Business contracts in Michigan
I am Mitchell Bisson, a Grand Rapids business formation lawyer. I have litigated for over 15 years. A business contract is only as useful as it is clear when something goes wrong. This page covers business contract questions in Michigan, including what makes a contract binding, oral agreements, contracts that must be in writing, email and text agreements, unclear terms, limitation of liability and indemnification clauses, and arbitration clauses. I help Michigan businesses draft and review contracts. The short answers below come from my Michigan legal library, and each links to the full answer.
Many business contract disputes in Grand Rapids, Kentwood, Wyoming and the rest of Kent County start long before a lawsuit, with a clause nobody read closely. A supplier points to a liability cap after a bad shipment. A partner points to an arbitration clause when the other side files in Kent County Circuit Court. A guarantor learns what a personal guaranty covers on the day the lender calls it. I work on contracts before a dispute, when the words can still be fixed, and after one, when the words are the evidence.
I act for either side. I draft and review contracts for the party that wants as much protection as the law allows, and I defend the party that signed someone else’s form. Both need the same thing, a contract that says what the parties meant in words a judge will enforce. Michigan courts start with the words: if the language is unambiguous, the contract is construed and enforced as written. Quality Products & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362 (2003). The general deadline to sue on a contract is six years under MCL 600.5807(9). For a contract for the sale of goods it is four years under MCL 440.2725(1), and the original agreement may reduce that period to not less than one year but may not extend it.
This page is about the contract itself: what it should say, the mistakes and gaps I see, and what happens when a clause is tested in a dispute. Nothing here predicts how a clause will hold up in your case, and I do not promise outcomes. I do tell you plainly where a clause is solid and where it is weak.
Michigan business contract rules and where they come from
These are the rules in the statutes, court rules and case law. How they apply depends on the exact words of your contract and on the facts.
| Contract issue | What the law looks at | Time limit or key rule | Authority |
|---|---|---|---|
| Agreements that must be in writing | A signed writing, or a signed note or memorandum, from the party to be charged | Listed agreements are void without it, including those not performable within 1 year and a promise to answer for another’s debt | MCL 566.132(1) |
| Sale of goods for $1,000 or more | A writing sufficient to show a contract for sale, signed by the party against whom enforcement is sought | Between merchants, a written confirmation of the contract satisfies the writing requirement against the recipient unless written notice of objection is given within 10 days after it is received | MCL 440.2201(1)-(3) |
| Changing a written contract | Not binding unless in a signed writing; a court may also find a modification or waiver on clear and convincing proof of mutual agreement | One side cannot change a two-sided agreement alone, and knowing silence generally is not enough | MCL 566.1; Quality Products, 469 Mich. 362 (2003) |
| Email, text and electronic signatures | A record, signature or contract is not denied effect solely because it is electronic | Applies only when each party has agreed to transact electronically, judged from context and conduct | MCL 450.837; MCL 450.835(2) |
| Limitation of liability | Read as written; a party may contract against ordinary negligence but not gross negligence or willful and wanton misconduct | Between businesses dealing at arm’s length, reasonableness is the primary consideration | Lamp v. Reynolds, 249 Mich. App. 591, 594 (2002); St. Paul Fire & Marine, 115 Mich. App. 278, 283-284 (1982) |
| Indemnification | Plain language controls; “all” and “any” apply as broadly as possible | Indemnity for the promisee’s sole negligence in real property work is void; a failure-to-indemnify claim accrues when the loss is sustained | Miller-Davis Co. v. Ahrens Construction, Inc., 495 Mich. 161 (2014); MCL 691.991(1) |
| Arbitration clause | An agreement in a record to arbitrate is valid, enforceable and irrevocable except on contract-revocation grounds | The court decides whether an arbitration agreement exists and covers the dispute; the arbitrator decides conditions precedent and enforceability of the contract | MCL 691.1686(1)-(3) |
| Out-of-state forum clause | A written agreement that an action be brought only in another state | The court shall dismiss or stay unless a listed exception applies, such as a substantially less convenient forum or a clause obtained by unconscionable means | MCL 600.745(3) |
What makes a business contract binding
Five elements. The Michigan Supreme Court lists five elements of a valid contract: parties competent to contract, a proper subject matter, legal consideration, mutuality of agreement, and mutuality of obligation. Innovation Ventures, LLC v. Liquid Manufacturing, LLC, 499 Mich. 491, 508 (2016); Bank of America NA v. First American Title Insurance Co., 499 Mich. 74, 101 (2016). Consideration is a bargained-for exchange, and courts generally do not inquire into whether it was sufficient. The fights I see are about whether the parties actually agreed to the same terms.
