Quality Products and Concepts Co. v. Nagel Precision, Inc.

                                                                       Michigan Supreme Court
                                                                       Lansing, Michigan 48909
_____________________________________________________________________________________________
                                                                C h i e f J u s ti c e               J u s t ic e s
                                                                Maura D. Corrigan                    Michael F. Cavanagh



Opinion
                                                                                                     Elizabeth A. Weaver
                                                                                                     Marilyn Kelly
                                                                                                     Clifford W. Taylor
                                                                                                     Robert P. Young, Jr.
                                                                                                     Stephen J. Markman
____________________________________________________________________________________________________________________________

                                                                                          FILED JULY 31, 2003





                QUALITY PRODUCTS AND

                CONCEPTS COMPANY,


                        Plaintiff-Appellee,


                v                                                                                   No. 119219 


                NAGEL PRECISION, INC,


                     Defendant-Appellant.

                ___________________________________

                BEFORE THE ENTIRE BENCH


                YOUNG, J.


                        This case implicates fundamental principles of contract


                law.     The primary issue presented concerns the circumstances


                under which a contract can be waived or modified, particularly


                where the contract protects itself against certain methods of


                waiver or modification.                 At the heart of this inquiry is how


                to      resolve         the       tension             between             the      freedom            to


                contract—specifically, in this case, the freedom to enter into


                a    contract       concerning         the     same                 subject   as   the        original

contract—and the provisions of the original contract that


restrict the manner in which the contract’s terms may be


waived or modified.


     We hold that parties to a contract are free to mutually


waive or modify their contract notwithstanding a written


modification or anti-waiver clause because of the freedom to


contract.     However, with or without restrictive amendment


clauses, the principle of freedom to contract does not permit


a   party    unilaterally     to     alter   the    original     contract.


Accordingly,      mutuality   is    the   centerpiece     to    waiving   or


modifying a contract, just as mutuality is the centerpiece to


forming any contract.


     This mutuality requirement is satisfied where a waiver or


modification      is   established    through   clear     and   convincing


evidence     of   a    written     agreement,      oral   agreement,      or


affirmative conduct establishing mutual agreement to modify or


waive the particular original contract. In cases where a


party relies on a course of conduct to establish waiver or


modification, the law of waiver directs our inquiry and the


significance      of    written      modification      and      anti-waiver


provisions regarding the parties’ intent is increased. 


     Plaintiff’s evidence establishes only that defendant


remained silent despite being aware of plaintiff’s conduct


inconsistent with the terms of their contract.                 Mere knowing


silence     generally    cannot    constitute      waiver.       Therefore,


                                     2

plaintiff has not submitted clear and convincing evidence that


the parties mutually agreed to modify or waive their contract.


Accordingly, we reverse the judgment of the Court of Appeals


and reinstate the original judgment of the circuit court


granting summary disposition to defendant.


                              I.   Background


      Plaintiff and defendant entered into a contract under


which plaintiff was to serve as a sales representative for


defendant.     Pursuant to the agreement, plaintiff would earn


commissions    on     sales   made    to     customers     in    plaintiff’s


contractually       designated     sales   territory.           The   contract


negotiated     by    the   parties     not    only     expressly       defined


plaintiff’s sales territory, but specifically excluded sales


to “machine tool suppliers.”               The contract also included


written modification and anti-waiver clauses.


      Despite these provisions, plaintiff solicited sales from


Giddings   &   Lewis    and   Ex-Cell-O.        It    is   undisputed      that


Giddings & Lewis and Ex-Cell-O are machine tool suppliers and


are   therefore     customers      excluded    from    plaintiff’s        sales


territory under the contract.


      Consistent with the unambiguous terms of the contract,


plaintiff was denied commissions on these sales.                      Plaintiff


sought to negotiate an amendment of the contract to include


payment of commissions for sales to machine tool suppliers.


However, plaintiff and defendant could not reach an agreement


                                     3

to reconfigure plaintiff’s sales territory and grant plaintiff


the right to sell products to machine tool suppliers.            As a


result, the parties’ contractual relationship ended.


      Plaintiff filed suit seeking payment of commissions for


its sales to Giddings & Lewis and Ex-Cell-O, alleging breach


of   “oral   contract,   implied/express   contract/modification,


quantum meruit, unjust enrichment.”          Defendant moved for


summary disposition on the basis of the provisions of the


written contract.


      The    circuit   court   granted   summary   disposition     to


defendant, stating in pertinent part:


           For purposes of this motion the court must

      look at the facts in a light most favorable to

      plaintiff.   Therefore, the court will accept as

      true that defendant knew about plaintiff’s efforts

      to procure sales with the machine tool suppliers

      and that defendant never objected to plaintiff’s

      efforts.


           Plaintiff   seeks    quantum   meruit  relief,

      alleging that defendant impliedly consented to

      modify the written agreement and/or waived the

      requirement that modifications be in writing by

      failing to object to plaintiff’s actions or notify

      plaintiff that there would be no commission.

      Plaintiff relies on the case of Klas v Pearce

      Hardware & Furniture Co, 202 Mich 334, 339-340

      (1918), where the court held that defendant

      impliedly   waived    the    requirement   that   a

      modification be in writing when he was benefitted

      by plaintiff’s services and was aware of and

      authorized changes or deviations to the written

      contract.


