Question

Mike hires a contractor to build him a house. Mike agrees to pay the contractor $1 million and the contractor agrees to build the 2,000 square feet house according to Mike’s specifications. In EACH case below, is there a valid consideration? Why? Why Not? Anwer and explain in terms of five consideration rules or/and exceptions to the preexisting rule.

• Case 1: During the construction, the contractor informs Mike that he will not build the house for less than $1.5 million. Mike agrees that he would pay $1.5 million.
• Case 2: Mike and the contractor later modify the contract so that Mike agrees to pay $1.5 million and the contractor agrees to build a house that is 3,000 square feet.
• Case 3: According to Mike’s specifications, the windows in the house are to be made of ordinary glass. Mike and the contractor then modify the contract so that Mike promises to pay $1.5 million and the contractor agrees to use bullet proof glass for the windows.
• Case 4: The contract price of $1 million includes the cost of building materials of $500,000. During construction, the cost of materials unexpectedly doubles so to $1 million. Mike and the contractor modify the contract so that the contractor agrees to build the house exactly as the first contract required and Mike agrees to pay $1.5 million.

Answer 1

1) No.
The architect has promised to render the same performance while Mike has agreed to pay more than the amount he originally agreed to pay. Under the legal duty rule, the architect's new promise is not consideration for Mike's promise to pay more money and, therefore, the architect cannot enforce this modification against Mike.

2) Yes.
Here, the modification is valid because the contractor has promised different performance in exchange for Mike's promise of more money.

3) Yes. Same reasoning as in 2.

4) Yes.
Even though Mike is agreeing to pay more money for the same performance, this modification is based on the unanticipated increase in the price of building material and is a fair modification in light of the new circumstances. Therefore, the legal duty rule does not apply and the modification is valid.

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