What has to be in writing. Under MCL 566.132(1), certain agreements are void unless the agreement, or a note or memorandum of it, is in writing and signed with an authorized signature by the party to be charged. The list includes an agreement not to be performed within one year of its making, a special promise to answer for another person’s debt, an assignment of things in action, and a real estate commission agreement. Subsection (2) adds that a person cannot sue a financial institution to enforce a promise to lend, extend credit or modify a loan unless the promise is in a writing signed by the institution. For goods priced at $1,000 or more, MCL 440.2201 requires a signed writing sufficient to show a contract for sale, with exceptions for specially manufactured goods, an admission in a pleading or testimony, and goods paid for and accepted or received and accepted. An oral agreement outside these statutes is not void for lack of a writing, but it is harder to prove.
Email, text and electronic signatures. A record or signature cannot be denied legal effect solely because it is electronic, a contract cannot be denied effect solely because an electronic record was used to form it, and an electronic signature satisfies a law that requires a signature. MCL 450.837. The Act applies only when each party has agreed to transact electronically, which is judged from the context and the parties’ conduct. MCL 450.835(2). In Clark v. Al-Amin, the Court of Appeals treated an email exchange as a valid settlement agreement under MCL 450.837 where the plaintiff did not dispute it and did not claim her attorney lacked authority. 309 Mich. App. 387, 403 n. 6 (2015). Whether a looser string of messages shows an agreement depends on what the messages say.
What the business contract should say
I do not use one form for every client. The clauses below are the ones that decide disputes, and what each should say depends on which side you are on.
Parties, scope, price, term and termination. Use the exact legal name of each party and say who signs for it and in what capacity. Describe the work or goods, the price and the payment dates so that two people cannot read the scope two ways. Say how long the contract runs and how each side can end it, including the notice, the address, the method and the number of days to cure.
Indemnification. An indemnity clause shifts the cost of certain claims from one party to the other. Decide which claims it covers, who controls the defense, how notice and tender work, and whether it reaches the indemnified party’s own fault. Michigan courts read an indemnity clause like any other contract, by its plain language, and words such as “all” and “any” apply as broadly as possible. Miller-Davis, 495 Mich. 161, 173-175 (2014). In a contract for the design, construction, alteration, repair or maintenance of a building, structure, road, bridge or other improvement to real property, a provision indemnifying the promisee against bodily injury or property damage caused by its sole negligence is void, and a public entity may not require a Michigan-licensed design professional or a contractor to indemnify for more than its own degree of fault. MCL 691.991(1)-(2).
Limitation of liability. A cap on damages or an exclusion of certain kinds of damages protects the party supplying the goods or services, and it is the clause the other side tends to fight hardest when the loss is large. A party may contract against liability for ordinary negligence but may not insulate itself from liability for gross negligence or willful and wanton misconduct. Lamp v. Reynolds, 249 Mich. App. 591, 594 (2002). In St. Paul Fire & Marine, the Court of Appeals enforced a clause limiting an alarm company’s liability to six monthly payments or $250 in a contract between two corporations dealing at arm’s length, and called reasonableness the primary consideration. 115 Mich. App. 278, 283-284 (1982). For a sale of goods, the Uniform Commercial Code lets the agreement limit or exclude consequential damages unless the limitation is unconscionable, and it treats a limitation of consequential damages for injury to the person in the case of consumer goods as prima facie unconscionable but a limitation where the loss is commercial as not. MCL 440.2719(3). A clause written for the transaction, saying what it covers, invites less argument than a boilerplate paragraph.
Liquidated damages. A clause fixing the amount of damages for a breach is enforceable if the amount is reasonable in relation to the possible injury and not unconscionable or excessive. St. Clair Medical, PC v. Borgiel, 270 Mich. App. 260, 270-271 (2006). Whether such a clause is valid or an invalid penalty is a question of law. UAW-GM Human Resource Center v. KSL Recreation Corp., 228 Mich. App. 486, 508 (1998).