           The   facts   of   the   case   at  bar   are

      distinguishable from the facts in Klas. When asked

      to put the request for extra work in writing as

      required by the written contract, the defendant in


                                 4

     Klas replied that “there was no necessity of going

     back to the contract on that point, that they were

     not children, they were willing to pay for any work

     they would order.” Id. at 336.


          In the case at bar, there is no evidence that

     defendant did anything to encourage or authorize

     plaintiff to seek sales outside of the express

     territory found in the written contract. Plaintiff

     unilaterally attempted to modify the written sales

     agreement by soliciting sales from suppliers

     outside of the territory expressly defined in the

     agreement.     Plaintiff alleges that defendant

     encouraged them to continue seeking the Giddings &

     Lewis and Ex-Cell-O sales, however, plaintiff has

     presented no evidence to support this allegation.

     While there is evidence that defendant had

     knowledge of plaintiff’s efforts, there is no

     evidence that defendant encouraged plaintiff or

     mutually consented to extend the sales agreement to

     machine tool suppliers.       The mere fact that

     defendant knew of plaintiff’s activities and did

     not object to them is not enough to constitute a

     waiver of the written modification requirement.

     The court finds no question of fact for the jury to

     decide.


     The Court of Appeals reversed and remanded, holding that,


although there was no evidence in the record that the parties


expressly modified the written agreement, there were genuine


issues of material fact regarding the issues of waiver and


implied contract.1     The Court of Appeals relied on Klas v


Pearce Hardware & Furniture Co, 202 Mich 334; 168 NW 425


(1918),   for   the   proposition    that   waiver   of   a   written


modification requirement may be implied where conduct, such as


silence in the face of knowledge, misleads a party into




     1
      Unpublished opinion per curiam, issued March 21, 2000

(Docket No. 207538).


                                5

reasonably believing that a contractual provision has been


waived.


     In lieu of granting leave to appeal, this Court issued


the following order:


          [T]hat part of the Court of Appeals March 21,

     2000, decision which held that a genuine fact issue

     exists regarding whether a contract may be implied

     in law is vacated.      MCR 7.302(F)(1).    Such a

     contract cannot be recognized where, as here, the

     express contract covers the subject sales by

     providing that no commission would be paid for

     them. The case is remanded to the Court of Appeals

     for reconsideration of the issue whether there

     exists a genuine fact dispute regarding whether

     defendant’s alleged silence in the face of

     plaintiff’s activity relative to the excluded

     machine tool suppliers constituted a waiver in

     light of the anti-waiver provision in the contract

     which purports to prevent modification of the

     written agreement. [463 Mich 935 (2000).]


     The Court of Appeals again reversed2 the circuit court’s


grant of summary disposition and remanded to the circuit


court, centering its analysis on the written modification


clause. The Court failed to take into consideration the anti­

waiver clause, contrary to the directions in our order.3


     We granted leave to appeal and directed the parties to


include among the issues to be briefed



     2
      Unpublished opinion per curiam, issued April 24, 2001

(Docket No. 207538).

     3
      Despite our explicit reference to the anti-waiver clause

and our direction to the Court of Appeals to construe it, the

panel failed to do so. Instead, the panel acknowledged the

reference to the anti-waiver clause in our remand order, but,

nevertheless, and for reasons unspecified, assumed that this

Court was referring to the written modification clause.


                              6

       whether there exists a genuine dispute of fact

       about whether defendant’s alleged silence in the

       face of plaintiff’s activity relative to the

       excluded machine tool suppliers constituted a

       waiver in light of the anti-waiver provision in the

       contract, paragraph 11, which purports to prevent

       silent modification of the written agreement. . . .

       [467 Mich 895-896 (2002).]


                        II.    Standard of Review


       We review de novo lower court decisions on a motion for


summary disposition.          First Pub Corp v Parfet, 468 Mich 101,


104; 658 NW2d 477 (2003).                 In reviewing the motion, the


pleadings, affidavits, depositions, admissions, and any other


admissible evidence are viewed in the light most favorable to


the nonmoving party. Radtke v Everett, 442 Mich 368, 374; 501


NW2d 155 (1993).        The legal effect of a contractual clause is


a    question   of   law      that   is    reviewed       de   novo.     Bandit


Industries, Inc v Hobbs Int’l, Inc (After Remand), 463 Mich


504, 511; 620 NW2d 531 (2001).


                              III.   Discussion


       We granted leave to appeal to consider whether the Court


of   Appeals    erred    in    concluding     that    a    genuine     issue   of


material fact exists concerning plaintiff’s allegation that


defendant silently waived or modified contractual provisions.


Plaintiff argues that defendant waived provisions of the


contract by failing to object to plaintiff’s sales activity in


the face of defendant’s knowledge of that activity.





                                      7

                        A.    Analytic Framework


     In order to decide this case, we must consider what


circumstances    may         support    amendment   of     a   contract,


particularly    where    the     contract   protects     itself   against


certain methods of waiver or modification.


     At the heart of this inquiry is the freedom to contract.


