No Duty to Renegotiate: Michigan Supreme Court Confirms the Implied Covenant Cannot Override an Express Pricing Formula or Create a Duty to Negotiate (“Unless Otherwise Agreed”) — Kircher v. Boyne USA, Inc. (2025)

Introduction

This unanimous per curiam decision arises from a family-business dispute over the redemption price of shares held by plaintiff Kathryn Kircher in Boyne USA, Inc. After her 2012 termination from the company, the parties executed a 2014 settlement agreement granting Kircher annual redemption rights at a price computed by a fixed formula tied to Boyne USA’s earnings (EBITDA) and total company debt. A 2019 supplemental settlement confirmed the formula would also govern the “to be determined” 2019 price once Boyne’s 2018 financials were finalized.

In 2018, Boyne borrowed approximately $300 million to acquire resort properties and other assets it had been leasing. Applying the agreed formula, that debt pushed the 2019 redemption price negative. Kircher sued, alleging breach of contract, principally on a theory that defendants acted in bad faith by refusing to use an alternative pricing method or to negotiate a different formula—invoking the implied covenant of good faith and fair dealing. The trial court denied defendants’ MCR 2.116(C)(8) motion; the Court of Appeals affirmed in part, allowing Kircher’s “bad faith refusal to renegotiate” theory to proceed because the 2014 agreement said redemptions would be calculated under the formula “unless otherwise agreed by the Parties.”

The Michigan Supreme Court reversed that portion of the Court of Appeals ruling. It held that the implied covenant is an interpretive tool only; it does not create an independent cause of action, does not override an express term, and does not impose a duty to negotiate a different deal. The Court left undisturbed the Court of Appeals’ conclusion that the 2014 agreement imposed no constraints on Boyne’s ability to incur debt (and therefore no breach could arise from the 2018 borrowing itself). The case returns to the trial court for further proceedings on any claims not resolved by the appellate rulings.

Summary of the Opinion

• The Supreme Court reversed the Court of Appeals’ holding that Kircher had stated a viable breach-of-contract claim based on defendants’ refusal to negotiate or adopt an alternative redemption formula. The phrase “unless otherwise agreed by the Parties” does not create a contractual duty to negotiate; it merely preserves the parties’ freedom to mutually modify the agreement.
• Reaffirming existing Michigan precedent, the Court emphasized that the implied covenant of good faith and fair dealing:
  • is not an independent cause of action;
  • operates as an interpretive tool to evaluate the exercise of contractual discretion or to measure performance where the contract leaves room for discretion;
  • cannot override or replace an unambiguous, express contractual term (such as a pricing formula).
• Because the redemption-price calculation was governed by an unambiguous, negotiated formula leaving no discretion to either party, the implied covenant could not be invoked to compel defendants to use an alternative formula or to negotiate one.
• The Court denied leave on the separate issue concerning whether Boyne’s 2018 debt-incurring transaction itself breached the 2014 agreement. The Court of Appeals had held there was no breach because the agreement contained no restrictions on Boyne’s indebtedness; that disposition remains in place for this litigation.