Governing law, venue, arbitration and jury waiver. Decide where disputes will be heard, and under what law, before anything goes wrong. If the parties agree in writing that an action must be brought only in another state and it is filed in Michigan, the court shall dismiss or stay it unless an exception applies. MCL 600.745(3). Considering the Restatement approach, the Michigan Supreme Court held that Michigan law governed an indemnity clause in a contract for work in Illinois, where the contract terms specified Michigan law, and that the clause was valid. Chrysler Corp. v. Skyline Industrial Services, Inc., 448 Mich. 113, 116-117 (1995). An agreement in a record to arbitrate is valid, enforceable and irrevocable except on a ground that exists at law or in equity for the revocation of a contract. MCL 691.1686(1). An arbitration clause should say which disputes it covers, which rules apply and who pays.
A jury is claimed by a written demand, filed as a separate document with the fee within 28 days after the answer or a timely reply, and a party who does not do that waives trial by jury. MCR 2.508(B)(1), (D)(1). A contract can also try to waive a jury in advance. In Feinberg v. Straith Clinic, the Court of Appeals held that a standard requiring only that the waiver be voluntary was enough for a jury waiver in a medical malpractice arbitration agreement signed before any dispute. 151 Mich. App. 204, 214-216 (1986). That is not an ordinary business contract, so I do not treat a jury waiver as certain.
Attorney fees. Michigan follows the American rule: attorney fees are not ordinarily recoverable unless a statute, court rule or common-law exception provides otherwise. Smith v. Khouri, 481 Mich. 519, 526 (2008). A contract can provide for fees, and contractual provisions for payment of reasonable attorney fees are judicially enforceable. Central Transport, Inc. v. Fruehauf Corp., 139 Mich. App. 536, 548 (1984). Say who pays, for which claims, and whether it runs both ways.
Entire agreement and changes. An entire-agreement clause makes the signed document the whole deal. In UAW-GM, the Court of Appeals said that when a contract has a valid merger clause, the only fraud that could undo the contract is fraud relating to the merger clause itself or fraud that invalidates the entire contract. 228 Mich. App. 486, 503 (1998). Every promise you rely on belongs in the signed paper. A clause saying changes must be in writing does not lock the parties in: parties can modify or waive a written contract despite such a clause, but the party claiming the change must prove mutual agreement by clear and convincing evidence. Quality Products, 469 Mich. 362 (2003). MCL 566.1 makes a change binding only if it is in a writing signed by the party against whom it is enforced, so I tell clients to sign every change.
Personal guaranties. A personal guaranty makes an owner answer personally for the company’s debt, and a special promise to answer for the debt, default or misdoings of another person must be in a signed writing. MCL 566.132(1)(b). In Comerica Bank v. Cohen, the Court of Appeals said a surety has a right to stand on the very terms of the contract and cannot be held beyond the precise terms of the agreement. 291 Mich. App. 40, 47 (2010). The guaranty there was a limited, continuing guaranty of payment and not of collection, with a waiver of any right to require the bank to proceed against the borrower or its collateral. The court held that the guarantor unconditionally and absolutely agreed to pay 30 percent of the indebtedness and that the bank did not have to foreclose first. 291 Mich. App. at 43, 49. The words that matter are payment or collection, any cap, what the guarantor waived and which debts it covers. Before an owner signs, I read the guaranty with the loan documents.
Mistakes and gaps I see in business contracts
A side promise that never reached the paper. The owner remembers a promise made at the table, and the signed contract has an entire-agreement clause and says nothing about it.
Forms that fight each other. In a sale of goods, a written confirmation with additional or different terms can still operate as an acceptance, and between merchants the added terms can become part of the deal unless the offer limits acceptance, they materially alter it, or timely objection is given. MCL 440.2207(1)-(2).
An open-ended guaranty. An owner signs at closing without asking what debts it covers, whether it is capped, or how it ends.
Deadlines nobody calendared. Cure periods, notice windows, renewal dates and shortened suit periods are all dates. For a sale of goods, the original agreement may cut the four-year period to as little as one year. MCL 440.2725(1). In 2025, in Rayford v. American House Roseville I LLC, No. 163989 (Mich. July 31, 2025), the Michigan Supreme Court held that where an employment agreement is adhesive, courts must examine whether a shortened limitations period is reasonable. That case concerned employment. It does not tell me how a court will treat a short suit clause negotiated between two businesses, so I calendar the shortest period a clause could be read to set.
What happens when a clause is tested in a dispute
The court starts with the words, and then the evidence. If two provisions of the same contract irreconcilably conflict, the contract is ambiguous. The meaning of an ambiguous contract is a question of fact, and relevant outside evidence can be considered. Only if the parties’ intent still cannot be found does the court read the ambiguity against the drafter, a rule the Supreme Court called one of last resort. Klapp v. United Insurance Group Agency, Inc., 468 Mich. 459 (2003).