As this Court recently observed in Wilkie v Auto-Owners Ins


Co, 469 Mich ___, ___; ___ NW2d ___ (2003):


          This approach, where judges . . . rewrite the

     contract . . . is contrary to the bedrock principle

     of American contract law that parties are free to

     contract as they see fit, and the courts are to

     enforce the agreement as written absent some highly

     unusual circumstance such as a contract in

     violation of law or public policy. This Court has

     recently discussed, and reinforced, its fidelity to

     this understanding of contract law in Terrien v

     Zwit, 467 Mich 56, 71; 648 NW2d 602 (2002). The

     notion, that free men and women may reach

     agreements    regarding    their  affairs    without

     government interference and that courts will

     enforce    those    agreements,  is   ancient    and

     irrefutable.     It draws strength from common-law

     roots and can be seen in our fundamental charter,

     the United States Constitution, where government is

     forbidden from impairing the contracts of citizens,

     art I, § 10, cl 1.      Our own state constitutions

     over the years of statehood have similarly echoed

     this limitation on government power.      It is, in

     short, an unmistakable and ineradicable part of the

     legal fabric of our society.     Few have expressed

     the force of this venerable axiom better than the

     late Professor Arthur Corbin, of Yale Law School,

     who wrote on this topic in his definitive study of

     contract law, Corbin on Contracts, as follows:


          “One does not have ‘liberty of contract’

     unless   organized  society  both   forbears  and

     enforces, forbears to penalize him for making his




                                       8

     bargain and enforces it for him after it is made.”

     [15 Corbin, Contracts (Interim ed), ch 79, § 1376,

     p 17.]


     While the freedom to contract principle is served by


requiring courts to enforce unambiguous contracts according to


their terms, the freedom to contract also permits parties to


enter into new contracts or modify their existing agreements.


Thus, as in the present case, we are required to resolve the


tension   between   the   freedom     to    enter   into   a   contract


concerning the same subject matter as a previous contract and


provisions in the previous contract restricting the manner in


which original contractual terms may be modified or waived.


     Justice CAMPBELL wrote on this issue over a century ago


when he stated:


          [T]he case seems to settle down to the simple

     question whether a person who has agreed that he

     will only contract by writing in a certain way,

     precludes himself from making a parol bargain to

     change it. The answer is manifest. A written

     bargain is of no higher legal degree than a parol

     one. Either may vary or discharge the other, and

     there can be no more force in an agreement in

     writing not to agree by parol, than in a parol

     agreement not to agree in writing. Every such

     agreement is ended by the new one which contradicts

     it. [Westchester Fire Ins Co v Earl, 33 Mich 143,

     153 (1876).]


     Echoing   Justice    CAMPBELL    was    this   Court’s     similar


conclusion in Reid v Bradstreet Co, 256 Mich 282, 286; 239 NW


509 (1931):


          It is well established that a written contract

     may be varied by a subsequent parol agreement

     unless forbidden by the statute of frauds; and that


                                 9

      this rule obtains though the parties to the

      original contract stipulate therein that it is not

      to be changed except by agreement in writing.


           In discussing the subject of varying written

      instruments by parol, Prof. Williston says: 


           "Nor does it make any difference that the

      original written contract provided that it should

      not subsequently be varied except by writing. This

      stipulation itself may be rescinded by parol and

      any oral variation of the writing which may be

      agreed upon and which is supported by sufficient

      consideration is by necessary implication a

      rescission to that extent." Williston, Contracts, §

      1828.


      The theory of the rule is that:


           “Whenever two men contract, no limitation

      self-imposed can destroy their power to contract

      again.” [Citation omitted.]


      Moreover, the next year, in Banwell v Risdon, 258 Mich


274, 278-279; 241 NW 796 (1932), we held that contracting


parties are at liberty to design their own guidelines for


modification or waiver of the rights and duties established by


the contract, but even despite such provisions, a modification


or waiver can be established by clear and convincing evidence


that the parties mutually agreed to a modification or waiver


of the contract.


      Accordingly, it is well established in our law that


contracts with written modification or anti-waiver clauses can


be   modified   or   waived   notwithstanding   their   restrictive


amendment clauses.     This is because the parties possess, and


never cease to possess, the freedom to contract even after the



                                 10

original contract has been executed. 


      However, the freedom to contract does not authorize a


party to unilaterally alter an existing bilateral agreement.


Rather, a party alleging waiver or modification must establish


a mutual intention of the parties to waive or modify the


original contract.        Banwell, supra.        This principle follows


from the contract formation requirement that is elementary to


the exercise of one’s freedom to contract: mutual assent.


      Where mutual assent does not exist, a contract does not


exist.      Accordingly, where there is no mutual agreement to


enter into a new contract modifying a previous contract, there


is no new contract and, thus, no modification.                 Simply put,


one   cannot      unilaterally   modify     a    contract      because   by


definition, a unilateral modification lacks mutuality.4


      The     mutuality    requirement      is     satisfied     where   a


modification      is   established    through    clear   and    convincing


evidence     of    a   written   agreement,       oral   agreement,      or


affirmative conduct establishing mutual agreement to waive the


terms of the original contract.            In meeting this clear and


convincing burden, a party advancing amendment must establish



      4
      We note that the understanding that an express bilateral

agreement is not susceptible to unilateral modification is

consistent with our remand order in this very case, where we

held that an implied-in-law contract cannot contradict an

express contract on the same subject. See also, e.g., Scholz

v Montgomery Ward & Co, Inc, 437 Mich 83, 93; 468 NW2d 845

(1991); In re De Haan’s Estate, 169 Mich 146, 149; 134 NW 983

(1912).


                                     11

that the parties mutually intended to modify the particular


original contract, including its restrictive amendment clauses


such as written modification or anti-waiver clauses.


