Professional Documents
Culture Documents
Construction Contract Court Cases
Construction Contract Court Cases
Construction Contract Court Cases
&
Temple University
By Meshel Alkorbi
Case I...........................................................................................................................................................1
Case title and number..............................................................................................................................1
Parties involved.......................................................................................................................................1
Project Specifications..............................................................................................................................1
Court/Case location and date...................................................................................................................1
Case summary.........................................................................................................................................2
Decision of the Appellate court...............................................................................................................3
Further action(s) by the parties................................................................................................................4
Commentary............................................................................................................................................4
Opinion of the case..............................................................................................................................4
Contract issues involved......................................................................................................................5
Prior actions the parties could have taken/made to settle the case before it went to court..................7
What could have been done by whom in the past (or what could be done in the future) to avoid
problems of this nature?......................................................................................................................7
Case II.........................................................................................................................................................9
Case title and number..............................................................................................................................9
Parties involved.......................................................................................................................................9
Project Specifications..............................................................................................................................9
Case location and date.............................................................................................................................9
Case summary.........................................................................................................................................9
Court decision and ward given..............................................................................................................11
Further action(s) by the parties..............................................................................................................11
Commentary..........................................................................................................................................12
Opinion of the case............................................................................................................................12
Contract issues involved....................................................................................................................12
Prior actions the parties could have taken/made to settle the case before it went to court................13
What could have been done by whom in the past (or what could be done in the future) to avoid
problems of this nature?....................................................................................................................14
References.................................................................................................................................................15
Appendix A...............................................................................................................................................16
Appendix B...............................................................................................................................................17
Case I
Parties involved
Project Specifications
Name: Provision of mechanical system design and construction services for the mechanical
Contract Amount: $4.7 million paid with $4.5 million meant for sub-subcontractors for 4 months
1
Case summary
The case is a reversal of a trial court order by the Fourth Appellate District court, which
denies a petition to compel arbitration. The case can be summarized by capturing what the
Appellate court held – that in a contract, once a party refused arbitration by filing a suit in a state
court, the other party that sought to compel arbitration was not required to make a formal
arbitration demand.
Hyundai Amco America, Inc, which is further referred to as Hyundai Amco herein, got
into a contract with Hyundai Motor America, Inc as their general building contractor for the
construction of the headquarters in the United States. S3H, Inc. was a subcontractor of Hyundai
Amco, which was meant to serve design and construction services. Hyundai Amco served as
general building contractor for construction of the United States headquarters of Hyundai Motor
America, Inc. The subcontract included a California choice of law provision and an arbitration
provision.
Four months after starting the project on May 15, 2013, S3H communicated to Hyundai
Amco its business dissolution and abandonment of the work. S3H was accused by Hyundai
Amco of a breach in its contractual obligations agreed upon by both parties and demanded cure
in a letter served to S3H on May 21, 2013. Hyundai Amco further proceeded to file suit against
S3H and related parties in the California state Court on June 28, 2013. S3H sought to compel
arbitration in accordance to the Code of Civil Procedure 1281.2. In their denial for the motion,
the trial court reasoned that there was failure to allege that S3H had demanded arbitration and in
return Hyundai Amco refused. S3H appealed in the Fourth Appellate District court.
2
Decision of the Appellate court
The Fourth Appellate court held that the State Court erred in making the conclusion that
S3H motion to compel arbitration required to be denied by Hyundai Amco for failure to fulfill
the requirements of Civil Procedure 1281.2. Therefore, the decision by the state Court was
reversed.
According to the court’s observation, the requirements of 1281.2 require that a party
seeking a court order for arbitration must show that the arbitration has a written agreement, and
that there was refusal to arbitrate a dispute by the other party. The appellate court cites the
Mansouri V Superior Court (1) (2010) case law, where the Third Appellate District held that a
party that would compel an arbitration agreement must prove that a written agreement exists, as
well as that there was a demand for arbitration that the other party refused. This was the basis for
trial court’s decision to deny the motion to compel arbitration by S3H since it did not meet the
burden of proof as declared under Mansouri (1). According to the Appellate court, that was
wrong. By its plain language, the Civil Procedure 1281.2 requirement is that a party with a
motion to compel arbitration should allege “the existence of a written agreement to arbitrate a
controversy and that a party thereto refuses to arbitrate such controversy.” The procedure to
enforce arbitration agreements does not require that the petitioning party make a demand for
arbitration. The only requirement according to Section 1281.2 is that the other party has refused
arbitration. The court was clear and put emphasis that refusal of arbitration can happen even
when there is no formal demand made (Hyundai Amco America, Inc.v.S3H, Inc. 2014).
