Summer Ltd. was recreation club builder who was contracted to
overall refurbish a 50 years old recreation club for $20 million in
6 months’ time (180 days). The contract had a penalty clause
for late completion for $30,000 each day. Summer Ltd.
subcontracted the waterproof work to Beach Ltd. at an agreed price
of $1,000,000 with same completion date. Shortly after the
commencement of the waterproof work, Beach Ltd. realised they had
priced the job too low and would be unable to complete at the
originally agreed price. Beach Ltd. approached Summer Ltd.
who had also recognised that the price was particularly low and was
much concerned about completing the contract on time. For the
purpose of risk management on that specific refurbish work, Summer
Ltd. agreed to pay Beach Ltd. an additional $1,000 per day as bonus
payment to finish on time. Beach Ltd. then continued work on the
waterproof work for further 2 weeks but only received an additional
$5,000 from Summer Ltd. Beach Ltd. then ran out of money and
refused to continue unless the agreed bonus payment was made.
Summer Ltd. engaged another waterproof water specialist to
complete the contract and refused to pay Beach Ltd. the further
sums promised - arguing that the Beach Ltd. had not provided any
new consideration as they were already under an existing
contractual duty to complete the work.
Advise Beach Ltd. whether they can enforce the promised bonus
from Summer Ltd.
Summer Ltd. was recreation club builder who was contracted to overall refurbish a 50 years old recreation club for $20 m
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