General Motors Corp. v. Department of Treasury

Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh

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

____________________________________________________________________________________________________________________________

FILED JUNE 4, 2002

GENERAL MOTORS CORPORATION,

Plaintiff-Appellant,

v No. 116984

DEPARTMENT OF TREASURY,

REVENUE DIVISION,

Defendant-Appellee.

____________________________________

BEFORE THE ENTIRE BENCH

WEAVER, J.

Plaintiff, General Motors Corporation (GM), appeals from

the Court of Appeals decision that defendant, Department of

Treasury, could impose use tax1 on the vehicle components and

parts plaintiff provided to customers as part of plaintiff’s

goodwill adjustments policy. We reverse the decision of the

Court of Appeals and hold that assessment of use tax on the

goodwill adjustments was improper because they were taxed

1
Use Tax Act, 1937 PA 94, MCL 205.91 et seq.

pursuant to the General Sales Tax Act2 when customers

purchased vehicles at retail.

When customers purchase new GM automobiles, they are

provided with a GM limited manufacturer’s warranty. These

limited manufacturer’s warranties provide, in pertinent part,

for the replacement of defective parts of the automobile under

certain circumstances. They also generally provide coverage

for an expressly stated length of time, subject to earlier

expiration, if the vehicle is driven for a certain number of

miles. The department acknowledges that parts provided under

these limited warranties are not subject to use tax because

the customers paid for the right to replacement parts under

the warranties at the time of the retail sale.

In addition to the limited warranties, GM provides a more

open-ended “goodwill” adjustment policy under which GM will,

on a discretionary basis, pay for replacement parts for GM

vehicles even after the limited warranty period has expired.

Although not referred to by name as a “goodwill adjustment

policy,” notice of this policy is contained in the General

Motors warranty manual provided to customers at the time of

sale. In this regard, the manual provides:

2
1933 PA 167 as amended, MCL 205.51 et seq.

2
Should you ever encounter a problem during or

after the warranty periods that is not resolved,

talk to a member of dealer management. If the

problem persists, follow the additional procedure

outlined in “Owner Assistance,” on page 16 of this

booklet. [Emphasis added.]

The Owner Assistance section of the manual outlines a

“Customer Satisfaction Procedure.” It states that problems

will “normally” be resolved by the dealer’s sales or service

departments.3 However, if a concern is not resolved at that

level, the manual recommends first discussing the problem with

the dealership management. If the problem is not resolved by

the dealer management, customers are told to contact GM

directly. A customer dissatisfied with the outcome of the

procedure may elect arbitration. The manual states that,

while a customer is not bound to accept the result of the

3
General Motors, in a bulletin to its dealers, directs

them to make goodwill adjustments case by case “where special

consideration is in order to enhance customer satisfaction and

loyalty.” GM provides the dealers with a recommended set of

guidelines for goodwill policy adjustments to help them

distinguish defects in materials and workmanship from defects

caused by aging, physical damage, lack of proper maintenance,

or owner abuse.

Testimony revealed that GM estimates the cost of, and

establishes a budget reserve for, both warranty repairs and

goodwill adjustments for the lifetime of every make and model

of vehicle. Twice annually, GM internally audits both the

cost of warranty repairs and that of the goodwill policy for

each make and model of vehicle. A GM representative explained

that the vehicle sales price is designed to recover all costs,

including those associated with the goodwill adjustment

policy, as well as to maintain profitability.

arbitration proceeding, GM will “generally” agree to be bound

by it even though it reserves the right to terminate its

participation in the arbitration program.4

The department conducted an audit of GM’s compliance with

Michigan tax laws for the period of January 1, 1986, through

December 31, 1992. As a result of the audit, the department

assessed against GM use taxes and interest of $5.5 million on

the vehicle components and parts provided by GM to customers

as goodwill adjustments. The department had not previously

assessed such a tax. During the audit period, GM customers in

Michigan obtained $82 million in components and parts under

the goodwill policy.

