Mr. Kafil agreed to build an extension to Mr. Alim’s house.

At that time they entered into the

agreement, the price of building materials was increasing week by week. Mr. Kafil seemed reluctant to
set a price for the work until he knew how much it was going to cost. Mr. Alim agreed into the contract
that he would pay Mr. Kafil “the purchase price of materials as at the date of completion plus $6000 for
labor”. The parties also agreed that the work must be completed by the end of June, as Mr. Alim’s family
was coming to visit him at that time. Before the work began, there was an unexpected increase in labor
costs and an equally unexpected drop in the price of building materials. Mr. Kafil told Mr. Alim that he
would need to increase the labor component to $10,000 or not do the job at all. Mr. Alim was worried
about the completion of the extension by the end of June so reluctantly agreed to the change. Mr. Kafil
built the extension but did not finish it until the middle of July. Because of this, Mr. Alim had to pay for
his family to stay in a hotel for three weeks at a total cost of $3000.

Now, Mr. Alim is refusing to pay Mr. Kafil more than the price of materials plus $6000 for labor. In
addition, he wants Mr. Kafil to compensate him for the money he had to pay for the hotel. In each case,
give reasons for your answers, and support your reasons with relevant law.

1. Is there a valid enforceable contract between Mr. Alim and Mr. Kafil?
Ans: Yes this is a valid enforceable contract between the 2 parties even though Mr Kafil didn’t
factor the probability of increased labor costs in the original offer. Mr. Alim agreed to pay the
purchase price of the materials according to the market price, whether it increases or not. He
would additionally pay 6000 for labor cost. They had both agreed on this. But with increased
labor cost, the labor cost was pushed to 10,000; before the work began. Since Mr Alim agreed to
pay, the previous offer will be terminated since the counter offer is accepted. This is a contract.
2. What arguments could Mr. Alim use to support his refusal to pay Mr. Kafil more than the
original agreed price?
Ans: Mr. Kafil didn’t communicate within a reasonable period of time. Since the work was to
begin very soon and the counter offer was made moments before, then Mr. Alim could refuse
this.
3. What arguments could Mr. Alim use to support his claim for compensation for the hotel?
Ans: Even though the counter offer with increased labor cost was accepted, Mr. Kafil missed the
deadline of the delivery. Hence Mr. Alim can support his claim for compensation for the hotel.
4. What arguments could Mr. Kafil use to support his claim to the $10,000 he wants Mr. Alim to
pay?
Ans: The labor Market goes up & down like that of the materials market. Since the materials
prices were slowing down, this might have impacted in the increased cost of the labor market.
This is how the market dynamics works. Decreased prices of materials means more access to
materials. More access to materials means more demand & with increased demand means
increased work for the same amount of labor. Hence labor market price increases
5. What is your Judgement regarding this case.
Ans: Since Mr Kafil missed the deadline, he should accept the penalty & decision of Mr. Alim.