In August 1996 ABC Hotel entered in to a construction contract with Hotel Builders to have a 50-bedroom luxury hotel. The contract was for $20 million and the hotel had to be completed by May 1, 1998.

After 12 months, work on the building fell behind and Hotel Builders approached ABC Hotels to explain that the are under duress due to financial difficulties and would not be able to complete the project in time.

The hotel was fully booked for 1998 holiday season and ABC Hotels offered to pay an additional $125,000 to ensure that the hotel was built on time. Hotel Builders agreed to this arrangement and continued with the building work.

In March 1998, just before the hotel was completed ABC Hotels informed the contractor that they did not intend to pay the additional $125,000.

Please advise Hotel Builders. Provide your reasonings when advising Hotel Builders, while using the principles of contract formation and other related topics covered in the course.?