The Lydig construction company

The Lydig construction company

The Lydig construction company verses the Martinez State Corporation is a case that was filed in the court of appeal, fourth appellate district, division one in the state of California. The case was documented under file number 2/26/15, D066854 and titled ‘Lydig Construction Inc., v. Martinez Steel Corporation.’

Parties involved in this dispute

This case involved two parties which were the Lydig construction, inc. and the Martinez Steel Corporation. The plaintiff and respondent of this dispute were Lydig Construction Company (Lydig), who was also the general contractor on a massive public works project.  The defendant and appellant were Martinez Steel Corporation (Martinez), who was the original steel supply subcontractor on the project.

PROJECT

In 2010, Lydig Construction after bidding for the San Bernardino project became the successful bidder on a project that was aimed to expand San Bernardino County’s (the location) Adelanto Detention Center (the project) and signed a contract with the county to complete the project.  Lydig laid its bid that was based in part on a subcontractor’s bid it had received from Martinez for reinforcing steel (rebar) that was a requirement needed to complete the project.  Soon after the bidding was successful and after Lydig was awarded the general contractor on the project, Lydig entered into a subcontract with Martinez, which was effective on January 14, 2011.

DATE AND LOCATION OF COURT

The Lydig-Martinez case was filed in March 2013, at the court of appeal, fourth appellate district, and division one that is located in California.

CASE SUMMARY

Lydig constructions made a bid in 2010 for a project and became the successful bidder on the project that was meant to expand San Bernardino County’s Adelanto Detention Center. After winning the tender, Lydig entered into a subcontract with Martinez. This became effective on January 14, 2011. The terms of the subcontract that the two parties signed necessitated the Martinez Steel Corporation to provide Lydig with bonds of payment and performance.  The bonds would protect Lydig in case the subcontracted party (Martinez) became unable to provide the necessities of the subcontract. Unfortunately, Martinez failed to meet the demands of the subcontract later on after it had been subcontracted.  In place of the required bonds, Lydig decided to take a personal guaranty from the owner of Martinez. Later on, in February 2012, Lydig was concerned about the ability of Martinez to perform the contract. In the point of Lydig’s concern, Martinez had been unable to meet the terms and conditions of the agreement. It was not able to acquire raw steel from its steel supplier unless it was ready to pay on a cash basis. Consequently, Lydig took the task upon itself and decided to obtain steel from the supplier by cash and made arrangements to ship the steel to Martinez. The responsibility to fabricate the steel into rebar and installation at the project remained to be held by the Martinez Corporation and its employees. The time that Lydig came in for the purchase of steel was in February 2012 until June 2012.

After this period (June 2012), it Lydig came to notice that 100000 pounds of steel that it had made the purchase for and delivered to Martinez for the project had been converted by the steel corporation to other different projects where it was required to provide rebar. This discovery prompted Lydig to obtain rebar from another supplier as it used employees of Martinez to install the rebar at the project. Further, Lydig initiated a legal process to replace Martinez as its subcontractor for rebar. Martinez’s subcontract was terminated in August 2012 after the county conducted a hearing on the issue. The findings from the trial were; Martinez steel had failed in the performance of the subcontract. This was evident because it was unable to procure steel on its own for fabrication into rebar and installation in the project as it was required in the subcontract. This action by the Martinez steel corporation supported with contentment that as a subcontractor, it was untrustworthy and lacked the capacity to perform the scope of the project with satisfaction. This gave freedom for Lydig to enter into a contract with an alternative supplier.

Lydig filed a complaint against Martinez in March 2013 in which it allegedly stated that Martinez had breached the terms of a subcontract. This, therefore, was a charge of the breach. On May 14, 2013, Martinez filed an opposition to Lydig’s allegations and complaints that it had made. The Martinez’s opposition received support from one of its employees, Harry Williams. In William’s declaration to oppose the accusations made by Lydig, he stated that Lydig, rather than paying Martinez steel the amount it had performed the contract, it asserted to substitute another subcontractor for Martinez steel. However, Martinez had worked on the project for two years, and it had never missed performing its contract for any single day. It, therefore, asserted that Lydig owed Martinez for the work completed before its contract was terminated.

COURT DECISION

On May 20, 2013, Martinez received a permit to file a cross-complaint. In the complaint, it alleged that Lydig owed it amounts that it had used in the installation of rebar for the period before its contract was terminated. After the arguments in the trial court, the court granted an application for attachment with respect to Martinez and in the amount of $203,315. It, therefore, prompted Martinez to file a timely notice of appeal from the order granting the right to attach.

COMMENTARY

In my opinion, in the case, the Martinez Steel Corporation had not met the requirements of its subcontract with the Lydig Company. This is to be regarded as a breach of contract and in consideration of the law of contract; it is illegal for one party to breach a signed contract. It is therefore advisable for the court of law to provide a judgment with reference to the requirements of the law of contract. Any legal action that needs to be taken should be applied to the party that has breached the agreement, and the inconvenienced party should be compensated loses it has incurred.

There are various contract issues involved in the case between Lydig and Martinez. The issue of breach of contract is portrayed by the Martinez steel corporation which is unable to meet its obligations in the subcontract. It failed to buy steel and fabricate it for rebar that was required in the contract. This gave Lydig a need to purchase steel for fabrication which was not part of its responsibility in the agreement. Secondly, performance is a contract issue that is involved in this case. The incapacitation of the Martinez Corporation to perform its duties in the contract explains the issue of performance which requires that a party should be terminated from the contract if it fails to perform its obligations in the agreement.

In an analysis of the case, the parties could have made appropriate arrangements to settle the case outside the courts. This could have made it less costly to the parties because it could cut the costs that they incurred in the court processes. Some of the possible actions that could be taken could be, the parties could make discussions and come into a consensus to compensate each other for loses.  Lydig could be paid for the costs it had made in the purchase and delivery of steel by the Martinez steel corporation. Equally, in case Martinez Corporation had performed in the contract, it could be compensated for the days it had delivered in proportion to the duties it had made before its subcontract was terminated. By observing and taking such actions, it could be possible for the two companies to retain a good reputation before the public and as well as maintain a good relationship between them. As a result, the conflict between the parties could remain solved outside court.

Since such conflicts arise in different settings, it is vital for parties to avoid problems of this nature. They can be avoided by going into contracts only when they are sure of having a capacity to perform; for instance, Martinez could agree to go into a contract if it was sure to perform. An analysis of the party to be awarded a subcontract is equally important as it can solve problems of a similar nature. In future, it is important for any contracted company to analyze the abilities of any company before they make a subcontract with them. Such measures will by far avoid problems of this nature.