Analysis

Precedents Cited and Their Influence

• Belle Isle Grill Corp v Detroit, 256 Mich App 463 (2003):
  This case establishes that Michigan law does not recognize an independent cause of action for breach of the implied covenant of good faith and fair dealing. The Supreme Court here aligns with Belle Isle Grill, reiterating that good faith is not a standalone claim.
• Gorman v American Honda Motor Co, Inc, 302 Mich App 113 (2013):
  Gorman frames the implied covenant as an interpretive tool used to evaluate contractual performance, particularly where a contract confers discretion. The Court relies on Gorman’s framing to underscore that good faith informs the exercise of discretion but cannot contradict express terms.
• Burkhardt v City Nat’l Bank of Detroit, 57 Mich App 649 (1975):
  Burkhardt’s key principle: when a contract makes performance a matter of one party’s discretion, the law implies a duty to exercise that discretion honestly and in good faith. The Supreme Court applies Burkhardt negatively here: because the pricing was fixed by formula—not discretion—Burkhardt’s implied duty has no role to play.
• Bank of America, NA v Fidelity Nat’l Title Ins Co, 316 Mich App 480 (2016):
  “The implied covenant of good faith and fair dealing neither overrides nor replaces any express contractual term.” The Supreme Court quotes and embraces this limitation to reject an attempt to use “good faith” to circumvent an unambiguous pricing formula.
• Hammond v United of Oakland, Inc, 193 Mich App 146 (1992):
  Hammond offers the oft-cited description of the implied covenant as protecting the other party’s right to receive the fruits of the contract. The Supreme Court acknowledges this broad description but clarifies the covenant’s boundaries through Belle Isle Grill, Gorman, Burkhardt, and Bank of America.
• Quality Prod & Concepts Co v Nagel Precision, Inc, 469 Mich 362 (2003):
  Quality Products confirms a foundational principle: parties always retain freedom to contract and mutually modify an agreement, but modification requires mutual assent. The Court relies on this to explain that “unless otherwise agreed by the Parties” simply preserves the capacity to modify; it does not impose a duty to negotiate or reach a different bargain.
• Hubbard Chevrolet Co v General Motors Corp, 873 F2d 873 (5th Cir 1989):
  Quoted for the proposition that when parties “unmistakably express their respective rights,” courts should not imply contrary obligations. The Court uses this to reinforce that the detailed, non-discretionary formula forecloses a judicially implied obligation to use a different method.
• Procedural standards:
  • Bailey v Schaaf, 494 Mich 595 (2013) and Spiek v Dep’t of Transp, 456 Mich 331 (1998): de novo review of MCR 2.116(C)(8) motions and the rule that dismissal is proper if no factual development could justify relief.

Legal Reasoning

The Court’s reasoning proceeds in three steps:

1. The implied covenant’s limited role under Michigan law. The Court reaffirms that the implied covenant has no independent life as a claim; it is a tool that may police the exercise of discretion where a contract leaves performance to a party’s judgment. It does not permit courts to rewrite unambiguous bargains or to replace express terms.
2. No contractual discretion exists in the redemption pricing term. The parties negotiated a specific formula—6.5 times average EBITDA minus total company debt, multiplied by 80%, divided by outstanding shares. That formula governed 2019 as well. Because calculation was mechanistic, tied to objective financial inputs and not left to either party’s discretion, there was no arena in which a “good faith” standard could operate to alter the outcome (e.g., by choosing a different formula).
3. “Unless otherwise agreed by the Parties” does not create a duty to negotiate. The Court rejects the Court of Appeals’ view that this phrase introduced discretionary authority or an obligation to consider a different formula. Instead, it merely memorializes the ever-present principle that parties may mutually modify their contracts. If parties do not actually agree to a modification, the original terms continue to govern. Reading a duty to negotiate into “unless otherwise agreed” would improperly transform the implied covenant into an independent cause of action, contrary to Belle Isle Grill and related authority.

Applying these principles, Kircher’s complaint—premised on defendants’ “bad-faith refusal” to renegotiate after the formula produced a negative price—fails as a matter of law under MCR 2.116(C)(8). No amount of factual development can convert a reserved ability to agree into a duty to do so, or convert an interpretive covenant into a power to override an express valuation methodology.

Impact and Practical Implications

This decision has significant implications for Michigan contract law and, specifically, for valuation formulas and redemption rights in closely held and family businesses:

