Contract law


Case Study
Chen invites tenders from a number of firms to remodel the kitchen at his restaurant in Sydney. The lowest tender is from Max Renovation Ltd for $155,000.00. Chen accepts Max’s tender and the work begins. Having taken out old ovens and cook tops so that the kitchen is unusable, Max realises that he has made a mistake in pricing the new ovens. The new oven will cost an additional $15,000.00, nearly his entire profit margin on the work. Max approaches Chen and explains the problem. Max says that unless Chen agrees to pay an extra $15,000.00, Max will simply walk off the job. Chen needs to get the restaurant reopened by the contract completion date, as he will need the cash flow to service loans. Because of this, he reluctantly agrees. When Chen complains to his father Xun about Max’s behaviour, Xun says: “That’s alright, you do not have to pay anymore than you originally agreed when you accepted Max’s tender.”
Advise Chen, with reasons based on your knowledge of contract law, as to whether you think Xun is correct.

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