Asked by Abigail Kooiker on May 07, 2024
Verified
Bacall, a building contractor, bid for and won the tender to construct Klegman's Shopping Centre. Due to rampant, unexpected inflation, she found she would not quite break even on the project and she asked Klegman to renegotiate the price. Klegman pointed out that there was no provision in the contract for that and said, "A deal's a deal."
A) Bacall can assert that this is a frustrated contract, and, since no work has been started, claim back the bid deposit of $50 000 and walk away from the whole thing.
B) Bacall is stuck with the contract and there is nothing she can do but take the loss.
C) Bacall can say that there has been a material alteration of the terms of the contract, and that this has discharged the contract's terms regarding payment, so she can renegotiate them without losing the contract.
D) Because Klegman will be unjustly enriched if the contract is not renegotiated, Bacall can insist on a substitute agreement, which will discharge the old one.
E) Any of the responses can be true.
Frustrated Contract
A legal concept describing a contract that, due to unforeseeable circumstances, has become impossible to perform, thus being voided without penalty to either party.
Material Alteration
The major alteration of an agreement that has the effect of discharging the contract and replacing it with another.
Renegotiate
The process of revising the terms and conditions of an existing contract through mutual agreement between the involved parties.
- Identify the factors leading to the frustration of a contract and the consequences thereof.
- Describe the processes and conditions under which a contract can be amended or discharged.
Verified Answer
GC
Grace CaugheyMay 13, 2024
Final Answer :
B
Explanation :
Bacall is bound by the terms of the contract she entered into with Klegman. The fact that unexpected inflation occurred does not provide a legal basis for her to renegotiate the contract terms or claim it as frustrated, materially altered, or unjust enrichment without specific provisions in the contract allowing for such adjustments. Contracts are legally binding agreements, and unexpected changes in economic conditions typically do not discharge the obligations agreed upon, unless specifically accounted for in the contract's terms.
Learning Objectives
- Identify the factors leading to the frustration of a contract and the consequences thereof.
- Describe the processes and conditions under which a contract can be amended or discharged.