Hardy Construction Ltd contractually agreed to build an office complex for Schtick Corp. for $5.5 million. Under the terms of that contract, Hardy Construction would incur a financial penalty if it failed to complete the project on schedule. Hardy Construction hired Laurel Electric Co as a subcontractor to install wiring in the building. The terms of that subcontract required payment of $50 000 on completion. Laurel Electric began work immediately but later discovered that it had honestly underestimated the cost of performance. Accordingly, it approached Hardy Construction and stated that unless it was promised an additional $20 000, it simply would not be able to complete the job. Hardy Construction realized (i) that it could not possibly find a replacement for Laurel Electric on such short notice, and (ii) that any delay in completion of the project would trigger the penalty provision contained in its contract with Schtick Corp. Hardy Construction consequently agreed to Laurel Electric's request. Nevertheless, although Laurel Electric subsequently completed its performance on schedule, Hardy Construction refuses to pay more than $50 000.

Does it have a right to do so in law? Explain your answer fully. Consider the elements of a contract for each of the relevant contracts.

Regardless of its legal position, why might Hardy Construction consider honouring its promise to pay an extra $20 000?