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26. If the contractor sues the landowner to recover the additional cost, will the contractor be likely to prevail?
When the contractor purchased lumber for the job, the price of the lumber had risen to $60 per 100 board feet. When the contractor submitted a final bill that included the increased price of lumber, the landowner refused to pay the increased price for the lumber on the grounds that the price-escalation clause was missing from the written contract.
A contractor agreed to build a wood-frame house for a landowner for $300,000. The parties agreed that the price would increase by the amount that the cost of lumber for the job exceeded the then-current cost of $30 per 100 board feet. The landowner reduced the agreement to writing but inadvertently failed to include in the written contract the price-escalation clause relating to the cost of lumber. Both parties signed the contract without noticing the omission.
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A is incorrect. When a written contract fails to express the actual agreement of the parties, the remedy is reformation of the contract, not avoidance. Therefore, the court may reform the contract to express the correct agreement between the landowner and contractor regarding the price-escalation clause.
B is incorrect. The parol evidence rule does not bar the introduction of evidence to prove that an agreed-upon term was mistakenly omitted from the writing. Therefore, the contractor may introduce evidence regarding the parties' agreement on the price-escalation clause. Further, the contractor is likely to prevail on this point since the court may reform the contract so that its terms accurately reflect the landowner and contractor's agreement as to the price-escalation clause.
D is incorrect. The issue here is not the interpretation of the written contract, but rather whether the contract may be reformed to express the parties' true intentions. In this case, both parties agreed to the price-escalation clause and both parties signed the written contract under the mistaken belief that the price-escalation clause was included. Therefore, the court may reform the contract so that it reflects the parties' actual agreement regarding the price-escalation clause.