Jackson Excavation Ltd. provides services to contractors by supplying heavy machinery and operators for excavation and various types of fill for building lots. Jackson managed to obtain for the first time a contract with a prominent residential builder for work on a 10-home development. The value of the work and fill was $60,000 and this was agreed upon as the contract price. After the work was completed and the invoice sent, Jackson learned that the builder had just been granted approval for a 50-home subdivision. Hoping to secure the excavation work for this project as well, Jackson immediately sent a letter to the builder stating that it would accept $50,000 as payment in full for the job just completed. He also mentioned in the letter that he hoped they would continue to do business together.
What legal problems does this situation present and how might the parties solve them?

This case looks at the debtor-creditor relationship and the problems of consideration when a lesser sum is accepted by a creditor for a debt owing. Unless there is some consideration given or benefit flowing to the creditor for accepting the lesser sum, the debtor may face an action by the creditor for the remainder of the unpaid debt. In this case the builder will want to ensure that paying the lesser amount will extinguish his debt to Jackson. He will, therefore, wish to structure this arrangement so that consideration flows to Jackson. This may be done in a number of ways:
i. the builder may promise Jackson a contract for the 50-home subdivision;
ii. the builder may ask Jackson to formalize this arrangement by preparing a document that is under seal and signed by Jackson; or
iii. the builder may pay the lesser amount before the due date on the invoice.
In each of these solutions either the lack of consideration has been eliminated or something of value or benefit has flowed to Jackson.