An indemnity claim has its own start date. In Miller-Davis, the Supreme Court held that a subcontractor breached twice, first by defective work and later by refusing to indemnify for the corrective work, and that the indemnity claim accrued when the indemnitee sustained the loss. 495 Mich. 161, 180-181 (2014). On tender, the Court of Appeals held that where there is an enforceable indemnity contract, a seasonable tender of defense is made with notice that a settlement will be entered, and the tender is refused, the indemnitee need show only potential liability, together with a reasonable settlement. Grand Trunk Western Railroad v. Auto Warehousing Co., 262 Mich. App. 345, 355, 358 (2004).
Arbitration and forum clauses are raised early. The court decides whether an agreement to arbitrate exists and whether the controversy is subject to it, while the arbitrator decides whether a condition precedent to arbitrability has been fulfilled and whether the contract containing the arbitration agreement is enforceable. MCL 691.1686(2)-(3). An agreement to arbitrate is an affirmative defense that must be stated in the responsive pleading under MCR 2.111(F)(3). An agreement to arbitrate or to litigate in a different forum is also a ground for summary disposition under MCR 2.116(C)(7), and under MCR 2.116(D)(2) it must be raised in the responsive pleading unless it is stated in an earlier motion.
How I handle a business contract matter
- Start with the deal and the goal. I ask what the business is trying to do, what it fears, and which side of the table it sits on.
- Read the whole paper. I read the contract, every exhibit, the purchase orders, the terms printed on invoices and the messages that changed anything. I check the exact entity names, who signed and in what capacity.
- Draft or mark up clause by clause. I work through the clauses above, decide with you which points matter and which to trade, and keep the words plain enough that everyone reads them the same way.
- Calendar every date. Renewal dates, notice windows, cure periods and any shortened suit period go on a calendar, using the shortest plausible reading.
- When a dispute starts, preserve and read. I have you keep every version and message, I read the notice, cure, tender, arbitration and venue provisions, and I decide what has to be sent or answered and by when.
- File or respond. If the clause sends the dispute to arbitration or another court, I raise it at the right time. If it stays in Kent County, I prepare the complaint or the answer, with the affirmative defenses stated as the court rules require.
- Test the clause against the record. Contract cases are often decided on the documents. I prepare discovery and any motion for summary disposition around the exact words and the proof of what the parties did.
Ways a business contract dispute may end without a trial
Whether any of these is available depends on the facts, the documents and the other side. None is automatic.
A negotiated resolution or amendment. Many disputes end with a signed amendment, a payment schedule or a release. It should say what is released, who pays what and when, what happens on a default, and whether the contract continues.
Summary disposition. If the unambiguous language of the contract answers the question, a judge can decide it on motion under MCR 2.116, for example on a limitations, statute of frauds or forum ground under subrule (C)(7).
Arbitration. If the agreement sends the dispute to arbitration, it is resolved there and not in the Kent County courts.
Case evaluation or mediation. The court rules provide for case evaluation under MCR 2.403 and for mediation under MCR 2.410 and 2.411, and a court may order them before trial.
What I need from you
Bring the signed contract and every version of it, including drafts, redlines, amendments, exhibits and the terms printed on purchase orders, invoices and acknowledgments. Bring the emails and texts that discuss the deal or changed it, the invoices and proof of payment, any notice of default, termination or demand, and a timeline with dates. If a guaranty or a loan is involved, bring the guaranty, the note, the loan agreement and every default notice. If you are being sued, bring the summons and complaint and note the date and manner of service, because the answer deadline runs from service. Do not delete messages, do not alter documents, and do not sign an amendment, release or guaranty until it has been read against the rest of the contract. Do not send “sounds good” or “agreed” unless you mean to be bound.
Where your Kent County business contract case will be heard
I represent clients in Grand Rapids, Kentwood, Grandville, Wyoming and across Kent County. Under MCL 600.8301(1), the district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000. Kent County district courts include the 61st District Court in Grand Rapids, the 59th in Walker and Grandville, the 62A in Wyoming, the 62B in Kentwood and the 63rd for Rockford, Lowell, Cedar Springs, East Grand Rapids and the surrounding townships. Larger claims are filed in the Kent County Circuit Court, the 17th Judicial Circuit. A dispute between businesses, or between a business and its owners, managers, suppliers, guarantors of a commercial loan or similar parties, can qualify as a business or commercial dispute under MCL 600.8031, which defines the cases eligible for a business court docket. If the contract sends the dispute to arbitration or to a court in another state, the case may be heard there instead.
