Breakfast Bowls manufactures pre-prepared bowls of muesli with yoghurt and fruit that are sold in supermarkets and are very popular as snacks for lunches for school children. Breakfast Bowls has a contract in place with Discount Groceries, a national chain of grocery stores, which has two years to run. The contract requires Breakfast Bowls to make daily deliveries to Discount Groceries stores so that there is always fresh stock for customers.

Breakfast Bowls buys the packaging for its bowls of muesli from Plastic Packaging and the parties have a contract in place covering the supply of packaging for the next two years. Six months after the start of the contract, Plastic Packaging tells Breakfast Bowls that unless it agrees to pay an extra $0.50 per bowl above the contract price Plastic Packaging will not complete the manufacture of any more bowls. Plastic Packaging decided to do this because it is unhappy with the low profit margin it earns on the bowls.

Breakfast Bowls reluctantly agrees to pay the extra $0.50 per bowl, as it needs the packaging in order to meet its obligations to supply Discount Groceries. Upon receipt of the invoice, Breakfast Bowls refuses to pay the additional $0.50 saying that there is no good consideration and so no legally binding agreement for the increased price.

Advise Breakfast Bowls whether it is correct.

Refer to relevant court cases in your analysis.

Answer rating: 100% (QA)

Variation of contract is a creation of new contract through the variation of the existing agreement by mutual consent of the parties in contract A var... View the full answer