Slodder Construction Co Entered into a Contract with the City

question 45

Essay

Slodder Construction Co entered into a contract with the City of Lowey.It agreed to build a tunnel under city hall in exchange for a total price of $5 million.Shortly after beginning the project, Slodder realized that it had entered into a very bad bargain.The job was much more difficult than initially expected.It would cost $15 million to complete.Slodder nevertheless carried on in order to protect its reputation.Somewhat surprisingly, however, after half the tunnel had been finished, Lowey breached the contract by refusing to give Slodder access to the worksite.At that point, the city had already paid $2.5 million to Slodder, and Slodder had already spent $7.5 million on the project.Before trial, another construction company completed the tunnel under a separate contract with the city.Is Slodder entitled to receive any more money from the city in the form of expectation damages or reliance damages? Explain your answer.Is there any other basis upon which Slodder can claim a remedy from Slowey? If so, how much will that remedy be worth? Explain your answer.

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Definitions:

Income Tax

A tax imposed by a government on the financial income generated by individuals or entities within its jurisdiction.

Plant Capacity

The maximum level of output that a company can sustain to produce in a given period under normal conditions.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one misses out on when choosing one option over another.

Sunk Cost

A cost that has already been incurred and cannot be recovered.