BetterLawNotes-5 (2)

CONTRACT LAW

Archie is about to develop a plot of land by constructing four houses. He enters into a contract with Barney for Barney to act as main contractor with principal responsibility for the building work. Barney agrees to complete the construction of all four houses in 20 weeks and Archie agrees to pay Barney £20,000 per week. 

After construction has been progressing for five weeks, Archie tells Barney that he cannot afford to continue with the contract on the agreed terms. After lengthy talks, Archie and Barney agree that from then on Barney will be paid just £18,000 per week until Archie’s financial situation improves.

10 weeks later, Archie finds buyers for each of the four houses, with each buyer paying Archie a substantial deposit. On learning of this, Barney demands that Archie re-instate the original weekly payment of £20,000 for the remaining five weeks. Archie refuses and says he still cannot afford the extra £2,000 per week. Archie adds, however, that he will ensure that Barney is ‘looked after’ once the project is finished.

Three weeks later, Archie learns that Cherie, one of the sub-contractors retained by Barney, is about to abandon her work on site as she has been offered more lucrative work elsewhere. Barney refuses to pay Cherie any more money. However Archie, anxious to avoid any delay, promises to pay Cherie a loyalty bonus of £1,000 if Cherie continues with performance of her sub-contract with Barney.

The following day, Archie receives a call from Dixon. Archie and Dixon previously agreed that Dixon would supply the kitchen appliances for the houses for a total price of £10,000. Dixon has telephoned Archie to say that his supplier has dramatically increased the prices of various items and that he has no choice but to pass on these increases to Archie. Dixon says that unless Archie agrees to pay an extra £2,000, Dixon will not be able to deliver any of the appliances. To avoid any delay, Archie agrees to pay the additional sum.

Work on the site is concluded on time two weeks later. Barney now claims that Archie owes him £30,000, being the £2,000 shortfall in each of the weekly payments for the last 15 weeks. Archie refuses to pay Barney anything more. Archie also refuses to pay Cherie the loyalty bonus of £1,000. Similarly, Archie is refusing to pay Dixon the additional £2,000 for the appliances. 

Barney, Cherie and Dixon now seek your advice.

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