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DeValk Lincoln Mercury, Inc. v. Ford Motor Company

    Brief Fact Summary. Plaintiffs were the owners of a failing Ford dealership. They agreed to resign as Ford dealers. During negations with Ford Motor Company (Defendant), concerning the winding down of the dealership, several issues remained unresolved.

    Synopsis of Rule of Law. One may not circumvent a mediation clause in a contract by saying that you have fulfilled the mediation clause’s purposes in other ways.

    Facts. Defendant accepted their resignation and agreed to buy back their inventory. Disputes over buying back the inventory and other issues gave rise to this lawsuit. The issue is a provision in the sales agreement providing for conflicts, which are to be appealed to the Policy Board. The provision further provides that the appeal to the Policy Board was a condition precedent to a dealer’s right to pursue any other remedy available to a dealer under the law.

    Issue. Does the fact that Plaintiffs did not appeal to the Policy Board defeat their claim?

    Held. Yes.
    Plaintiffs claim that that substantially complied with the policy. They base this contention on the fact that they fulfilled the purpose of the clause by informing Defendant of their case and giving Defendant the opportunity to settle. The law involving substantial performance does not apply to mediation clauses, only to the absence of conditions precedent.
    Plaintiffs also claim that Defendants waived their right to have the appeal taken to the Policy Board by continuing negotiation after the one-year limit had expired. This is unpersuasive because Defendants did not expressly waive their right to mediation and implied waiver is not permitted in the sales agreement.

    Discussion. Alternative dispute resolution agreements in a contract are generally upheld and performance is narrowly construed unless it can be shown that the agreement treated on of the parties unjustly.


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