Reference no: EM133282617

Alan Fulkins, who owns a construction company that specializes in single-family residences, is constructing a small subdivision with 23 homes. Tretorn Plumbing, owned by Jason Tretorn, was awarded the contract for the plumbing work on the homes at a price of $8,600 per home.

Plumbing contractors complete their residential projects in three phases. Phase one consists of digging the lines for the plumbing and installing the pipes that are placed in the foundation of the house. Phase two consists of installing the pipes within the walls of the home, and phase three is installing of the surface plumbing, such as sinks and tubs. However, industry practice dictates that the plumbing contractor receive one-half of the contract amount after completion of phase one.

Tretorn completed the digs of phase one for Fulkins and received payment of $4,300. Tretorn then went to Fulkins and demanded an additional $1,200 per house to complete the work. Fulkins said, "But you already have a contract for $8,600!" Tretorn responded, "I know, but the costs are killing me. I need the additional $1,200."

Fulkins explained the hardship of the demand, "Look, I've already paid you half. If I hire someone else, I'll have to pay them two-thirds for the work not done. It'll cost me $10,000 per house."

Tretorn responded, "Exactly. I'm a bargain because the additional $1,200 I want only puts you at $9,800. If you don't pay it, I'll just lien the houses and then you'll be stuck without a way to close the sales. I've got the contract all drawn up. Just sign it and everything goes smoothly."

Should Fulkins sign the agreement?

Does Tretorn have the right to the additional $1,200?

Was it ethical for Tretorn to demand the $1,200?

Is there any legal advice you can offer Fulkins?

I. First, discuss the case making sure you answer all 4 questions from the last paragraph in the box.(For the 4th question, no not say you have no legal advice for him because you are not an attorney- yes a student has done that). You must come up with some legal advice anyway.

II. For this second part, here is a little FYI - Under the Uniform Commercial Code (which we do not really cover in Business Law I- and which is not a part of our example on page 275), modification of a contract FOR THE SALE OF GOODS (not for services), MAY be acceptable WITHOUT consideration. For example, if there is a shift in the market and the seller (in good faith) asks for a modification (an increase to reflect those costs) and the buyer agrees, no consideration is required. (You do not have to study the Uniform Commercial Code to answer this second question. Just know that this code exists, and that when parties are operating under this code because the contract involves a sale, and all the elements are met, no consideration is required for modification).

a) That said, my question is: Do you PERSONALLY believe, that a buyer has an ethical obligation to pay an AGREED UPON increase on a contract, regardless of consideration? Why or Why not? (Remember, this is a personal belief, not a legal one- so you should not use the law to support your answer). So after my lecture on this not being Jay Leno Jaywalking, this time, AFTER you have Discussed the case from the book, here I am looking for your opinion.

b) Is your belief the same for a contract for services? (again, this is a question about ethics and your belief. It is not a legal argument).