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14. What is the maximum amount to which the construction company is entitled?
The construction company informed the warehouse owner (accurately) that because of the rock, the driveway as specified would cost at least $20,000 more than figured, and demanded that for that reason a total contract price of $520,000. Since the warehouse owner was expecting warehousing customers immediately after the agreed completion date, he signed a writing promising to pay the additional $20,000. Following timely completion of the warehouse and driveway, which conformed to the contract in all respects, the warehouse owner refused to pay the construction company more than $500,000.
A construction company contracted with a warehouse owner to construct for $500,000 a warehouse and an access driveway at highway level. Shortly after commencing work on the driveway, which required for the specified level some excavation and removal of surface material, the construction company unexpectedly encountered a large mass of solid rock.
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C is correct. The construction company ran into an expensive difficulty that caused an increase of $20,000 in the expense to build the driveway. This difficulty was not foreseen by either party because the level of excavation was intended to be minimal until they hit the layer of rock. Further, the increase was an accurate reflection of the cost to deal with the unforeseen difficulty. Therefore, the written modification is valid and the construction company is entitled to a maximum amount of $520,000.
A is incorrect. It fails to take into account the exception to the general common law rule: an unforeseen change in circumstances, such as impracticability. Courts are more likely to allow unforeseen difficulty as an exception to the pre-existing rule when it is in terms of analyzing consideration.
B is incorrect. The facts do not show that the modification was coercive. Both parties agreed to the expense increase, and the contract was performed under the modification. There is no evidence in these facts that the warehouse owner was under duress to agree to the written modification.
D is incorrect. It is the terms of the contract, not the reasonable value of the performance, which governs the recovery in this situation. This answer choice would be appropriate if the contract did not already have a monetary value assigned to it, or if the value of the contract was in dispute and damages were being sought. However, in this question, the contract and the written modification to the contract are assigned dollar amounts, so a «reasonable» analysis is unnecessary.