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 given case as per pre- existing duty rule which states that the promise which one already has a legal or contractual duty will not constitute consideration and the return promise is unenforceable.

It means the amount $166000, which was initially agreed is applicable and not the extra amount. There are four exemptions to this:

1. If the plan of the house was changed in the middle and there will be consideration on Bowie to pay additional $15,000.

2. Recession and new contract theory cab be applied by which old agreement can be cancelled by mutual understanding. And the new contract will be placed for $181000. In case given the reason given is not strong enough to cancel the order. So,this is not applicable.

3. If in writing they have mentioned in agreement that in exception cases if there is rise in prices of raw materials then Bowie has to pay the additional amount. This is applicable only in few cases(states).

4. The unforeseen difficulty or hardship rule could be argued. This is applicable only for unknown risks which are not assumed in business transaction. Examples may include floods, earthquake etc., The rise in prices is normal thing and it is not applicable.