## Facts

- Firwood Manufacturing Company, Inc. manufactured specialized post-cure inflators (PCIs) used in tire production.
- After extended negotiations, Firwood sent General Tire, Inc. an October 9, 1989 letter setting quantity-based pricing on a minimum purchase of 55 units through 1990, with a true-up invoice if fewer than 55 were purchased.
- The letter requested a letter of intent confirming agreement and anticipated purchase dates.
- General Tire sent a letter of intent in February 1990 and issued purchase orders reflecting pricing keyed to a 55-unit commitment.
- General Tire ultimately purchased 22 PCIs and stopped ordering additional units after operational changes.
- Firwood manufactured (or substantially completed) the remaining 33 PCIs, attempted to locate alternative buyers, and resold them over approximately three years at prices below the contract price due to the limited market for the equipment.
- During the resale period, Firwood removed certain components from units identified to the General Tire contract to fill spare-parts orders, replacing them later with newly manufactured parts; the removed components were fungible parts regularly sold in Firwood’s spare-parts business.
- Firwood sued for breach and sought UCC resale damages for the 33 units not purchased, plus interest.

## Issues

1. Whether the jury instructions and evidence permitted a finding that the parties formed a contract obligating General Tire to purchase 55 PCIs.
2. Whether Firwood proved resale damages under Michigan’s UCC § 2-706 where (a) some resold machines contained substituted but fungible parts and (b) the resales occurred about three years after the breach.
3. Whether an award for “lost use of money” interest is recoverable by a seller as incidental damages, or instead constitutes barred consequential damages (with only statutory prejudgment interest available).

## Decision

- The Sixth Circuit affirmed the jury’s finding that a contract obligated General Tire to purchase 55 PCIs and affirmed denial of JMOL and a new trial on contract-formation grounds.
- The Sixth Circuit affirmed the award of $187,513 in UCC § 2-706 resale damages for the 33 PCIs not purchased.
- The Sixth Circuit reversed the $100,476 interest award as impermissible consequential damages to a seller and remanded for recalculation of interest solely as statutory prejudgment interest under Michigan law from the filing date.

## Legal Principles

- A writing can constitute an offer for a minimum quantity commitment, not merely a price quote, when the language and surrounding evidence support an intent to contract for a stated minimum quantity.
- Under UCC § 2-706, a seller may recover the deficiency between the contract price and the resale price if the resale is made in good faith and in a commercially reasonable manner.
- For goods incorporating fungible components, resale damages under § 2-706 are not defeated merely because the resold items are not the identical physical units originally identified to the contract, where substitutions do not affect the resale price or market value.
- Commercial reasonableness of a resale under § 2-706 is context-specific; for specialized equipment with a limited market, a multi-year resale period may be commercially reasonable if the seller acts reasonably to find buyers.
- Under Michigan law as applied, “lost use of money” interest is consequential damages; sellers may recover incidental damages under UCC § 2-710 but not consequential damages, while statutory prejudgment interest may be awarded as provided by state statute.

## Conclusion

The court upheld a jury verdict that General Tire breached a 55-unit contract and that Firwood’s delayed resales with fungible-part substitutions supported UCC § 2-706 deficiency damages, but it disallowed “lost use of money” interest as seller consequential damages and limited interest recovery to Michigan statutory prejudgment interest from the lawsuit’s filing date.


Firwood Mfg. Co. v. Gen. Tire, Inc., 96 F.3d 163 (6th Cir. 1996)