Amendments to Contract Require Consideration

Question: Under our January 15 contract with our homebuilder for construction of a new home in Buckeye, we had a closing date of October 15. A month later the homebuilder’s sales agent emailed us that the home should be completed by September 1. In reliance on her email, we “locked in” an interest rate for September 1. The homebuilder, however, failed to complete our new home until the scheduled closing date of October 15. Due to this delay, we lost thousands of dollars because of a higher interest rate. Do we have a claim against the homebuilder based on their sales agent’s email that our new home would be completed by September 1?

Answer: Probably not. Any contract, and any amendment to a contract, requires what the law calls “consideration,” which generally means an agreement by one party to do something in exchange for another party doing something, e.g., one party delivers a pen in exchange for payment of $5. There was probably no consideration from you to the homebuilder for an earlier completion date of September 1. Therefore, your homebuilder should not be liable to you for your higher loan costs of thousands of dollars because your homebuilder failed to complete the home by September 1.

Under the law of detrimental reliance, however, you may have had a claim against the homebuilder if you had emailed back the sales agent, and said that you were going to “lock in” a September 1 interest rate based on her email.

Note: The email from the homebuilder’s sales agent was probably only “puffing,” i.e., “bragging” about her homebuilder’s ability to build a home by September 1. No sales agent has liability for “puffing.” For example, the homebuilder’s sales agent saying that your new home in Buckeye will have “the best views of the White Tank Mountains,” or the legendary Tex Earnhardt saying on TV that “this new Ford Mustang is the best in Arizona, and that ain’t no bull.”