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Question 1

Tom and Jerry entered into a written contract for the construction of a house for Tom on land that he owns. The house was to be built according to very detailed plans and specifications prepared by Tom's architect. The contract price was $750,000, payable in four equal installments, the first when the foundation was poured, the second when the house was framed, the third when the electrical and plumbing work was completed, and the fourth at completion of the house. The contract also provided that "time was of the essence." The contract was signed on March 1, and Jerry began work on March 3. By March 15, Jerry's workers had excavated the site and were ready to pour the foundation. At that point, they discovered that the soil conditions were much more severe than anticipated. The soil was like quicksand and would not hold a normal foundation without additional work. This work would add $100,000 to the cost of the project. Jerry immediately stopped work and contacted Tom. He explained the problem and asked Tom to agree to pay the additional $100,000. Tom was very upset, protesting that it was not his responsibility to pay for the additional work. Nevertheless, he agreed to the price increase, since he felt he had no choice and he wanted the house built as quickly as possible. Jerry then resumed work.