Joe Was a Contractor and Hired Subtrades to Help Build

question 19

Essay

Joe was a contractor and hired subtrades to help build his houses. Sam was a framer and had agreed to frame four houses for Joe for a set price. Joe was to supply the materials. After two houses were completed, Joe's suppliers increased the cost of lumber and Joe told Sam that he could no longer pay him the amount that they'd agreed. Sam agreed to take 15% less for the other two jobs, which were then completed. During this time, regular payments were made from Joe to Sam, but the total amount received was 15% lower than the originally agreed on price for the last two jobs. Sam sued Joe for the original contract price, claiming that he'd received no consideration for his agreement to take less for the last two jobs. Explain what defences may be available to Joe under these circumstances and his likelihood of success.

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Definitions:

Cost of Capital

The rate of return that a company must pay to its creditors and shareholders for using their capital.

Income Return

A measure of the income generated by an investment, usually expressed as a percentage of the investment's cost.

Capital Structure Weight

The proportion of debt and equity that composes a company's financing of its operations and growth, often affecting its risk and return.

Tax Rate

The extent to which the government extracts a percentage of income as taxes from businesses or people.