As such, in this case, there was no requirement for S3H to make a formal arbitration
demand since filing of a suit by Hyundai Amco invoked the procedures and protections of the
3
court, which meant that this was an effective refusal to arbitrate as provided in the written
arbitration agreement. To this end, S3H met its Section 1281.2 burden of proof. As a
clarification, the Appellate court declared that it was not in disagreement with Mansouri (1) in
the context of that case’s presentation of facts. To clarify, the petitioning party in Mansouri (1)
sought to compel arbitration on different terms from the ones in the written agreement that the
parties consented to. On the contrary, Hyundai Amco’s filing of suit in this case was rooted from
a controversy emanating from the contractual performance of the parties involved. Under the
facts, this was sufficient to establish refusal by Hyundai Amco to arbitrate (Hyundai Amco
The appellate court sent the case back to the trial court to determine whether a stay on
There is no documented further action by the parties. The ruling by the Appellate court,
however, meant that the motion to compel arbitration was successful, which means that the court
gave pause to litigation actions. Therefore, it is likely that the parties sought relief under the
Commentary
The case brings up necessary allegations in order to file a motion to compel arbitration.
The two important allegations that the petitioner should allege are existence of a written
agreement and refusal of a party to the agreement to arbitrate. Indeed, Hyundai Amco and S3H
4
had a written agreement that provided for arbitration incase of any dispute. Therefore, Hyundai
Amco should have commenced with arbitration as stipulated in the contract, rather than filing a
suit. A suit should have only have come up if either party demanded for arbitration as provided
S3H meets it burden by showing that all the requirements to compel arbitration are met. It
was wrong for the state Court to deny the motion; rather, it should have ordered the petitioner
and respondent to pursue arbitration. Indeed, it was right for the Appellate Court to reverse the
decision of the state Court that denied S3H the motion to compel arbitration. An agreement
containing provisions for arbitration should avoid seeking relief in state courts by filing actions.
a) Breach of contract
The controversy between Hyundai Amco and S3H that led to filing of the suit was
because Hyundai Amco alleged that the contract was breached. According to the Judicial
Education Center (2021), a breach of contract is described as failure to perform part or all forms
of the contract without a legal excuse. Failure also includes failure to perform in accordance to
For Hyundai Amco, the allegations of breach of contract were rooted in the fact that, S3H
failed to perform as per the agreement of providing services for the mechanical systems in the
Hyundai Amco and S3H. The contract was not amended or modified that would allow S3H to
abandon its obligations to the agreement. This was a breach, which was material to the contract.
5
Judicial Education Center (2021) asserts that when a breach is material, the breaching party
b) Fraud by concealment
Hyundai Amco alleged fraud by concealment, which according to Cornell Law School
(2021) is failure of one party to disclose information to the other party. Fraudulent concealment
arises when one party has duty to disclose information, but intentionally hides it, especially in
instances where the other party’s decision would have been influenced by this information. It can
be argued that S3H intentionally hid information about its dissolution from Hyundai Amco. S3H
only executed its obligations of the contract for just four months and then communicated its
dissolution, hence termination of the contract. This could mean that S3H got into the contract
c) Conversion
personal property, hence leading to curtailing possession by the owner. Essentially, this is
usually to the detriment of the rightful owner rather than benefit of the wrongful taker. It
originated from protection of personal property, but as Lee (2009) asserts, the protection has
extended to intangibles such as cheques, money, insurance policies, shares and guarantees. In
this case, S3H was provided payment to cover the sub-subcontractors for materials and services
up until March 2013. However, in their communication, S3H said that they had no intention of
paying for work done in March 2013, thereby taking possession of property meant for other
parties.