     Upon proof of an express oral or written agreement, the


mutuality requirement is clearly satisfied.          This is because


where the parties expressly modify their previous contract,


rescission of the terms of the prior agreement is a necessary


implication.       Reid, supra.   By the clear expression of the


parties, contradictory provisions in the prior agreement are


waived.


     However, in situations where a party relies on a course


of conduct to establish modification, mutual assent is less


clear and thus the rescission, or waiver, of the original


contract’s terms is not so evident.5            As a result, where


course of conduct is the alleged basis for modification, a


waiver analysis is necessary.


     As we have stated in other contexts, a waiver is a


voluntary    and    intentional   abandonment   of   a   known   right.


Roberts v Mecosta Co Hosp, 466 Mich 57, 64 n 4; 642 NW2d 663


(2002);    People v Carines, 460 Mich 750, 762 n 7; 597 NW2d 130


(1999).     This waiver principle is analytically relevant to a


case in which a course of conduct is asserted as a basis for



     5
      This potential ambiguity is, in part, why parties to a

contract often include written modification and anti-waiver

provisions; that is, to protect against unintended and

unilateral modification or waiver.


                                  12

amendment of an existing contract because it supports the


mutuality requirement.         Stated otherwise, when a course of


conduct establishes by clear and convincing evidence that a


contracting party, relying on the terms of the prior contract,


knowingly waived enforcement of those terms, the requirement


of mutual agreement has been satisfied.


      Further,      whereas    an    original    contract’s    written


modification or anti-waiver clauses do not serve as barriers


to subsequent modification by express mutual agreement, the


significance of such clauses regarding the parties’ intent to


amend is heightened where a party relies on a course of


conduct to establish modification.              This is because such


restrictive amendment clauses are an express mutual statement


regarding the parties’ expectations regarding amendments. 


      Accordingly, in assessing the intent of the parties where


the   intent   to    modify    is   not   express,   such   restrictive


amendment provisions are not necessarily dispositive, but are


highly relevant in assessing a claim of amendment by course of


conduct.   Any clear and convincing evidence of conduct must


overcome not only the substantive portions of the previous


contract allegedly amended, but also the parties’ express


statements regarding their own ground rules for modification


or waiver as reflected in any restrictive amendment clauses.


                          B.    Application


      With this analytical framework in hand, we now turn to


                                    13

the present case.


     We begin by determining whether the parties’ written


contract contemplates the factual circumstances alleged by


plaintiff.       In interpreting a contract, our obligation is to


determine the intent of the contracting parties.              Sobczak v


Kotwicki, 347 Mich 242, 249; 79 NW2d 471 (1956).                If the


language of the contract is unambiguous, we construe and


enforce the contract as written.           Farm Bureau Mut Ins Co of


Michigan v Nikkel, 460 Mich 558, 570; 596 NW2d 915 (1999).


Thus, an unambiguous contractual provision is reflective of


the parties’ intent as a matter of law.          Once discerned, the


intent of the parties will be enforced unless it is contrary


to public policy.       Id.


     First, it is unambiguous in the contract at issue that


plaintiff could not receive commissions for the disputed


sales.      Plaintiff’s    sales   territory    under   the    contract


excludes “all House Accounts and: All [t]ransmission plants


and other machine tool suppliers (turn key operations),” and


plaintiff has conceded that Giddings & Lewis and Ex-Cell-O are


excluded    machine    tool    suppliers   as   contemplated    by   the


contract.    


     Second, the contract includes a written modification


clause, located at ¶ 13(b), which provides:


          This Agreement may not be modified in any way

     without the written consent of the parties.



                                   14

     Plaintiff has not submitted any evidence that the parties


agreed in writing to modify or waive any provisions of the


contract.     The facts alleged clearly fall within the ambit of


the written modification clause.


     Finally,     included   as    ¶   11   of   the   contract    is   the


following anti-waiver provision:


          No delay, omission or failure of [defendant]

     to exercise any right or power under this Agreement

     or   to   insist   upon    strict   compliance   by

     Representative of any obligation hereunder, and no

     custom or practice of the parties at variance with

     the terms and provisions hereof shall constitute a

     waiver of [defendant’s] rights to demand exact

     compliance with the terms hereof; nor shall the

     same affect or impair the rights of [defendant]

     with respect to any subsequent default of the

     Representative of the same or different nature.

     [Emphasis added.]


     Viewing the facts most favorably to plaintiff, we must


assume that defendant (1) knew that plaintiff was actively


soliciting the business of Giddings & Lewis and Ex-Cell-O on


behalf   of    defendant,    (2)   knew     that   plaintiff      expected


commissions on any resulting sales, and (3) failed to object


to plaintiff’s solicitation of the excluded customers until


after sales were completed.        Accordingly, plaintiff’s proofs


establish, at best, knowledge and silence on defendant’s part


of plaintiff’s effort to enlarge plaintiff’s rights under the


contract.     However, defendant’s knowing silence clearly falls


within the excluded activity covered by the “delay, omission


or failure” language of ¶ 11.



                                   15

     For     these    reasons,      the     parties’        written       contract


contemplates the circumstances alleged by plaintiff. 


     Nevertheless,         although       the    parties         negotiated     and


consented    to   contractual      terms        that     fully    and     precisely


contemplate the factual circumstances alleged by plaintiff and


explicitly     provide      the    legal        effect     of     those    alleged


circumstances, plaintiff asks this Court not to enforce those


terms. Viewing the alleged facts in a light most favorable to


plaintiff, we decline to accommodate plaintiff’s request to


not enforce the contract.