Why people hire me for a Michigan business contract matter
You work directly with me, the lawyer handling your contract or your dispute. I give you the strengths and weaknesses of a clause or a case straight, including what it could cost you and what it could protect or recover. I draft or defend what the facts and the documents support, and then we decide together how to proceed.
Fees depend on the type of work, its complexity and whether a dispute is likely to go to trial. I explain my fee arrangement at the consultation, before you decide whether to hire me.
Questions I hear from people with a business contract problem in Michigan
What makes a contract legally binding in Michigan?
The Michigan Supreme Court lists five elements: parties competent to contract, a proper subject matter, legal consideration, mutuality of agreement, and mutuality of obligation. Mutuality of agreement is usually shown through an offer and an acceptance of the same terms. A contract does not have to be on any particular form.
Is an oral contract enforceable in Michigan?
Yes, unless a writing statute applies, but proof is harder. Michigan’s statute of frauds, MCL 566.132, lists the kinds of agreements that are void unless in a signed writing. If your agreement falls outside those categories and outside other writing statutes, an oral agreement that meets the contract elements can be enforced.
Which contracts have to be in writing under Michigan law?
Under MCL 566.132(1), these are void unless in a signed writing: agreements not to be performed within one year, promises to answer for another’s debt, promises made on consideration of marriage (other than mutual promises to marry), a personal representative’s promise to pay from their own estate, real estate commission agreements, assignments of things in action, and medical care or cure warranties.
Can an email or text exchange create a binding contract in Michigan?
It can. Michigan’s electronic transactions law says a contract cannot be denied effect solely because an electronic record was used to form it. In Clark v Al-Amin, the Court of Appeals treated an e-mail exchange between an insurer’s adjuster and the plaintiff’s attorney as a valid settlement agreement under that statute where the plaintiff did not dispute it. Whether a specific exchange is a contract depends on its terms.
If a clause in my contract is unclear, how does a Michigan court decide what it means?
A court first reads the contract’s words to find the parties’ intent, and unambiguous language is enforced as written. If two provisions irreconcilably conflict, the contract is ambiguous, and its meaning becomes a fact question that can be answered with relevant outside evidence. Only if the parties’ intent still cannot be found does the court resolve the ambiguity against the person who drafted the contract (Klapp v United Insurance Group Agency).
Will a Michigan court enforce a limitation of liability clause?
In some cases, but not for everything. The Court of Appeals has said a party may contract against liability for ordinary negligence but may not insulate itself from liability for gross negligence or willful and wanton misconduct. Whether a particular clause works also depends on its wording, who signed it, and the claims involved.
What does an indemnification clause in a Michigan business contract make me pay, and are there limits?
An indemnification clause is read like any other contract, by its plain language, so a broad clause can make you cover a lot. In a contract for construction or other work on real property, a clause that indemnifies a party against its own sole negligence for bodily injury or property damage is void under MCL 691.991. A claim for failure to indemnify accrues when the indemnitee sustains the loss, and the six-year contract period in MCL 600.5807(9) applies.
Is an arbitration clause enforceable in Michigan?
Generally yes. Under the Michigan Uniform Arbitration Act, an agreement in a record to arbitrate existing or future disputes is valid, enforceable, and irrevocable except on grounds that exist at law or in equity to revoke a contract. The court decides whether an agreement to arbitrate exists and whether the dispute falls within it.
Related Michigan pages
- Grand Rapids Business Formation Attorney
- Grand Rapids LLC Formation Attorney
- Grand Rapids Business Entity Choice Attorney
- Operating agreements and managing an LLC
- Commercial contracts and UCC disputes
- Grand Rapids Breach of Contract Attorney
- Business contracts and contract clauses in Michigan
I help Michigan businesses draft, review and enforce their contracts. Contact me 24/7 by phone or email. Your Rights, My Fight! Call for a free initial consultation.
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Law Offices of Mitchell S. Bisson, 2828 Kraft Ave SE, Suite 295, Grand Rapids, MI 49512, serving Kent County and West Michigan.
This page provides general information about Michigan law and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and every case turns on its own facts. Consult a licensed attorney about your specific situation.