Additional payments under construction contracts

Abstract

Parties to a construction contract who wish to increase the sum payable under the contract face legal problems. Such transactions are manifest in a promise by the principal or head contractor to pay more. According to traditional contract theory, a promise is not enforceable unless supported by consideration, that is, the party making the promise receives something tangible in return. The courts have attempted to define circumstances where promises that do not strictly comply with this requirement would be enforceable. The issue arose in the English Court of Appeal decision of Williams v. Roffey Bros & Nicholls; the solution, there proposed, depended on the application of subjective tests that are unworkable in the construction industry. Equally, the High Court of Australia in Walton Stores v. Maher proposed a solution that leaves the parties in doubt as to their position. The law as it presently stands is reviewed and the recommendation made that the original contract be replaced by one confirming the new price. Otherwise the consideration requirement needs to be satisfied by a new promise in exchange for the promised additional payment.

Keywords:

• Contracts
• variations
• consideration
• estoppel
• economic duress