GM appealed the assessment to the Court of Claims. In

pertinent part, GM alleged that the department lacked the

statutory authority to impose use tax on goodwill adjustments

because sales tax was imposed on the cost of the goodwill

adjustments when vehicles were sold at retail. However, the

Court of Claims disagreed with GM’s position and granted

summary disposition in favor of the department pursuant to MCR

2.116(C)(10), holding, in relevant part, that the transfer of

4
We note the possibility of arbitration merely to

provide a comprehensive outline of the complaint resolution

procedure. In light of our analysis, it is not necessary to

consider whether the possibility of arbitration is a form of

“consideration” in this case.

parts under the goodwill program is subject to use tax. The

Court of Appeals affirmed regarding this issue5, concluding

that “plaintiff’s dealers were not obligated to provide all

customers with goodwill adjustments” and, therefore, that the

“value of the goodwill program was not included in the gross

proceeds arising from the retail sales of plaintiff’s

vehicles.”6 The Court of Appeals also emphasized its view

that the purchasers of GM vehicles did not obtain “any

enforceable rights in the goodwill program.” We granted leave

to appeal.

Because the essential facts are not in dispute, we are

presented with a question of law: whether replacement parts

provided to customers at GM’s expense through the goodwill

program are independently subject to Michigan’s use tax in

connection with the transfer of the parts. We review

questions of law de novo. Kelly v Builders Square, Inc, 465

5
However, the Court of Appeals would have reversed the

Court of Claims in part and remanded for further proceedings

with regard to GM’s constitutionally based arguments that it

was denied equal protection of the laws and the benefit of

uniformity of taxation because the department did not apply

the use tax in the same way to other similarly situated

parties. In light of our conclusion that the transactions at

issue are not subject to the use tax as a matter of statutory

law, it is unnecessary to reach these constitutional issues.

6
Unpublished opinion per curiam, issued May 9, 2000

(Docket No. 213186).

Mich 29, 34; 632 NW2d 912 (2001). This is the same standard

of review applicable to the grant of a motion for summary

disposition. MacDonald v PKT, Inc, 464 Mich 322, 332; 628

NW2d 33 (2001).

III

The sales tax and the use tax are interrelated. Sales

tax is imposed by the General Sales Tax Act (GTA) on the gross

proceeds of a business. MCL 205.52(1). The GTA defines

“[g]ross proceeds” as the “amount received in money, credits,

subsidies, property, or other money’s worth in consideration

of a sale at retail . . . .” MCL 205.51(1)(i). In contrast,

pursuant to the Michigan Use Tax Act (UTA), use tax is

generally imposed on the privilege of “using, storing, or

consuming tangible personal property.” MCL 205.93(1).

GM contends that the cost of its goodwill adjustments is

exempt from use tax under § 4(1)(a) of the UTA. MCL

205.94(1)(a) provides that “[p]roperty sold in this state on

which transaction a tax is paid under the general sales tax

act” is exempt from the use tax “if the tax was due and paid

on the retail sale to a consumer.” Thus, our inquiry is

whether “tax was due and paid” pursuant to the GTA on the cost

of the goodwill adjustments when vehicles were sold at retail.

The sales and use taxes, while imposed in different ways,

do not operate in isolation. Rather, provisions of the UTA

and the GTA are supplementary and complementary. World Book,

Inc v Treasury Dep’t, 459 Mich 403, 408; 590 NW2d 293 (1999);

Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144,

153; 549 NW2d 837 (1996). UTA § 4(1)(a)’s exemption is an

expression of a legislative intent to avoid pyramiding of

sales and use tax. Elias Bros, supra. In other words, a

transfer of property that has already been subjected to

Michigan’s sales tax is not subject to this state’s use tax.

As directed by § 4(1)(a), we examine the provisions of the GTA

to determine whether tax was paid on the goodwill adjustment

at the retail sale to a customer or whether the department’s

assessment of use tax was appropriate.

