Bullies keep forcing the main character to sign up for the tournament by destroying the old man's tree shop and stealing his bonsai trees. They later trap Daniel and Jessica in a canon filling with water and force him to sign it for his life. The main bully snaps a very precious bonsai tree in half although the old man manages to heal it overtime.
Mister Miyagi says he can't train Daniel for tournament until he catches on what really happened. The main villain meanwhile, pretends to help the main character when in reality he isn't and even secretly laughs at one point. Later, he reveals his plan and it leads to a big karate fight.
The final tournament fight is pretty tense too.