Hawaii Attorney Legal Blog

A contracting party who fails to give proper notice and opportunity to cure any alleged breach, default, or defect (as expressly required in the contract) is in breach of the contract. See Kalaus v Prime Care Physician, 20 A.D. 3d 452, 454 (N.Y.A.D. 2 Dept., 2005)(Defendants breached the contract with plaintiff for failure to give plaintiff 30 days to cure plaintiff's breach as expressly provided in the contract. Plaintiff was awarded summary judgment on the issue of liability). The party who is held in breach for failing to give proper notice and opportunity to cure also loses any of its claims or defenses related to the other party's alleged breaches. Id. ("Based on the conclusion that that defendants breached the termination for cause provision of the employment agreement [for failing to give plaintiff notice of his breach and opportunity to cure], it is irrelevant whether the defendants did, in fact, have the requisite cause to terminate the plaintiff's employment.")(brackets added). See also The American Outdoorsman, Inc. v Pella Products, Inc., 144 P.3d 81, *8 (Kan.App., 2006)("[E]ven if American Outdoorsman's network change could be considered a material breach, Pella should not be allowed to assert this breach as a defense when it failed to give American Outdoorsman the opportunity to correct such breach.") Likewise, "an injured party that acts precipitously and terminates before it is entitled to do so loses its defense as well as the possibility of claiming damages for total breach, and will itself be liable for damages for total breach." Farnsworth on Contract section 8.18 (3d.ed., 2004).

Admittedly, the party breaching the contract could argue that (i) there was a mutual rescission of the agreement or (ii) it was orally modified. However, "to establish rescission by mutual consent, the contracting parties' acts and declarations must be inconsistent with the continued existence of the previous contract." AAA Uniform and Linen Supply, Inc. v. Barefoot, Inc., 17 S.W. 3d 627,629 (Mo.App. W.D. 2000) (emphasis added). Moreover, proof of these "acts and declarations" of "rescission must be clear, positive, unequivocal and decisive, and it must manifest the parties' actual intent to abandon contract rights." Id.

The second option, "a written contract can subsequently be orally modified if all of the requisites of a valid or enforceable agreement are met." Honolulu Federal Sav. And Loan Ass'n v. Murphy 7 Haw.App 196, 205 (Haw.App.1988). "A requisite is that the modification must be supported by new consideration." Id.

For a discussion of our Commercial Litigation Practice click
here .

Labels: Commercial Litigation

Hawaii Courts strongly encourage arbitration. In fact, Hawaii Courts favor arbitration to such an extent that if there are three parties to a contract (and one didn't sign the agreement containing the arbitration clause) the Court will likely enforce the arbitration agreement (if the nonsignatory wants the agreement enforced).

That's right, in certain circumstances nonsignatories to an agreement have standing to invoke an agreement's arbitration clause. The Hawaii Supreme Court explained this principle in Luke v Gentry, Ltd., 105 Hawaii 241, 248 (Hawaii, 2004) as follows:

[W]e hold that a nonsignatory agent has standing to invoke an arbitration agreement if one of the following two conditions is met:

First, when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory. Second, when the signatory to the contract containing a arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract.

Id. at 248.

Thus, if you have entered into an arbitration agreement in Hawaii, it appears that it will be enforceable by parties and non parties.

Moreover, if a Hawaii court holds that defendant has standing to invoke an arbitration clause, the court will stay the case pending the outcome of the arbitration. H.R.S. section 658A-7. Admittedly, the stay may be limited to the claim(s) subject to the arbitration that are severable. H.R.S. section 658A-7; Ueoka v Szymanski, 107 Hawaii 386, 396 (Hawaii, 2005). However, in order to promote judicial efficiency, the court will likely the remainder of the action (not just the claims subject to the arbitration) until the arbitrable issues are decided or the parties waive their right to arbitrate. Creative Telecommunications, Inc. v Breeden, 120 F.Supp.2d, 1225, 1242-43 (D.Haw., 1999)("[I]f non-arbitrable issues depend on arbitrable issues, or if resolution of arbitrable issues would render the district court's ruling on the non-arbitrable issues unnecessary, litigation on the non-arbitrable issues should be stayed pending arbitration.").

For a discussion of our Arbitration and Mediation Practice, please click
here.

Labels: Civil Procedure and Trial Practice, Mediation and Arbitration

Hawaii courts favor arbitration. Arbitration is a device in which the litigants agree to hire a private, independent third party to decide their case. It is generally accepted that parties will reduce litigation costs by arbitrating a matter, since the process will be streamlined. It is quite common for parties to agree to arbitrate in a contract, although any case may be resolved through arbitration (so long as all parties agree to do so).

If there is an arbitration clause in an agreement, courts are obligated to enforce it so long as the court determines that the dispute is subject to the clause in the agreement. H.R.S. section 658A-6, H.R.S. section 658A-7. Moreover, if (i) a party to the contract files a motion to compel arbitration or (ii) the court orders arbitration, then the court shall stay any proceeding that involves the same claim(s). H.R.S. section 658A-7.

Hawaii Revised Statutes ("H.R.S") section 658A-6 states the following:

(a) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.

(b) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.

(c) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.

(d) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.

Further, H.R.S. section 658A-7 provides,

(a) On motion of a person showing an agreement to arbitrate and alleging another person's refusal to arbitrate pursuant to the agreement:

(1) If the refusing party does not appear or does not oppose the motion, the court shall order the parties to arbitrate; and

(2) If the refusing party opposes the motion, the court shall proceed summarily to decide the issue and order the parties to arbitrate unless it finds that there is no enforceable agreement to arbitrate.

(b) On motion of a person alleging that an arbitration proceeding has been initiated or threatened but that there is no agreement to arbitrate, the court shall proceed summarily to decide the issue. If the court finds that there is an enforceable agreement to arbitrate, it shall order the parties to arbitrate.

(c) If the court finds that there is no enforceable agreement, it shall not, pursuant to subsection (a) or (b), order the parties to arbitrate.

(d) The court shall not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.

(e) If a proceeding involving a claim referable to arbitration under an alleged agreement to arbitrate is pending in court, a motion under this section shall be made in that court. Otherwise a motion under this section shall be made in any court as provided in section 658A-27.

(f) If a party makes a motion to the court to order arbitration, the court on just terms shall stay any judicial proceeding that involves a claim alleged to be subject to the arbitration until the court renders a final decision under this section.

(g) If the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject to the arbitration. If a claim subject to the arbitration is severable, the court may limit the stay to that claim.

Arbitrations are heavily favored by Hawaii Courts. The Hawaii Supreme Court in Lee v Heftel explained the rationale behind this policy:

. . .[We] emphasize the importance of utilizing alternative methods of dispute resolution in an effort to reduce the growing number of cases that crowd our courts each year. This court has long recognized the strong public policy supporting Hawaii's arbitration statutes as codified in HRS Chapter 658. We have stated that the proclaimed policy . . . is to encourage arbitration as a means of settling differences and thereby avoiding lititgation. Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. As with any contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability. The preeminent concern of Congress in passing the [Federal Arbitration] Act was to enforce private agreements into which parties had entered, [a concern which] requires that we rigorously enforce agreements to arbitrate.

Lee v. Heftel, 81 Hawaii 1,4 (1996)(no citations or brackets included).

For a discussion of our Arbitration and Mediation Practice, please click here.

Labels: Civil Procedure and Trial Practice, Mediation and Arbitration