The GTA defines a “sale at retail” as “a transaction by

which the ownership of tangible personal property is

transferred for consideration, if the transfer is made in the

ordinary course of the transferor’s business and is made to

the transferee for consumption or use, or for any purpose

other than for resale . . . .” MCL 205.51(1)(b). The

question is thus whether the goodwill adjustment policy is

consideration flowing to customers when they purchase a GM

vehicle or merely an illusory promise. Stated otherwise, we

examine whether the cost of the goodwill adjustment policy is

included in the retail price of GM vehicles as something that

is purchased by customers.

At the time of retail sale, GM customers receive an

owner’s manual. The manual invites customers to initiate a

dialogue with the dealership when a defect arises, “during or

after the warranty periods.” The manual states the goal of

resolving the defect to the “customer’s satisfaction.” GM

admits that its customers are not guaranteed that requested

after-warranty goodwill adjustments will be made. Indeed, GM

suggests its dealers negotiate with customers for copayment on

goodwill adjustments case by case.7 Nevertheless, GM’s

goodwill policy is a promise to hear and address customer

complaints even after the written warranty expires.

To have consideration there must be a bargained-for

exchange. Higgins v Monroe Evening News, 404 Mich 1, 20-21;

272 NW2d 537 (1978). There must be “‘a benefit on one side,

or a detriment suffered, or service done on the other.’”

Plastray Corp v Cole, 324 Mich 433, 440; 37 NW2d 162 (1949).

Courts do not generally inquire into the sufficiency of

consideration, Harris v Bond & Mtg Corp, 329 Mich 136, 145; 45

NW2d 5 (1950). It has been said “[a] cent or a pepper corn,

in legal estimation, would constitute a valuable

consideration.” Whitney v Stearns, 16 Me 394 (1839). The

7
GM Service Bulletin No. 57-05-01, April 1995.

8
owner’s manual provided at the time of sale invites customers

to voice complaints even after the warranty period ends, with

the goal of resolving the complaint to the customer’s

satisfaction. We hold that this opportunity for dialogue and

possible resolution of complaints—even outside the warranty

period–is a benefit flowing to purchasers of GM vehicles at

the time of retail sale and, therefore, is consideration for

the sale.8 Therefore, replacement parts provided pursuant to

the goodwill program are subject to the sales tax at the time

of retail sale and are exempt from the use tax under § 4(1)(a)

of the UTA.9

8
While acknowledging that a customer pays for the

goodwill program, the dissent “cannot fathom” that a customer

would bargain for the opportunity to have postwarranty

complaints addressed. This skepticism is inconsistent with

this Court’s traditional reluctance to question the

sufficiency of consideration and is not justification to

override the Legislature’s expression of intent in UTA §

4(1)(a) to avoid the pyramiding of the sales and use taxes.

9
While not part of our dispositive analysis, it is

noteworthy that GM audits the cost of the goodwill adjustment

policy twice annually with the goal of recovering costs and

maintaining profitability. A witness for the department

acknowledged that GM uses the same method to account for the

cost of warranty repairs and goodwill policy adjustments. It

is evident that GM attempts to effectively include the cost of

warranty repairs in the retail price of its vehicles. The

record reflects that the cost of the goodwill adjustment

policy is likewise included in the retail price of GM

vehicles. A GM witness testified that “implicit in the price

is the fact that we need to cover all the costs, and both

policy and warranty are costs that are included . . . .”

GM’s promise pursuant to its goodwill adjustments

policy, while discretionary with respect to whether there will

be any “adjustment,” is not discretionary regarding GM’s

obligation to act reasonably and in good faith in response to

a customer complaint.10 Reinforcing this contractual

undertaking to act in good faith is MCL 440.1203, part of

Michigan’s version of the Uniform Commercial Code. MCL

440.1203 provides that “[e]very contract or duty within this

act imposes an obligation of good faith in its performance or

enforcement.”11 This means that, should GM not consider

complaints under the goodwill adjustment policy in good faith,

it can be sued.

