Margaret Willis is the owner of Willis Concrete Company. Her company supplies poured concrete to residential and commercial construction sites throughout the San Diego area. She recently ran into a major problem with Telweda Construction Company, one of her oldest and largest customers. Telweda is a residential construction company that specializes in upscale new housing developments. Willis Concrete routinely pours concrete for hundreds of Telweda’s job sites every month.
A recent problem occurred when it was discovered that because of improper concrete mixing, the concrete foundations and slabs for 23 of Telweda’s new homes did not meet minimum materials standards. A local homeowner, a retired engineer, had discovered the problem only after he had moved into his new home. The bottom line was that none of the 23 homes was safe to live in. All had to be evacuated immediately, and the very expensive process of retrofitting foundations and slabs had to begin. The work would take months to complete, and Telweda’s reputation has been severely damaged. Several homeowner lawsuits had already been filed, and more were on the way.
Margret Willis had always known of the possibility that mixing problems could occur. That is the reason that her contracts with all vendors included clauses that made it the responsibility of the vendor to perform tests on the quality of the concrete before relying on it.
Telweda argued that despite this clause in its contract with Willis, there was still a reasonable expectation that Willis would provide quality materials and assume responsibility for any problems. Therefore, the CEO of Telweda demanded that Willis pay $20 million to cover the damages.
a. From Willis’s point of view, is litigation or ADR preferred? Why?
b. From Telweda’s point of view, is litigation or ADR preferred? Why?
c. Which form of ADR could be preferred by the two companies?
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