Huron Tool and Engineering Co. v. Precision Consulting Services, Inc.

Majority - Michael J. Kelly, J.

No, the economic loss doctrine bars a fraud claim when the alleged misrepresentations concern the quality and characteristics of goods sold and are indistinguishable from the contract and warranty terms; however, a circuit court cannot resolve material factual disputes regarding a contract's completion date at summary disposition for purposes of the UCC statute of limitations. The court first addressed the economic loss doctrine, which holds that where a purchaser suffers only economic losses due to a product not working properly, their remedy lies in contract alone, to prevent contract law from being 'drowned in a sea of tort.' While acknowledging Neibarger v Universal Cooperatives, Inc. applied the doctrine to non-intentional torts, the court found the doctrine's application to intentional torts like fraud to be an unaddressed issue in Michigan. Reviewing other jurisdictions, the court adopted an exception for 'fraud in the inducement.' This type of fraud involves pre-contractual conduct where a party is tricked into contracting, thereby undermining their ability to negotiate fair terms. This is distinct from fraud concerning the quality or character of the goods themselves, which is typically addressed by contract and warranty terms. The court emphasized that fraud in the inducement is 'extraneous to the contract,' unlike fraud 'interwoven with the breach of contract,' which relates to the breaching party’s performance and does not create an independent tort action. Applying this distinction to Huron Tool's complaint, the court found that the alleged fraudulent representations concerned the 'quality and characteristics of the software system sold.' These representations were 'indistinguishable from the terms of the contract and warranty' that Huron Tool alleged were breached. Therefore, Huron Tool's fraud allegations were not extraneous to the contractual dispute and were restricted to UCC contractual remedies, making the circuit court's dismissal of the fraud claim proper. Separately, regarding Huron Tool's remaining contractual claims, the court found that the circuit court improperly made findings of fact concerning the contract's completion date and the accrual of the UCC's four-year statute of limitations. A material factual dispute existed, evidenced by conflicting affidavits from Huron Tool's vice president and defendant Wulffenstein regarding whether key software components were installed by the payment date or much later. The court held that a contract provision stating final payment was due upon installation completion did not mean payment itself was tantamount to completion, especially given evidence of continued work. Thus, the circuit court erred in granting summary disposition on the contractual claims. The court affirmed in part, reversed in part, and remanded the case for further proceedings on the contractual claims.