The dissent agrees that a unilateral or discretionary

promise could “constitute valid consideration.” Post, p 4.

However, the dissent would decline to rule that GM’s promise

10
As stated by Professor Arthur Corbin:

Promissory words are not nullified by making

the promise conditional on some event within the

promisor’s own power, if at the same time the

promisor impliedly promises to make a reasonable

effort to bring the event about or to use good

faith and honest judgment in determining whether or

not it has in fact occurred. [2 Corbin, Contracts,

§ 5.32, p 177.]

11
Because the sale of a vehicle is the sale of a good,

a contract for such a sale is subject to the Uniform

Commercial Code. See MCL 440.2102 (providing generally that

the UCC “applies to transactions in goods”).

is valid consideration in part because GM’s customers have

“little if any” knowledge of the scope of GM’s discretion.

Id. That it is unknown how liberally GM will exercise its

discretion does not mean there is no discretion. In fact, it

means there is discretion, i.e., a benefit to the consumer.12

The dissent has fallen into the error of considering not

merely if there is consideration, but its sufficiency. As we

have stated, courts do not inquire into the adequacy of

consideration to support a contract. Higgins, supra.13 Thus,

we conclude that the duty the goodwill policy imposes on GM to

12
We note that this is a greater right than the inherent

ability to complain possessed by consumers generally. While

a customer would typically have the practical ability to bring

a complaint to the attention of a manufacturer, absent a

contractual or other legal duty, the manufacturer would be

free to simply ignore such complaints without giving them any

consideration. However, because of its contractual

undertaking for the goodwill policy, GM has a duty to consider

such complaints in good faith.

13
This point is reinforced by Professor Samuel Williston:

It is an elementary and oft quoted principle

that the law will not inquire into the adequacy of

consideration so long as the consideration is

otherwise valid to support a promise. By this is

meant that so long as the requirement of a

bargained-for benefit or detriment is satisfied,

the fact that the relative value or worth of the

exchange is unequal is irrelevant so that anything

which fulfills the requirement of consideration

will support a promise, regardless of the

comparative value of the consideration and of the

thing promised. The rule is almost as old as the

doctrine of consideration itself. [3 Williston,

Contracts (4th ed), § 7:21, pp 383-386.]

11
consider requests for redress in good faith is a valuable

consideration that is worth far more than the legendary

peppercorn.14

Moreover, the evidence indicates that for the period

1986-1992, plaintiff provided “goodwill” parts to customers of

General Motors cars having an estimated value of $82 million.

As the dissent itself recognizes, “the cost of . . . [these]

parts has been factored into the retail cost of the

car . . . .” Post, p 5. If this is so, then such costs have

been necessarily paid by the consumer at sale, i.e., a car

otherwise valued at $9975 has been increased in price to

$10,000 and the consumer has paid an additional $25 for the

goodwill policy. Plaintiff, not being a charitable

institution, must necessarily have factored the cost of the

goodwill policy into the cost of the car, and such cost must

necessarily have been paid by the consumer. Further, it can

be presumed that the consumer paid $25 because something of

value passed. The automobile industry is sufficiently

competitive that few companies can afford to tack costs onto

14
In concluding that the goodwill program amounted to an

illusory promise, the Court of Appeals referenced Barbat v M

E Arden Co, 74 Mich App 540, 543-544; 254 NW2d 779 (1977), for

the proposition that “[a]n unenforceable promise cannot

constitute consideration.” However, that case is inapplicable

because it involved a promised performance that was

“unenforceable” because it was void as illegal.

their products for parts or services that are perceived as

valueless by their consumers. Contrary to the dissent, we can

easily envision a “rational, self-interested market

participant” paying something for a benefit estimated to

provide more than $13 million in annual benefits to consumers.