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d) Equitable subrogation
Equitable subrogation is a doctrine in law that allows for damages or funds recovery from
a third party when a party has made payments for another party. This doctrine is meant to avoid
unjust enrichment (Bernhardt, 2013). In S3H accepting payment of $4.5 million dollars from
Hyundai Amco to pay its sub-subcontractors, and in turn choosing not to pay for the month of
Prior actions the parties could have taken/made to settle the case before it went to court
There are a number of ways the parties could have handled the case. The parties had a
written agreement to arbitrate. Once Hyundai Amco was served with a letter that S3H was
dissolving the company and could not further fulfill its contractual obligations, this should have
been followed by another letter from SH3 for arbitration. On the other hand, Hyundai Amco
should have initiated the arbitration as provided in the written agreement by submitting a claim
to S3H of contentions the party is raising. A cure for the contentions should have been sought by
Hyundai Amco within the provisions of the written agreement. As such, before any court
indulgence, provisions of the written agreement should have been used by the parties to resolve
the dispute as at the time it arose. Arbitration should have been an inexpensive dispute resolution
What could have been done by whom in the past (or what could be done in the future) to avoid
The motion to compel arbitration would have been upheld by the Appellate Court if there
existed an express requirement in the written agreement that requires a party to make a demand
7
for arbitration. With such express requirement, S3H would have failed to meet its burden of
proof hence leading to denial of a motion to compel arbitration. While drafting the written
agreement, the legal departments can choose to include such express requirements. Otherwise,
the legal departments in companies should understand the specific language of Section 1281.2 as
declared and emphasized by the Appellate Court that the requirement is the other party has
refused to arbitrate; rather than requirement for a petitioner to have made a demand for
arbitration.
As such, the language in the written agreement could have avoided such a problem.
Going forward, the written agreement can also avoid such problems by expressly including any
other requirements. Otherwise, filing suits for cure under written agreements contained in
8
Case II
Parties involved
Project Specifications
Contract Amount: Amount for debris north of Highway 53 at $8.90 per cubic yard
Case summary
Harrison County had been working with W.C. Fore Trucking, further referred to here as
W.C, and after Hurricane Katrina, the county extended the contract to remove debris from the
9
rights-of-way in the county. W.C subcontracted T.C.B Construction, Inc., further referred here
as T.C.B, to remove debris North of highway 53. T.C.B removed debris north of highway 53 and
later started removing debris to the south. As per the contract, all daily work tickets and invoices
were sent to W.C. W.C billed Harrison County for all the debris removed by T.C.B, but the
subcontractor was underpaid by $ 6,634,436.69 (T.C.B. Constr. Co. v. W.C. Fore Trucking, Inc.
2013).
W.C claimed that T.C.B’s geographical scope was only to the north of Highway 53 as
stipulated in the written subcontract. As such, according to W.C, the company had no duty to pay
for debris collection to the south of the highway. T.C.B countered this claim by arguing that W.C
had modified the contract orally, requiring T.C.B to expand the scope of work to the south too.
The dispute proceeded to trial and was heard by a jury, which found that indeed there was
contract modification between T.C.B and W.C in which the subcontract was amended to cover
the south and north areas. However, the jury ignored the express payment of $8.9 per cubic yards
and awarded T.C.B only half of what it was owed. T.C.B appealed.
The case proceeded to the Mississippi Court of Appeals. The court upheld the jury trial’s
decision that according to the law, the contact had been modified. Further, the court held that
compensatory damages were revised by the Court of Appeal to the right amount of $
6,634,436.69. However, T.C.B’s ongoing request of punitive damages to be submitted to the jury
was denied. The Court of Appeal ruled that W.C’s refusal to pay the full amount for work done
was not malicious. T.C.B appealed the punitive damages to the Mississippi Supreme
10
Court decision and ward given
The Mississippi Supreme Court held that the issue of punitive damages should be brought
to the jury’s attention. According to the court, the state law provides for instances where breach
of contract would lead to award of punitive damages. First, punitive damages can be awarded if a
defendant has acted maliciously. Second, if the defendant committed a wrong intentionally.
Third, is if the defendant’s actions were of gross disregard or was reckless in regards to the rights
of others. The focus that the Court of Appeal paid on the notion that W.C acted malicious led to
a favorable conclusion that it was a hard-line business position from W.C. However, the
Supreme Court shifted its focus to the notion that W.C as the contractor acted with gross
disregard of the rights of its subcontractor, T.C.B (T.C.B. Constr. Co. v. W.C. Fore Trucking,
Inc. 2013).