     Following       the   analytical       framework       set    forth     above,


plaintiff    must    present      clear    and     convincing       evidence     of


conduct that overcomes not only the substantive portions of


the previous contract allegedly amended, but also the parties’


express    statements      regarding      their     own    ground       rules   for


modification or waiver as reflected in restrictive amendment


clauses.     Accordingly, plaintiff must establish clear and


convincing evidence of a mutual agreement to waive the sales­

territory and sales-commissions limitations as well as the


written modification and anti-waiver clauses.


     Plaintiff’s proofs rest on the mere fact that defendant


knew about plaintiff’s activity inconsistent with the contract


and remained silent.        Plaintiff has submitted no evidence of


representations or affirmative conduct by defendant that it


was intentionally and voluntarily relinquishing its right to


                                      16

confine the parties’ relationship to the terms of the contract


and thus demand strict adherence to the sales-commissions and


sales-territory provisions in the contract.          Plaintiff has


forwarded no evidence that defendant affirmatively accepted


plaintiff’s sales activity that was inconsistent with the


contract as a modification of the contract. 


     Defendant’s mere silence, regardless whether defendant


possessed knowledge of plaintiff’s sales activity outside the


contract,   does   not   here    amount    to   an     intentional


relinquishment of the sales-territory and sales-commissions


limitations in the contract or the contract’s restrictive


amendment clauses, ¶ 13(b) and ¶ 11.      Accordingly, plaintiff


has failed to establish waiver of the original contract by any


evidence, much less clear and convincing evidence.


     Plaintiff advances Klas as supportive of its position


that knowing silence is sufficient to establish a waiver of a


contractual provision.   The Court of Appeals agreed with this


suggestion. 


     However, as the circuit court concluded, Klas is clearly


distinguishable.   It was the defendant’s agent’s affirmative


expressions of assent, not a course of mere knowing silence,


that amounted to a waiver in Klas.     When the Klas plaintiff


informed the defendant that permission to do extra work was


required to be in writing, the defendant’s agent orally


responded that “there was no necessity of going back to the


                                17

contract on that point, that they were not children, they were


willing to pay for any work they would order . . . .”             Id. at


336.       This   is   an   affirmative    representation    that   the


contractual provisions were being waived.6 Thus, in Klas, the


defendant’s affirmative expression was sufficient to establish


a waiver.


       Nevertheless, the Klas Court proceeded to expound on


“implied     waivers.”       Because     the   Klas   defendant   orally


expressed its consent to waive the requirement for written


approval of extra work, no discussion of implied waivers was


necessary to the resolution of the case.              Accordingly, the


Klas Court’s exposition on implied waivers not only mislabels


the defendant’s express representations as implied conduct, it


is obiter dictum.


       This is not to say that waiver requires an oral or


written expression of amendment.           It is well settled that a


course of affirmative conduct, particularly coupled with oral


or written representations, can amount to waiver.             Minkus v


Sarge, 348 Mich 415, 421-422; 83 NW2d 310 (1957) (holding that


an oral request and statement that the request was an “extra”



       6
      Further, Mr. Ransom Pearce, the individual who had

actual authority to contract for defendant in Klas, testified,

“I ordered Mr. Klas to do the extra work.” Klas, supra at

338. Defendant’s agent, Mr. Chester Pearce, also testified,

“Whenever a change was made either at the suggestion of [the

plaintiff] or at my suggestion, I talked it over with [Mr.

Ransom Pearce] and we agreed to make the change, or not make

it as the case may be.” Id. at 339.


                                   18

to the contract, coupled with the fact that the disputed


matters were “matters of frequent conversation” between the


plaintiff and the defendant, was inconsistent with a claim


that there was no waiver).        However, we note that waiver and


forfeiture are related, but distinct concepts.                   Roberts,


supra.     While waiver requires an intentional and voluntary


relinquishment of a known right, a forfeiture is the failure


to assert a right in a timely fashion.              Id. at 69.      In the


present    case,    plaintiff’s       alleged   facts   amount   only     to


forfeiture, which is insufficient to establish clear and


convincing evidence of a mutual assent to modify or waive an


express contract as a matter of law.


                                Conclusion


     Simply put, the parties agreed to the terms of their


written    contract.     Nevertheless,          plaintiff   seeks    to    be


rewarded    for    proceeding    in    direct    contradiction      to    the


contract    and    in   the     face    of   the    contract’s      written


modification and anti-waiver provisions on no basis other than


that defendant was aware of plaintiff’s activities.              There is


no evidence that defendant affirmatively accepted plaintiff’s


activities as a modification of the original contract. 


     In order to find for plaintiff on the facts presented,


this Court must refuse to give effect to the express agreement


of the parties without clear and convincing evidence of


subsequent bilateral consent to alter the existing bilateral


                                      19

agreement.    In other words, this Court would have to allow


plaintiff to unilaterally modify a bilateral agreement and, in


addition,    do   so   in   the   face    of   contractual   terms   that


precisely prohibit unilateral modification on the basis of no


more than the defendant’s knowing silence.           Our obligation to


respect and enforce the parties’ unambiguous contract absent


mutual assent to modify that contract precludes us from doing


so.