• Good faith cannot rewrite explicit terms. Litigants cannot invoke “good faith and fair dealing” to avoid, soften, or renegotiate clear contract language, especially pricing formulas and other mechanical terms. Where no discretion is conferred, the implied covenant does not apply.
• “Unless otherwise agreed” is permission, not obligation. Drafting a clause that redemptions occur under a formula “unless otherwise agreed by the parties” will not suffice to impose any duty to negotiate, consider alternatives, or reach a different deal. If a negotiation duty is desired, it must be express (e.g., “the parties shall negotiate in good faith to adjust the formula if it yields a negative price”).
• Early dispositive motions will have traction. Post-Kircher, complaints that rely solely on the implied covenant to create obligations absent contractual discretion are strong candidates for dismissal under MCR 2.116(C)(8).
• Corporate finance decisions and redemption formulas. Borrowings that affect a formulaic equity value (such as enterprise value minus debt) can dramatically reduce redemption prices—even below zero. If minority holders or exiting founders require protection, the contract must say so (e.g., floors, collars, caps on debt calculations, exclusions or adjustments for acquisition debt, anti-dilution provisions, or “extraordinary transaction” carve-outs).
• How to draft for negotiation duties. If parties want a real obligation to revisit terms, they should draft:
  • “The parties shall negotiate in good faith to adopt an alternative valuation method if the formula yields a negative per-share value,” or
  • “If debt incurred after [date] exceeds $X or is used for acquisitions above $Y, the ‘Total Company Debt’ input shall exclude such debt,” or
  • “Minimum redemption price per share shall be no less than $Z,” or
  • “Company shall not incur additional indebtedness primarily for the purpose of materially reducing the redemption price,” coupled with objective tests and remedies.
• Comparative perspective. Some jurisdictions are more receptive to using the implied covenant to police opportunistic conduct even against the backdrop of express terms. Michigan’s reaffirmed stance is narrower, aligning with jurisdictions like New York: the covenant is interpretive and cannot override unambiguous terms.
• What Kircher does not decide. The Supreme Court denied leave on whether Boyne’s 2018 borrowing itself breached the 2014 agreement, leaving intact (for this litigation) the Court of Appeals’ conclusion that the contract imposed no restrictions on indebtedness. The Supreme Court also did not opine more broadly on any divergence among jurisdictions (e.g., the Ninth Circuit’s Vylene approach), because the parties agreed to the governing Michigan principles.

Complex Concepts Simplified

• Implied covenant of good faith and fair dealing: A background rule that parties must not sabotage the other side’s receipt of the contract’s benefits. In Michigan, it is not its own lawsuit and is typically used to evaluate how a party exercised contractual discretion; it cannot contradict clear contract language.
• Contractual discretion vs. mechanical terms: If a contract gives a party leeway (“in its sole discretion”) to act, a good-faith limit may apply to how that leeway is used. If a contract prescribes a formula or rule that leaves no choice, there is no discretion for “good faith” to police.
• “Unless otherwise agreed by the Parties”: A reminder the parties may mutually modify their contract in the future. It does not require anyone to negotiate, consider alternatives, or actually agree to change the terms.
• TBD (“to be determined”): A placeholder for a number that depends on future, objective inputs (e.g., year-end financials). It is not an invitation to renegotiate unless the contract says so.
• EBITDA and “Total Company Debt” in valuation formulas: Valuation by enterprise value often looks like “multiple of EBITDA minus net debt.” If debt rises substantially relative to EBITDA, equity value—and thus per-share redemption price—can fall to zero or below.
• MCR 2.116(C)(8) summary disposition: Michigan’s analog to a motion to dismiss for failure to state a claim. The court assumes the complaint’s factual allegations are true and asks whether, as a matter of law, any set of facts could entitle the plaintiff to relief.

Conclusion

Kircher v. Boyne USA, Inc. solidifies a clear rule in Michigan contract law: the implied covenant of good faith and fair dealing is interpretive, not transformative. It cannot be deployed to override unambiguous contract terms or to manufacture a duty to renegotiate where none exists. The phrase “unless otherwise agreed by the Parties” is not a stand-in for a negotiation obligation; it is a recognition of the parties’ ongoing freedom to modify their contract by mutual assent.

For drafters and dealmakers, the lesson is plain. If parties want flexibility in a formula that might produce unpalatable outcomes (like negative redemption prices), they must write that flexibility into the contract. Courts will enforce the agreed formula—even if it yields a harsh result—rather than supply a substitute method under the banner of “good faith.” As to litigation practice, Kircher sharpens the boundary lines: claims premised on a refusal to depart from an express formula are unlikely to survive a motion under MCR 2.116(C)(8) absent a textual grant of discretion or an express duty to negotiate in good faith.

In short, Kircher takes Michigan one step further in reaffirming contractual certainty: where the parties “unmistakably expressed their respective rights,” courts will not imply a different bargain.