Our interpretation of MCL 205.94(1)(a) does not constitute a

“lax” interpretation of consideration as the dissent asserts.

Post, p 7. Rather, our interpretation is based on fundamental

contract principles and reflects the realities of the

marketplace.15

Because the goodwill adjustment policy provides an

opportunity for GM customers to seek redress of vehicle

defects and because the policy is included in the retail price

of GM vehicles and purchased at the time of retail sale, it is

part of the consideration flowing to GM customers when they

purchase a GM vehicle that is taxed pursuant to the GTA at

15
The dissent asserts that “[m]erely because plaintiff

proves through its accounting methods that it charges all

consumers for costs associated with a program . . . , I cannot

conclude that ‘consideration’ was paid by purchasers . . . .”

Post, p 6, n 4. If this statement does not set forth the very

essence of “consideration,” it is hard to know what the term

means. Of course, we recognize that not every cost factored

into the price of a manufacturer’s product is exempt from use

tax as a form of “consideration” to a customer. Costs that do

not provide a benefit to a customer could not be

consideration.

retail sale. We reverse the decision of the Court of Appeals

and remand this case to the Court of Claims for entry of

judgment in favor of GM.

CORRIGAN , C.J., and TAYLOR , YOUNG, and MARKMAN , JJ.,

concurred with WEAVER , J.

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

SUPREME COURT

GENERAL MOTORS CORPORATION,

Plaintiff-Appellant,

v No. 116984

DEPARTMENT OF TREASURY,

REVENUE DIVISION,

Defendant-Appellee.

___________________________________

CAVANAGH, J. (dissenting).

I write separately to express my disagreement with the

majority’s conclusion that retail new car customers exchange

consideration for goodwill policy parts when purchasing

vehicles manufactured by plaintiff. Plaintiff has claimed its

goodwill repair parts should not be subject to use tax because

the costs are included in the price of the vehicle, which is

subject to sales tax. Under MCL 205.94(1)(a), no use tax is

owed on retail sales subject to sales tax. However, this

exemption applies only if the parts are included in a “sale at

retail,” i.e., “a transaction by which the ownership of

tangible personal property is transferred for

consideration. . . .” MCL 205.51(1)(b). Because I cannot

agree that the goodwill parts are transferred for

consideration, I must respectfully dissent.

Plaintiff directs its dealers to make goodwill

adjustments case by case “where special consideration is in

order to enhance customer satisfaction and loyalty.”1 Most

dealers have the discretion to provide repair parts free or at

a reduced rate to consumers after the original warranty

expires.2 These repairs are provided to select customers who

1
GM Service Bulletin No. 57-05-01, April 1995.

2
Plaintiff provides specific negotiation tactics:

In situations beyond the warranty period, but

within your claim authorization empowerment,

customers have received a value from use of the

vehicle. It would be reasonable to consider

partial payment by the customer. The judgment

belongs to you.

* * *

In those cases which warrant a Policy

Adjustment, there is seldom a reason for Buick to

pay the entire amount. Never lose sight of the

fact that the owner has driven the vehicle for the

life of the warranty, and then some.

Unquestionably, the customer has received some

value from the investment. Do not hesitate to

bring this up during the negotiation.

Dealers are also advised to “determine what the owner

expects . . . evaluate the . . . complaint . . . [and]

(continued...)

are unsatisfied with defective parts after the manufacturer’s

warranty expires.

Consumers are not given any general or specific

information concerning the goodwill program and are informed

in the warranty manual of their right to contact plaintiff

after the manufacturer’s warranty expires if they are

dissatisfied with the dealer’s offered resolution. The

written warranty also indicates that arbitration proceedings

may be an option.3 In essence, the consumer is given an

opportunity to ask for free repair parts, but has no legal

right to any specific repair and knows nothing of the goodwill

policy program in general, or of its specific terms. Though

plaintiff may agree to subject itself to arbitration

proceedings, consumers gain no legally enforceable right as a

result of this program, a program purportedly “purchased” at

the retail sale.