       Accordingly, we hold that the circuit court correctly


granted summary disposition for defendant because the parties’


contract was not modified by waiver as a result of defendant’s


silence in the face of knowledge of plaintiff’s solicitation


activities. The judgment of the Court of Appeals is reversed.


                                     Robert P. Young, Jr.

                                     Maura D. Corrigan

                                     Clifford W. Taylor

                                     Stephen J. Markman





                                    20

                 S T A T E     O F   M I C H I G A N


                             SUPREME COURT





QUALITY PRODUCTS AND

CONCEPTS COMPANY,


     Plaintiff-Appellee,


v                                                           No. 119219


NAGEL PRECISION, INC,


     Defendant-Appellant.

___________________________________

KELLY, J. (concurring in part and dissenting in part).


     We granted leave to appeal to consider whether a           course


of conduct, if proven, could constitute a waiver of the


written modification and antiwaiver clauses contained in the


parties' contract.      I concur with the majority's holding that


contractual     terms    may    be    waived,    including     written


modification and antiwaiver clauses.          I concur also with the


majority's holding that contractual waiver may be shown by a


course   of   conduct   that   constitutes    clear   and   convincing


evidence. 


     I write in dissent because I believe that a contracting

party     should      be     permitted        to    show    waiver       of    written


modification       and      antiwaiver        clauses      through   a    course     of


conduct constituting estoppel.                     The proofs would have to


demonstrate      that       one    party      misled       the   other        into   the


reasonable belief that he had waived certain conditions of


their contract.            In addition it would have to be shown that


the other party reasonably relied on the misleading behavior.


As applied to this case, I would find that a question of fact


exists whether defendant led plaintiff to believe that it had


waived    the    portions         of    the    parties'      contract         that   (1)


prevented plaintiff from recovering commissions for certain


accounts, (2) required a                 written modification of contract


changes, and (3) required any waiver to be in writing.                                 A


question of fact exists also concerning whether plaintiff


relied on the alleged behavior.                    Accordingly, I would affirm


the decision of the Court of Appeals that set aside the


summary disposition for defendant. 


                             I.   DEMONSTRATING WAIVER


        Both our case law and modern legal treatises recognize


that parties may waive contract clauses by a course of conduct


constituting estoppel.                 Both contemplate that a course of


conduct may consist of silence plus knowledge by one party and


detrimental reliance by the other over time.


        Our   Court    first      considered        the    proofs    necessary        to



                                           2

establish a contractual waiver in Klas v Pearce Hardware &


Furniture Co, 202 Mich 334; 168 NW 425 (1918).     We formulated


the plaintiff's burden by quoting the following among several


sources as authority:


          "Waiver is a matter of fact to be shown by the

     evidence. It may be shown by express declarations,

     or by acts and declarations manifesting an intent

     and purpose not to claim the supposed advantage; or

     it may be shown by a course of acts and conduct,

     and in some cases will be implied therefrom. It

     may also be shown by so neglecting and failing to

     act as to induce a belief that there is an

     intention or purpose to waive.    Proof of express

     words is not necessary, but the waiver may be shown

     by circumstances or by a course of acts and conduct

     which amounts to an estoppel."     40 Cyc. p. 267.

     [Klas, supra at 339 (emphasis added).1]


     Modern legal treatises reflect Klas's view that silence


with knowledge can form the basis of a contractual waiver by


estoppel.   American Jurisprudence 2d provides:



     1
      The majority characterizes as obiter dictum the Klas

Court's inclusion of a course of conduct in the law of

contractual waiver. Ante at 20. I believe this an incorrect

reading of the opinion. The plaintiff in Klas alleged waiver

consisting of (1) certain oral representations by those

working for the defendant, and (2) the defendant's course of

conduct.   The Court held that waiver may be shown either

expressly or impliedly, without articulating which formed the

basis of its decision. Because we do not know on which basis

the Klas Court made its decision, the statements or the course

of conduct, we should not discard one holding in favor of the

other. The Klas Court apparently chose not to rank one over

the other, in the belief that, given the facts of the case, a

jury might find either or both. Thus, Klas's discussion of

implied waiver is not dictum.       At any rate, it is not

essential for my analysis that Klas have precedential value.

Rather, I cite it for the fact that this Court has recognized

the validity of the test that I apply in this case. 


                              3

            [C]ontract provisions may be waived expressly

       or the waiver may be implied from the acts of the

       parties. . . . [O]ften [waiver] is sought to be

       proved by various species of acts and conduct

       permitting different inferences and not directly,

       unmistakably, or unequivocally establishing it, in

       which case it is a question for the jury.        An

       implied waiver exists when there is either an

       unexpressed intention to waive, which may be

       clearly inferred from the circumstances, or no such

       intention in fact to waive, but conduct which

       misleads one of the parties into a reasonable

       belief that a provision of the contract has been

       waived. [17A Am Jur 2d, Manner of waiver, in

       general, § 656, 663 (1991).] 


Williston provides:


            [S]ilence or inaction which is coupled with

       knowledge by the party charged with waiver that the

       contract’s terms have [not] been strictly met, and

       detrimental reliance by the other, for such a

       length of time as to manifest an intention to

       relinquish the known right, may result in a waiver

       of rights under the contract. [13 Williston,

       Contracts, Silence, Inaction or Forbearance, §

       39.35, p 653-654 (2000).]


