prices and charges under the contract, and states that Ford will sell its products to the dealer in price schedules or notices published in accordance with the Heavy Duty Truck Terms of Sale Bulletin or Parts and Accessories Terms of Sale Bulletin. 5 The contract further provides that Ford has the right to change its prices by issuing a new HEAVY DUTY TRUCK or PARTS AND ACCESSORIES TERMS OF SALE BULLETIN, new price schedules, or other notices. Ford contends that its Appeal-Level CPA program does not breach its contract with the Dealers because the contract language gives it the power to establish transaction-specific prices with each individual dealer. Ford seizes upon the singular Dealer in the contract language and contends that it is only obliged to publish its prices to the Dealer; accordingly, Ford is not obliged to sell its products only at prices previously distributed to all dealers. Further, Ford argues that when it faxes its decision on Appeal-Level CPA to an individual dealer, it is simply changing its price through issuance of a notice as provided for in the contract. Even accepting Ford's posited interpretation as a reasonable interpretation of paragraph 10, however, we cannot construe the contract to support only Ford's interpretation to the exclusion of other interpretations. The Sales and Service Agreement requires prices to be set forth in schedules or notices in accordance with either the Heavy Duty Truck or Parts and Accessories Terms of Sale bulletins. Section 1(g) of the contract defines the Heavy Duty Truck Terms of Sale Bulletin as the latest HEAVY DUTY TRUCK TERMS OF SALE BULLETIN and amendments thereto furnished to the Dealer from time to time by the Company setting forth the terms of sale and ordering procedures applicable to sales of HEAVY DUTY TRUCKS to Authorized Ford Heavy Duty Truck dealers.  R12-2 (emphasis added). Similarly, section 1(h) also describes the Parts and Accessories sales bulletin as a document setting forth terms of sale for all authorized dealers. Id. Thus, while each individual dealer contract may only impose obligations on Ford with respect to that dealer, the contractual language suggests that one of Ford's obligations to the individual dealer is to maintain and distribute bulletins which contain sale information pertinent to all dealers. The contract consistently couples the price schedules and notices with these dealer-wide bulletins and provides that price schedules and notices are to be published in accordance with these dealer-wide bulletins. Mindful of our obligation to consider every word and term in the agreement, we believe a reasonable interpretation of paragraph 10 would be to require Ford to publish its price schedules and other notices in accord with the truck and parts bulletins: containing sale information applicable to all dealers, and published to all dealers. Thus, we cannot conclude that the language of Paragraph 10 admits of no interpretation other than Ford's suggestion that the contract only requires it to deliver to each individual dealer the prices at which Ford will sell its products to that dealer. At the very least, the language of the contract is ambiguous as to whether price schedules and other notices published in accordance with dealer-wide bulletins could ever be in nature dealer-specific. The additional language in the Heavy Duty Truck contract creates further ambiguity. The Heavy Duty Truck contract, unlike the Truck contract, imposes an additional obligation upon Ford to make available to the Dealer price schedules for HEAVY DUTY TRUCKS for distribution to Authorized Ford Truck dealers in the DEALER'S LOCALITY, or the Company may directly distribute such price schedules to such dealers. This contractual language contemplates, at least with regard to Ford's heavy truck dealerships, that Ford would prepare and distribute pricing schedules that were applicable to all dealers in a given locality, not just the individual dealer named in the contract. From this provision, then, one reasonable interpretation of the contract would seem to require Ford to sell its products at prices applicable to all dealers in a given locality. Given that the preceding portion of paragraph 10, common to both truck and heavy truck Sales and Service Agreements, could be reasonably interpreted to require price schedules and notices to be published at a minimum locality-wide, we cannot find that the contractual language in the paragraph clearly and unambiguously allows of only one interpretation, one that allows Ford to publish notices of prices that are specific to that dealer and that dealer alone. Without such a finding, we cannot interpret contractual language as a matter of law. In light of our finding, we must reverse the district court's award of summary judgment and remand this issue to that court for a trial on the merits, including a determination of the contract meaning. 6