The Supreme Court was skeptical of the sincerity of W.C’s obliviousness to TBM
conducting debris removal south of the highway. In lieu of this, the court opined that W.C acted
in bad faith and that as the contractor, the company wanted to reap the benefits of the
subcontractor by denying its obligations. The court remanded the case Harrison County circuit
Once the case was remanded to the Harrison County Court, there is no documented
further action by the parties. The ruling by the Supreme Court, however, meant that T.C.B was
11
successful in convincing the court to consider punitive damages, which means that punitive
Commentary
The subcontract between TBM and W.C was for debris removal to the North of Highway
53. Modification of the contract to remove debris to the south of the highway was however not
written but orally agreed to by the parties. There was no written contract either demanded by
T.C.B, or granted by W.C. However, an oral contract is binding and can be legally enforced. The
contractor, W.C could therefore not go ahead and deny knowledge of the additional work. The
oral contract was not only the binding agreement, but also the contractor, W.C, knew about the
work,
No written contract modification was ever requested or granted. W.C acted in bad faith
and wanted to unjustly enrich themselves at the expense of the subcontractor. Rightly put by the
Supreme Court, this is not only malicious, but also a disregard for the rights of the sub
contractor.
a) Breach of contract
its entirety (Judicial Education Center, 2021). In this case, W.C failed to make payments for an
oral contract agreed to orally. The agreement was to pay $8.9 per cubic yard, but W.C, despite
12
receiving payment from the county failed to make a single payment to the subcontractor for
b) Compensatory damages
Compensatory damages, also referred to actual damages, are meant to cover loss incurred
due to breach of contract. The amount awarded is supposed to replace loss or make good due to
the breach (Merkin & Saintier, 2019). Since W.C breached the contract, compensatory damages
awarded by the Court of Appeals to TBM were meant to cover the actual cost of the contract that
was not paid. The compensatory damages in this case were meant to make good.
c) Punitive damages
Punitive damages, also referred to as exemplary damages, are awarded to ensure the
wrongdoer or one breaching a contract due to malicious intent, intention or disregard of rights of
another party is made an example of and punished. Different from compensatory damages that
make good or cover a loss, punitive damages intend to punish behavior and deter such behavior
from that party and others (Merkin & Saintier, 2019). In this case, the Supreme Court
established that W.C not only acted maliciously, but also disregarded the rights of TBM.
Therefore, the decision by the Supreme Court to remand the case for a jury trial to determine the
Prior actions the parties could have taken/made to settle the case before it went to court
During the court proceedings, there was no discussion of the subcontract provisions on
the modifications of the contract. Actually, there perhaps were not any. The contractor, W.C,
overly relied on the subcontractor’s geographical restriction even if the clause was not modified
in writing; therefore, there was no justification for allowing the subcontractor to continue
13
working for months south of the Highway and then spring a surprise by not paying. The moment
W.C started billing the county for T.C.B’s work done south of the Highway; the contract clause
should have been modified. W.C received full payment from the county by using T.C.B’s daily
work sheets, meaning the contractor had knowledge that T.C.B, the subcontractor was working
south of the Highway too. Instead of pocketing the proceeds and failure to pay T.C.B under the
circumstances was definitely invitation for suits. W.C should have amended the contract to
include debris removal south of the Highway and made the payments as agreed in the contract at
What could have been done by whom in the past (or what could be done in the future) to avoid
The problems in this case came up because of lack of a written modification to a contract
and not honoring an oral contract. An oral contract is just as valid as a written contract. The
parties to an oral contract should recognize when the offer is made, acceptance regarding the
offer done and consideration that makes the oral contract legally binding. All this were met in
T.C.B. Constr. Co. v. W.C. Fore Trucking, Inc and W.C’s refusal to make payments based on the
written contract was malicious. Parties can avoid punitive damages by knowing when an oral
contract is made.
14
References
Bernhardt, R. (2013). Equitable subrogation: A sensible remedy but don't count on it. SSRN
Cornell Law School. (2021). Fraudulent concealment and Misrepresentation. LII / Legal
Hyundai Amco America, Inc.v.S3H, Inc. (Court of Appeal, Fourth District, Division 3,
Judicial Education Center. (2021). Breach of contract — Judicial education center. Welcome —
tutorial/breach-of-contract
https://www.advocatemagazine.com/article/2020-november/compelling-arbitration
Lee, P. (2009). Inducing breach of contract, conversion and contract as property. Oxford
Merkin, R., & Saintier, S. (2019). 9. Damages for breach of contract. Poole's Textbook on
T.C.B. Construction Company, Inc. v. W.C. Fore Trucking, Inc. (The Supreme Court of
15
Appendix A
16
Appendix B
17