       This Court should retain the waiver burden set forth in


Klas and in modern legal treatises.          The inquiry into whether


a    written   contract   provision    has   been    waived      should   be


directed to the parties' words and behavior that are alleged


to demonstrate a revised agreement.            Accordingly, I would


allow a court to find waiver on the basis of knowing silence,


in    accordance   with   the   standard     set    forth   in    American


Jurisprudence 2d: 


            An implied waiver exists when there is either

       an unexpressed intention to waive, which may be

       clearly inferred from the circumstances, or no such

       intention in fact to waive, but conduct which


                                  4

     misleads one of the parties into a reasonable

     belief that a provision of the contract has been

     waived. [17A Am Jur 2d, Manner of waiver, in

     general, § 656, p 663 (1991) (emphasis added).]


          II .   THE MAJORITY 'S "HEIGHTENED " EVIDENTIARY REQUIREMENT


     The majority requires that the party charged with showing


waiver of a written modification or antiwaiver clause meet a


"heightened" standard of proof.               Ante at 14-15.     This is a new


notion in the law, concocted out of whole cloth.                  Not only is


it lacking in supporting precedent, it unnecessarily injects


confusion into established law.


      What compels addition of this heightened standard of


proof?      Logically, if the parties had decided to amend their


agreement, they intended to waive any provisions preventing


them from doing so.             There should be no need for an additional


showing of waiver merely because the contract contains a


written modification or antiwaiver clause.                     Moreover, the


existing standard, clear and convincing evidence, already sets


a high hurdle for the burdened party. 


      It appears that the purpose of the "heightened" standard


is   to     enhance       the    gatekeeping    function    of    the   judge,


diminishing the role of the jury.               Its addition renders more


difficult the burden of a party arguing waiver of a written


modification         or    antiwaiver      clause    to    survive      summary


disposition and reach a jury.                  The effect is to signal a


distrust of any jury's willingness or ability to apply the


                                         5

established standard faithfully. 


            III .   THE DEMONSTRATION    OF   WAIVER   IN THIS   CASE


     In this case, I would find that a question of fact exists


about whether a waiver occurred.2              Because we are reviewing a


summary disposition ruling, we judge the evidence in the light


most favorable to the nonmoving party, plaintiff.                         Maiden v


Rozwood, 461 Mich 109; 597 NW2d 817 (1999). Plaintiff alleges


that it repeatedly reported to Rolf Bochsler, defendant's


vice-president      and    chief    operating      officer,        that    it   was


soliciting business for defendant from companies that were


excluded from its territory.             Defendant knew of plaintiff's


efforts, was in a position to benefit financially from them,


and repeatedly said nothing to deter plaintiff's efforts.


Moreover, defendant accepted without hesitation the money from


the sales negotiated by plaintiff to businesses excluded from


its territory.


     While one instance of mere silence fails to evince the


"course of acts and conduct" envisioned in Klas, this case


involves   more     than    a   single     instance        of    mere     silence,


defendant's arguments notwithstanding. Plaintiff alleges that


it   repeatedly     informed       defendant      that      it    was     pursuing


     2
      I dispute the majority's derogatory characterization of

plaintiff as a party that seeks to have the Court "not enforce

the contract." Ante at 18. Rather, plaintiff requests that

the Court examine the contract and find that defendant waived

certain portions of it.


                                      6

extracontractual accounts prohibited by the parties' contract.


Not only did defendant know of plaintiff's activities, it knew


that they would inure to its financial benefit.                         Defendant


said       nothing.      Plaintiff      relied     on    defendant's        repeated


instances of silence and concluded the sales in question.


Defendant took the proceeds, but refused to pay plaintiff its


commissions. This course of conduct, if proven, could satisfy


the standard described in 17A Am Jur 2d, causing the contract


language that prevented plaintiff from recovering the sales


commissions to be treated as waived.                     Accordingly, I would


hold that defendant's alleged behavior created a fact question


regarding waiver.


                  IV .   CONSTRUCTION   OF THE   ANTIWAIVER CLAUSE


       I disagree also with the majority's assumption that the


antiwaiver clause applies in this case.                     Under the parties'


antiwaiver       clause,       defendant         was     entitled      to     "exact


compliance"       by     plaintiff      with     the    terms   of    the    written


agreement, even if it failed consistently to "insist upon


strict compliance" by plaintiff.3                  Plaintiff asserts that it



       3
           The antiwaiver clause states:


            No delay, omission or failure of [defendant]

       to exercise any right or power under this Agreement

       or   to   insist   upon    strict   compliance   by

       Representative of any obligation hereunder, and no

       custom or practice of the parties at variance with

       the terms and provisions hereof shall constitute a

                                                 (continued...)


                                          7

could       show    that     defendant    failed   to     insist    on    strict


compliance by plaintiff; it allowed plaintiff to solicit


accounts not available to it under the contract.                     Defendant


infers that, even if plaintiff's allegation is true, defendant


was   entitled        to   "exact    compliance"     by     plaintiff.         The


"compliance"         would    be,   apparently,     that    plaintiff      would


refrain       from    claiming      commissions    from     sales    to    these


accounts.          The majority appears to agree with defendant and


interprets this reasoning as an obvious application of the


contract language as written.


        I    quite    disagree.          The   antiwaiver    clause       is   not


implicated under the facts of this case. Therefore, waiver of


it never becomes an issue. The following hypothetical example


illustrates how, I believe, the clause should be interpreted:


Assume that the same contract exists as in the case before us.


