What happens according to law in Canada if two parties agree and sign a contract

Question

What happens according to law in Canada if two parties agree and sign a contract, but after some time party one demands extra money in order to fulfill the demanded production and party two agrees to pay that extra amount if the product is delivered on time, but when the pay date comes the second party disagrees to pay the extra amount and only agrees to pay the amount stated in the original contract?

"Hogtown Hotels Inc (HHI) is about to open a new hotel in Toronto. HHI plans to open on June 1, 2018. HHI has a contract with Evyl Empire Ltd (EEL) for the purchase and sale of beds and linens for the new hotel. Pursuant to this contract, EEL is supposed to deliver the beds and linens on May 23. It is important that HHI receive the beds and linens on time in order to ensure that the hotel is ready to open its doors on June 1. On May 3, EEL contacted HHI to advise HHI that it had oversold its inventory of beds and linens. EEL told HHI that it would not have any beds or linens available for delivery until June 8. Alternatively, the representative of EEL explained that it could make beds and linens available IF HHI was willing to pay a higher price. If HHI agreed to pay the higher price (“Price 2”), then EEL said that it would be able to deliver the beds and linens on time. Because HHI plans to open on June 1 and cannot afford to wait for new beds and linens, HHI promises to pay Price 2, the higher price. EEL delivered the new beds and linens on May 23. HHI signed for the beds and linens. However, when the bill came, HHI refused to pay the increased price. Instead, it submitted the original price it had agreed to in its contract with EEL. EEL was furious and it has demanded that HHI honour its promise to pay Price 2. EEL has threatened to sue HHI if it does not keep that promise."

Explanation / Answer

The party two can be sued for breach of contract as the initial contract is already discharged through mutual agreement and only the new contract exists which entitles the party one for higher price after performance. According to Canadian law, the discharge of contracts can be done based on performance, mutual agreement, impossibility of performance or breach of contract. In this case, the first contract made by the two parties HHI and EEL is discharged through mutual agreement when EEL told it would be able to deliver the beds and linen on time to HHI only if HHI agrees to pay higher price and HHI accepted the same. Hence a new contract is made between HHI and EEL when HHI agreed to pay higher price to EEL for delivering the goods. EEL has relied on the promise and performed their duties by delivering bed and linen on time. Hence HHI is obliged to pay the price as per new contract since the first contract no longer exists. EEL can sue HHI for breach of contract if they refuse to pay the increased amount.

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