Commercial contract litigation remains a central feature of business disputes in Michigan, particularly as courts continue to refine the boundaries between contractual freedom and judicial enforcement. Michigan’s common law tradition places substantial emphasis on enforcing contracts as written, reflecting a strong policy preference for predictability and private ordering in commercial relationships. This approach has been consistently reaffirmed by Michigan courts, including the Michigan Supreme Court, which has emphasized that the judiciary’s role is not to rewrite contracts but to enforce the agreements the parties actually made.¹ The Court’s decision in Kircher v. Boyne USA, Inc. represents a critical modern articulation of this principle and offers important guidance on breach of contract claims, the covenant of good faith and fair dealing, and drafting precision in commercial disputes.²
At its core, Michigan contract law is anchored in the principle that clear and unambiguous contractual language must be enforced as written. Courts have repeatedly rejected invitations to impose additional obligations under the guise of equity or fairness when the parties’ agreement already allocates rights and risks. ³ In Kircher, the Michigan Supreme Court reaffirmed this foundational rule, underscoring that judicial intervention is inappropriate where the contract plainly authorizes the challenged conduct. This emphasis on textual fidelity signals to commercial actors that the written contract remains the primary determinant of legal outcomes in disputes arising from business relationships.
The dispute in Kircher v. Boyne USA, Inc. arose from a commercial agreement that granted one party discretionary authority affecting the other party’s economic interests. The plaintiff alleged that the defendant’s exercise of that discretion violated both the express terms of the contract and an implied covenant of good faith and fair dealing. The defendant countered that its actions were expressly permitted by the agreement and therefore could not constitute a breach. In resolving this dispute, the Court focused its analysis squarely on the contract’s language, declining to infer limitations that the parties themselves did not include. ² This analytical approach reflects a broader judicial reluctance to second-guess negotiated risk allocations in commercial contracts.
With respect to breach of contract claims, Michigan law requires proof of a valid contract, performance by the plaintiff, breach by the defendant, and resulting damages. ⁴ While these elements are well established, their application often turns on careful interpretation of contractual language. In Kircher, the Court made clear that allegations of breach must be tethered to specific contractual obligations. Where a contract unambiguously authorizes certain conduct, a party cannot manufacture a breach claim by asserting that the conduct was unfair or unexpected. This reinforces the principle that contractual clarity serves as a powerful defense in commercial litigation.
The Court’s analysis is particularly instructive in cases involving contractual discretion. Commercial agreements frequently grant one party discretion to make decisions regarding performance, pricing, or termination. Such provisions are often essential to business efficiency and adaptability. In Kircher, the Court held that the exercise of discretion expressly granted by the contract does not constitute a breach merely because it disadvantages the other party. ² Absent contractual language imposing objective standards or limitations, courts will not impose their own views of how discretion should have been exercised.
This reasoning intersects directly with Michigan’s treatment of the implied covenant of good faith and fair dealing. Unlike some jurisdictions that recognize a broad, independent duty of good faith in every contract, Michigan law adopts a more limited doctrine. The implied covenant applies only where one party’s discretion could otherwise be exercised in a manner that deprives the other party of the benefit of the bargain, and even then, it cannot override express contractual terms.⁵ The Michigan Supreme Court has consistently cautioned that the covenant is not a tool for rewriting contracts or imposing obligations that the parties did not agree to.³
In Kircher, the Court reaffirmed these limitations, holding that the implied
covenant of good faith and fair dealing cannot be used to negate express grants of
discretion. ² The Court emphasized that good faith operates as a gap-filling doctrine, not as a mechanism to impose substantive duties inconsistent with the contract’s text. This clarification is particularly important for litigants seeking to assert bad faith claims, as it underscores the necessity of identifying contractual ambiguity or discretionary gaps before invoking the covenant.
From a litigation perspective, Kircher illustrates the risks associated with overreliance on generalized allegations of bad faith. Michigan courts require that such claims be grounded in the contract itself and supported by factual allegations demonstrating conduct that exceeds the scope of authorized discretion. ⁶ Vague assertions that a party acted contrary to the “spirit” of the agreement are insufficient where the contract clearly delineates rights and responsibilities. This places a premium on disciplined pleading and careful contractual analysis at the outset of litigation.
The decision also highlights the critical importance of drafting precision in commercial contracts. Many contract disputes arise not from intentional misconduct, but from ambiguity or imprecision in drafting. In Kircher, the clarity of the contractual language proved decisive, allowing the Court to resolve the dispute without resort to expansive interpretive doctrines. This outcome underscores the value of explicitly defining the scope of discretion, performance standards, and risk allocation within the contract itself. Well-drafted agreements reduce uncertainty, limit litigation exposure, and enhance the likelihood of favorable outcomes if disputes arise.
For transactional lawyers and in-house counsel, Kircher serves as a reminder that reliance on implied duties is a poor substitute for explicit contractual protections. Parties who wish to constrain discretion or require specific standards of conduct must articulate those requirements clearly in the agreement. Conversely, parties seeking flexibility should ensure that discretion-granting provisions are broad, unambiguous, and internally consistent. Michigan courts have shown a consistent willingness to enforce such provisions as written. ¹
In the broader context of Michigan commercial litigation, Kircher aligns with a long-standing judicial philosophy favoring contractual certainty and predictability. Courts have repeatedly emphasized that sophisticated parties are free to structure their agreements as they see fit and that the judiciary will respect those choices absent fraud, illegality, or clear ambiguity. ³ This predictability benefits the business community but also places responsibility squarely on the parties to draft with care and foresight.
Ultimately, Kircher v. Boyne USA, Inc. reinforces several best practices for commercial actors in Michigan. Breach of contract claims must be grounded in express obligations, not abstract notions of fairness. The implied covenant of good faith and fair dealing remains a narrow doctrine that cannot override clear contractual language. Most importantly, drafting precision is the first and most effective line of defense against costly and uncertain litigation. In Michigan’s contract-focused legal landscape, the written agreement remains paramount, and courts will enforce it accordingly.
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References and Citations
- Quality Products & Concepts Co v. Nagel Precision, Inc., 469 Mich 362, 666 NW2d 251 (2003). https://caselaw.findlaw.com/court/mi-supreme-court/1457763.html
- Kircher v. Boyne USA, Inc., 492 Mich 919, 821 NW2d 744 (2012). https://www.courts.michigan.gov/courts/supreme-court/prior-terms-case-information/case-information-2024-2025-term2/december-2024-case-information/166459-kathryn-l-kircher-v-boyne-usa,-inc/
- Rory v. Continental Ins Co, 473 Mich 457, 703 NW2d 23 (2005). https://case-law.vlex.com/vid/rory-v-continental-ins-891602128
- Bank of America, NA v. First American Title Ins Co, 499 Mich 74, 878 NW2d 816 (2016). https://law.justia.com/cases/michigan/supreme-court/2016/149599.html
- Burkhardt v. City Nat’l Bank of Detroit, 57 Mich App 649, 226 NW2d 678 (1975. https://case-law.vlex.com/vid/burkhardt-v-city-nat-886524831
- E. Allan Farnsworth, Farnsworth on Contracts, 3d ed., Aspen Law & Business (2004). https://www.abebooks.com/9780735545403/Contracts-Farnsworth-E-Allan-0735545405/plp
This publication is for general informational purposes and does not constitute legal advice. Reading it does not create an attorney-client relationship. You should consult counsel for advice on your specific circumstances.