Question

Respond to ONE of the following scenarios. Identify and discuss the relevant legal issues and discuss them fully. Specifically state what you think the outcome will be and why. In Questions #1, be sure to include the applicable general rule(s) as well as any exceptions and whether they apply.

1. Jim Bowie owns a lot in Starr County and wants to build a house according to a certain set of plans and specifications. He solicits bids from three building contractors as follows: George Kimbell bids $ 175,000; Green Jameson bids $170,000; and, Davy Crockett bids $ 166,000. Bowie accepts Crockett’s bid and construction begins. A month into the work, Crockett advises Bowie that due to an unexpected rise in fuel and materials costs, he will need $ 15,000 more to complete the project. Bowie raises a fuss, but after discussing the situation with the out-bid contractors who indicate that they cannot finish the contract for less, he agrees. When the house is finished, he refuses to pay the extra money. Discuss whether Bowie is legally required to pay the additional amount.

Answer 1

In the legal system, consideration means something of value given to others in return for goods, services, or some other promise. A promise to do what one already has a contractual duty to do does not constitute consideration, and thus the return promise becomes unenforceable.

In the given case, Bowie accepts Crockett’s bid for $166,000 and the construction work begins. Later, Crockett advises Bowie that due to an unexpected rise in fuel and materials costs, he will need $15,000 more to complete the project. For that Bowie reluctantly agrees. Bowie's agreement to pay an additional $15,000 for exactly what Crockett was required to do for $166,000 is without consideration and it is unenforceable.

There are few basic exceptions. They are:

a) Some states have statutes that allow any modification to be enforceable if it is in writing. The indicated facts in the given case provides no evidence that Bowie's agreement to the additional $15,000 is in writing, but if it is in writing, then Bowie is legally bounded.

b) If the duties of Crockett's are modified, for example, by changes made by Bowie in the specifications, and hence these changes can constitute consideration and Bowie has to pay the additional $15,000.

c) The unforeseen difficulty or hardship rule could be used to argue. However, this rule applies only to unknown risks not ordinarily assumed in business transactions.

d) Rescission and new contract theory could be applied, but most of the courts would not apply this theory unless there is a clear intent to cancel the original contract. According to this, the existing contract would be mutually canceled and a new contract for $181,000 is made. It seems here that intent to cancel the existing contract is lacking, so this exception would not apply to the given case.