1. Ordinarily, in requirement contracts, where the parties do not fix a quantity figure, is the Buyer held liable for breach of contract for reductions in volumes over previous years?

2. When GM directed Automodular to reduce shifts, change assembly line speed, and change the length of workers’ shifts, in fairness, was not Automodular allowed, even entitled, to a price adjustment to reflect actual increases in its costs of production?

Automodular entered into a series of purchase orders that obligated Delphi to purchase and Automodular to provide all of Delphi’s requirements deliverable to the original equipment manufacturer (OEM), General Motors. Automodular receives directions from the OEM’s final assembly plants, regardless of whether Automodular is under contract to the OEM or Delphi. The purchase orders (“Contracts”) incorporated Delphi’s terms that the Buyer, GM, could require Automodular to implement changes to the specifications or design of the goods or to the scope of any services covered by the Contracts. GM informed Automodular that it needed fewer components and directed Automodular to, among other requirements, reduce shifts, change the assembly line speed, and change the length of workers’ shifts (the “Delphi changes”). As a result, Automodular requested a price increase per unit assembled from Delphi because Automodular believed that such an increase was warranted pursuant to the Contract’s change-in-scope provision. Delphi, however, refused to negotiate any price increase and the matter was litigated.

JUDICIAL OPINION

MARRERO, D. J.… In the instant matter, it was the clear intent of the parties to enter into requirement contracts. In a requirement contract, the parties do not fix a quantity term, but instead, the quantity will be the buyer’s needs of the specific commodity over the contract’s life. Specifically, this intent is demonstrated by language in the Contracts requiring Automodular to supply 100 percent of Delphi’s particular subassembly needs, typically at a fixed price. Because the Contracts are requirement contracts, Delphi cannot generally be held liable under the Contracts for mere reductions in volume unless Delphi acted with bad faith. Automodular has not alleged that Delphi acted with bad faith in reducing its requirements, and the record clearly demonstrates that Delphi’s reduced requirements were a result of GM’s lowered demand, not bad faith on the part of Delphi.

Automodular counters that, although the Contracts may have been requirements contracts, it is entitled to an increase in price because the Delphi Changes altered the scope of services and were not merely reductions in requirements. Section 3 of the Terms states that: Buyer may at any time request [Automodular] to implement changes to the specifications or design of the goods or to the scope of any services or work covered by this Contract, including work related to inspection, testing or quality control … Buyer will equitably determine any adjustment in price or delivery schedules resulting from such changes.…

Automodular argues that by requiring the Delphi Changes, Delphi effectively altered the scope of the services or work covered by the Terms and that, pursuant to 3 of the Terms, Automodular is entitled to a price adjustment…. ………………………………