## Facts

- Webcor Packaging Corp. manufactured cartons used to package AutoZone’s “Duralast” brake parts.
- Webcor’s recurring contracts for cartons were primarily with AutoZone’s independent parts vendors, not with AutoZone, though AutoZone sometimes referred vendors to Webcor and occasionally bought cartons directly by purchase order.
- AutoZone supplied branding artwork and specifications for the Duralast packaging.
- Webcor initially kept about a 30-day supply of Duralast cartons in inventory; as demand rose, Webcor considered increasing inventory to a 60-day supply.
- Webcor claimed that an AutoZone purchasing manager orally promised AutoZone would pay for a 60-day inventory if it became obsolete; AutoZone disputed that any such promise was made, and there was no signed writing.
- In 1993, AutoZone decided to discontinue Duralast brake packaging and instructed Webcor to stop producing Duralast cartons.
- Webcor was left with unsold, brand-specific carton inventory and sued AutoZone in federal court (diversity) to recover its costs.
- Webcor argued the alleged oral agreement was enforceable under Michigan’s U.C.C. statute of frauds exception for specially manufactured goods.

## Issues

1. Whether the Michigan U.C.C. § 2-201(3)(a) specially manufactured goods exception permits enforcement of an alleged oral promise against an “ultimate purchaser” when the goods were typically sold through intermediaries.
2. Whether, under the circumstances of manufacture and distribution, the Duralast cartons were “to be specially manufactured for the buyer” and “not suitable for sale to others in the ordinary course” so as to remove the claim from the statute of frauds.

## Decision

- The Sixth Circuit affirmed judgment for AutoZone.
- The court held the specially manufactured goods exception did not render the alleged oral promise enforceable against AutoZone on the facts presented.
- The court agreed that the circumstances showed Webcor’s inventory was intended to serve multiple vendor-purchasers in the supply chain rather than a direct contractual buyer relationship with AutoZone for a continuous stock.
- Because no signed writing bound AutoZone and the statutory exception was not satisfied, the statute of frauds barred enforcement.

## Legal Principles

- Under Michigan’s U.C.C. statute of frauds, contracts for the sale of goods priced at $500 or more are generally unenforceable absent a signed writing.
- The specially manufactured goods exception requires proof that (1) goods were specially manufactured for the buyer, (2) the goods are not suitable for sale to others in the ordinary course of the seller’s business, and (3) the seller made a substantial beginning on manufacture or procurement before notice of repudiation.
- In applying the exception, courts may focus on the circumstances of manufacture and the commercial structure (including intermediary purchasers), not merely on the branding or identity of the end-market company.
- The presence of multiple ordinary-course purchasers for the same branded goods within a distribution channel can undercut a claim that the goods were manufactured “for the buyer” and were unsuitable for sale to others for purposes of § 2-201(3)(a).

## Conclusion

The Sixth Circuit refused to enforce an alleged oral inventory-guarantee promise against AutoZone because the Michigan U.C.C. statute of frauds applied and the specially manufactured goods exception was not met where Webcor’s cartons were ordinarily sold to multiple vendor-intermediaries and AutoZone did not sign a written commitment.


Webcor Packaging Corp. v. AutoZone, Inc., 158 F.3d 354 (6th Cir. 1998)