The construction industry is going through challenging times, as the price of raw materials is soaring due to numerous well-reported causes. On top of this,over the last year or two there have been shortages of key materials because of Covid supply chain disruptions. Not surprisingly, some larger and smaller construction companies have reported insolvency during this year, while many others are struggling in financial terms.

You work at Another Brick in the Wall (ABW), the largest developers' consortium in Melbourne. The company works with several builders (construction companies) which are in charge of the actual construction of the different projects. The repercussions of inflation on building companies have also reached ABW, as the builders it works with are trying to renegotiate the price of existing contracts.

Indeed, ABW has always used fixed price contracts with their builders. These contracts set a total price for all construction-related activities during a project, and usually include benefits for early completion and penalties for late completion. Also, in these contracts the builders agree to bear any costs above the fixed price, except for those costs incurred because of variations requested by the developer. In present times, because materials' prices have gone through the roof this formula, as we can imagine, has put construction companies on the brink of collapse.

This morning, you had a meeting with the CEO and CFO of ABW. They explained to you their concerns about the financial situation of their builder contractors, which, in some cases, could negatively impact on the bottom line of some ABW projects. One of ABW's main concerns is that some of their clients are first homeowners who have bought "off the plan" (ie. signed a contract for purchase before construction) and may sue ABW, if their properties are not finished by the agreed date.

Your task (5 marks)

At the end of the meeting, you agreed to send them a short brief addressing the legal implications in the following scenarios:

A. ABW is aware that the costs in some, but not all, of their projects are rising exponentially. For this reason, ABW is willing to renegotiate the price of these, and only these, contracts (ie. those which, due to substantial price increases, have become economically unviable), provided the original deadlines for completion are met.Would agreements to vary these contracts be enforceable? (Do not addresspromissory estoppel in your answer)

B. Would it make a difference if these new agreements are in the form of a deed?

C. ABW is concerned that if it renegotiates some of the contract prices, other builders whose contracts are not renegotiated and who are not in a critical financial situation may demand the same opportunity to renegotiate. They may even threaten that, without new prices, projects may not be completed by the agreed date. If ABW decides to accept these demands for contractual modifications but it is not able to honour them,would these new prices be enforceable?