Consideration requires bargained-for legal detriment.

2
(...continued)

[d]etermine if the customer will be satisfied with any offer

you might make.”

Contrary to the implication by the majority,

plaintiff’s participation in arbitration is in no way

guaranteed. While a consumer may always request arbitration,

plaintiff reserves the right to refuse to participate. See

1990 Warranty and Owner Assistance Information for Buick New

Cars (“GM will generally agree to be bound by the arbitrator’s

decision . . . . [GM] reserves the right to change eligibility

limitations and/or to discontinue its participation in the

program” [emphasis added]).

Higgins v Monroe Evening News, 404 Mich 1, 20-21; 272 NW2d 537

(1982) (opinion by Blair Moody, Jr., J.). I agree with the

majority that a discretionary promise must be exercised in

good faith and that the reasonable execution of such a promise

may constitute valid consideration. J R Watkins Co v Rich, 254

Mich 82, 84-85; 235 NW 845 (1931); Wood v Lucy, Lady Duff-

Gordon, 222 NY 88; 118 NE 214 (1917). However, I am not

convinced that plaintiff’s good-faith exercise of its

discretionary power is sufficient to permit a finding of

bargained-for consideration in this instance. A party relying

on the good-faith exercise of another’s unilateral discretion

generally has some knowledge of the scope of discretion

involved and the potential benefits that might accrue. In

this case, customers have little if any knowledge of what they

allegedly bargained and paid for at the retail sale. I cannot

fathom what rational, self-interested market participant would

actually bargain for and purchase such a promise. If it came

free with the purchase price, most would accept it, but almost

no one would buy it.

Further, I am not sure that an arbitrator would have any

reason to rule in favor of a customer if dissatisfaction

actually resulted in an arbitration hearing. On the basis of

the contract between the parties, the express warranty would

have expired if a customer requested parts under the goodwill

policy. The simple failure to purchase a supplemental

warranty suggests plaintiff has absolutely no legal or good

faith duty to repair defective parts after the warranty

expires. The presence of express promises (original warranty)

and the opportunity to purchase supplemental promises

(extended warranty) evidence the parties’ intention that

plaintiff escape liability for defects after the original

warranty period expires. Because information concerning the

terms of the goodwill policy is generally kept secret, I am

not sure that a consumer could adequately plead his case to

the arbitrator, assuming plaintiff agreed to participate. All

a consumer is left with is the right to complain to plaintiff,

and I believe it is a stretch to consider that sufficient

consideration where such a right exists regardless of the

goodwill policy. Therefore, I would hold that the goodwill

policy adjustment program does not constitute valid

consideration.4

4
Like the majority, I respect the doctrine that generally

prohibits courts from questioning the adequacy of

consideration. Unfortunately, that doctrine is inapplicable

here because absolutely no consideration for the goodwill

parts passed between the parties at the retail sale. Merely

because plaintiff proved through its accounting methods that

it charges all consumers for costs associated with a program

that results in free or discounted parts to some, I cannot

conclude that “consideration” was paid by purchasers at the

retail sale for goodwill parts. GM’s $82 million dollars

worth of repairs, while certainly of value, simply cannot be

regarded as legal consideration.

(continued...)

Even so, I agree that the cost of the goodwill policy

parts has been factored into the retail cost of the car, and

to that extent the goodwill parts are subject both to use and

sales tax. Unfortunately, because the use tax statute exempts

only costs transferred for consideration in a retail sale, the

Legislature essentially failed to avoid pyramiding taxes where

costs are factored into a product, but are not actually part

of the consideration paid. MCL 205.51, 205.94(1)(e).5

(...continued)
Further, the majority implies that any cost factored into

the price of the car by GM should be exempt from use tax. If

that were the case, no manufacturer would ever pay use tax

because generally all costs work their way into the price of

products. The statute as currently drafted does not provide

an exclusion per se for all costs factored into product

prices, only those for which consideration has passed at a

retail sale. See MCL 205.94(1)(a), 205.51(1)(b).

