On May 3, 2016, in the case of Wyandotte Electric Supply Company v Electrical Technology Systems, Inc., the Michigan Supreme Court issued an important opinion regarding “notice” requirements under the Michigan Public Works Act (PWA). The case involved renovation of the Detroit Public Library. KEO & Associates was the general contractor and Westfield Insurance Company supplied KEO with a $1.3 million payment bond as required under PWA. KEO subcontracted with Electrical Technology Systems (ETS) who in turn subcontracted with Wyandotte Electrical Supply for material and supplies.
ETS and Wyandotte had agreed to an open account arrangement, pursuant to which ETS would be liable for attorney fees and time-price differential charges of 1.5% on past due amounts. A time-price differential charge is “the difference between the current cash price of an item and the cost of purchasing the item with credit. A payment made with cash is immediate; a payment made with credit is not. Thus, when a payment is made with credit, the seller [such as Wyandotte] is burdened by a cash-flow interruption. A time-price differential compensates for the increased cost to a seller for credit. It reflects the difference between the credit price and the cash price.”