Plaintiff seeks to makes sales to company                    A,    which is an


excluded company under the parties' agreement.                       Plaintiff


notifies defendant of its activities and defendant is silent.


Plaintiff relies on defendant's silence and tries, but is


unable, to make the sale. Then, plaintiff seeks to make sales




      3
       (...continued)

      waiver of [defendant's] rights to demand exact

      compliance with the terms hereof; nor shall the

      same affect or impair the rights of [defendant]

      with respect to any subsequent default of the

      Representative of the same or different nature.


                                          8

to   company   B,    another   company   excluded    from   plaintiff's


territory.     This time defendant objects, reminding plaintiff


that company    B   is an excluded account for which plaintiff is


not entitled to commissions.         Plaintiff makes the sale and


claims the commission. 


      Defendant is entitled to refuse to pay, even though it


received the proceeds of the sale. It was entitled to "strict


compliance" by plaintiff regarding company           B,   even though it


had failed to "insist upon strict compliance" by plaintiff


regarding company      A.   Its prior “practice . . . at variance


with the [contract's] terms . . . [did not] constitute a


waiver of [defendant's] right to demand exact compliance with


the terms of [of the contract.]"         See n 3.


      However, if plaintiff had made the sale to company              A ,



defendant could not have successfully relied on the antiwavier


clause.      When plaintiff attempted to sell to company              A ,



defendant had no "prior practice" of waiving the no-sales-to­

excluded-accounts       contract    provision.        Moreover,     when


contracting, plaintiff surely did not agree that defendant


could waive plaintiff's compliance with one provision, then


insist on plaintiff's compliance with another if plaintiff,


thereby, worked without commission.         To read the language as


the majority does would mean that the parties contracted that


one could cheat the other, something to which they surely did



                                   9

not intend to agree.


       Therefore, properly construed, the antiwaiver clause does


not apply to the facts of this case and whether it was waived


is irrelevant.


                                V.   CONCLUSION


       I would hold that written modification and antiwaiver


clauses in a contract may be waived by a course of conduct.


This    includes     conduct    that    misleads     one   party     into   the


reasonable belief that a waiver has occurred and on which the


misled party relies, a form of estoppel.                   In this case, a


waiver may have taken place. Plaintiff alleges that defendant


exhibited repeated instances of silence when it was notified


that plaintiff was pursuing sales opportunities forbidden by


the contract and plaintiff relied on that conduct as a waiver.


If proven, that could suffice to establish that defendant


waived       the   parties’    antiwaiver    and    written    modification


contract provisions.


       The    majority    disagrees      with      this    dissent    on    how


defendant's course of conduct should be judged.                The heart of


our disagreement concerns the role of the jury in deciding


contractual waiver cases.         The effect of the majority decision


is to authorize and encourage judges to decide close waiver


questions, such as whether a defendant's alleged repeated


instances of knowing silence constitute waiver.               I would allow



                                       10

a jury to make this determination.    I have faith that juries


can understand and apply the waiver burden correctly, and I


would give them a chance to do so in this case.   Accordingly,


I would affirm the decision of the Court of Appeals that set


aside the summary disposition for defendant and remand the


case to the trial court.


                              Marilyn Kelly





CAVANAGH, J.


     I concur in the result only. 


                              Michael F. Cavanagh





                             11

                   S T A T E     O F   M I C H I G A N


                               SUPREME COURT





QUALITY PRODUCTS AND

CONCEPTS COMPANY,


     Plaintiff-Appellee,


v                                                               No. 119219


NAGEL PRECISION, INC,


     Defendant-Appellant.

___________________________________

WEAVER, J. (concurring in part and dissenting in part).


     I    concur    with   the    majority   and    Justice     KELLY    that


contractual     terms      may    be   waived,      including     written­

modification and antiwaiver clauses.             I also concur that, in


addition to the fact that contract terms may be waived by the


parties’ written or oral agreement, waiver may be established


by clear and convincing evidence of an intent to waive through


the parties’ course of conduct. 


     I    disagree      with     the   majority’s    imposition         of    a


“heightened” burden on a party who relies on a course of


conduct    to   modify     a   contract   that    includes    a   written­

modification or antiwaiver clause.               Ante at 14-15.              The

majority’s heightened standard is not necessary, because the


existing law already requires that waiver by a course of


conduct must be established by clear and convincing evidence.


Moreover, the majority has failed to justify why the parties’


mutual consent to contractual terms addressing waiver or


modification methods deserves any greater weight than their


mutual consent to any other term of the contract.           As noted by


Justice KELLY , the apparent purpose of this heightened standard


is to make it more difficult to establish that a question of


fact exists regarding the intent to waive contract terms.


     I dissent separately also because I would hold that


defendant’s    course   of   conduct,   as   alleged   by   plaintiff,


establishes a question of fact regarding whether defendant


intended to waive the contract requirements, including the


written-modification and antiwaiver clauses of the contract at


issue.    In    light   of   defendant’s     alleged   knowledge    of


plaintiff’s     contractually      prohibited      sales      efforts,


defendant’s silence as those efforts proceeded, as well as


defendant’s acceptance of payment resulting from plaintiff’s


efforts, I would allow a jury to determine whether defendant


intended to waive the terms of the contract at issue.                 

                                                                      I

would, therefore, affirm the decision of the Court of Appeals


that set aside the summary disposition for defendant.


                                  Elizabeth A. Weaver



                                  2