The majority also presumes that a customer can pinpoint

the costs associated with a program it knows nothing of and

buy the car in part on the basis of the promised value

associated with the goodwill policy. The error lies in that

assumption. We cannot assume market participants are making

rationale choices when they lack sufficient knowledge of the

goodwill policy. Neither GM nor the dealer bargains over this

product with the consumer. GM keeps the terms and scope of

the program confidential, thereby making it impossible for a

consumer to pay for such a program with consideration. The

majority’s attempt to rebut my position ignores the

foundational principles of consideration, i.e., bargained-for

consideration is absent where “the action that the promisee

took was not induced by the promise.” Farnsworth, Contracts,

(2d ed), § 2.6, p 52 (emphasis in original). In this case,

plaintiff simply fails to give consumers an opportunity to be

induced by the alleged benefit.

5
In an attempt to refute my position, the majority

erroneously infers the following:

(continued...)

I suspect the most appropriate and forthright method to

analyze the goodwill program for tax purposes would be to

conceive of the parts as promotional or gratuitous items.

Plaintiff grants adjustments “in order to enhance customer

satisfaction and loyalty.” In essence, the goodwill policy is

a select form of advertising, i.e., a large scale version of

the distribution of free pens and cups to conference

participants or the provision of free pharmaceutical samples

to physicians. Dealers probably grant the benefits of the

discretionary goodwill program to those customers most likely

to experience enhanced manufacturer loyalty. Because the

program most resembles a marketing or customer satisfaction

5
(...continued)

[T]he dissent would decline to rule that GM’s

promise is valid consideration in part because GM’s

customers have “little if any” knowledge of the

scope of GM’s discretion. Id. That it is unknown

how liberally GM will exercise its discretion does

not mean there is no discretion. In fact, it means

there is discretion, i.e., a benefit to the

consumer. [Ante at 10-11.]

To clarify, I conclude that GM’s parts cannot constitute valid

consideration because the consumers did not bargain for, and

were not induced to act because of, the goodwill policy in

general or the parts in particular. Moreover, I agree that GM

has discretion. In fact, GM has so much discretion that it

would be impossible for consumers to bring an action claiming

that discretion was exercised without good faith. The majority

errs by inferring from my statement that describes a

consumer’s lack of knowledge concerning the scope of GM’s

discretion that the existence of discretion is itself

dispositive of the inquiry.

offer, and because there is no general statutory exemption for

promotional items from use tax in Michigan,6 I would permit

defendant to assess use taxes, assuming it does so in a

uniform fashion. See Virginia Dep’t of Taxation v Miller-

Morton Co, 220 Va 852, 859; 263 SE2d 413 (1980) (when a

distributor of products withdrew products from inventory

within the state for free disposition to customers also within

the state, the distributor exercised a power incident to

ownership of the products, and this use of products previously

held for resale was not within the exemption from use tax).

III

The majority permits a lax interpretation of

consideration in order to bridge the gap between the text of

the statute and the general desire to avoid duplicate

taxation. While the end might be worthwhile, the method

arguably creates an empty definition of consideration that

could affect future bargainers. Rather than compensate for

the legislative failure to exempt all product costs from use

tax by watering down our understanding of consideration, I

6
MCL 205.94(1)(c) exempts from use tax certain

promotional items, which include:

[P]romotional merchandise transferred pursuant

to a redemption offer to a person located outside

this state or any packaging material, other than

promotional merchandise, acquired for use in

fulfilling a redemption offer or rebate to a person

located outside this state. [Emphasis added.]

would hold that the repair parts are not included in the

retail sale for which consideration is paid.

KELLY , J., concurred with CAVANAGH , J.