John agrees to build an extension to Chen’s house. At the time they enter the agreement, the price of building materials is increasing week by week. John is reluctant to set a price for the work until he knows how much it is going to cost. Chen agrees in the contract that he will pay John “the purchase price of materials as at the date of completion plus $6000 for labour”. The parties also agree that the work must be completed by the end of June, as Chen’s family is coming to visit him at that time. Before the work begins, there is an unexpected increase in labour costs and an equally unexpected drop in the price of building materials. John tells Chen that he will need to increase the labour component to $10,000 or not do the job at all. Chen is anxious that the work be completed by the end of June so reluctantly agrees to the change. John builds the extension but does not finish it until the middle of July. Because of this, Chen had to pay for his family to stay in a hotel for three weeks at a total cost of $3000. Chen is now refusing to pay John more than the price of materials plus $6000 for labour. In addition, he wants John to compensate him for the money he had to pay for the hotel.
Required: Answer the following questions. In each case, give reasons for your answers, and support your reasons with case law.
a) Is there a valid enforceable contract between Chen and John?
There is a valid enforceable contract between Chen and John because according to the case scenario, there was an agreement between these two parties. On the one hand, John was supposed to provide the services of extending Chen’s house while Chen agreed to pay for the services to be rendered by John. According to Alces & Greenfield (2010 a contract is essentially any agreement regardless of whether it is verbal or written is enforceable by law. Given this condition of the law the agreement between these two gentlemen was valid and enforceable by law. Since this agreement does not pertain matters to land or leasing of houses it does need to pass the statue of frauds (5 marks)
b) What arguments could Chen use to support his refusal to pay John more than the original agreed price? (10 marks)
c) What arguments could Chen use to support his claim for compensation for the hotel? (5 marks)