This isn't accurate or good business. A contractor isn't responsible for hidden conditions.Run!, Forest Run!
Even IF you do fix it, will it EVER pay you for the risks you took? I.e. the same amount of labor and cash could fix five other old buildings with out crappy framing......
That is catnip to the permit authorities, they could milk you like a porn star, then deny a occupancy permit, because it STILL doesn't meet today's or the code in effect when built......
Would You loan the owner money from YOUR pension fund?
Some old buildings need to torn down prior to killing their inhabitants.
Anyone who works on old homes is going to find things like this, they have to be repaired by someone, why not the guy who's already there? It's a valid extra. You determine a proper repair, if you can't then you get an engineer involved. Once you have an understanding of what needs to be done you write up a change order.
Simply saying "I can't do this" and walking away is bush league. You're a professional builder, and if you're remodeling you're also a problem solver. If you're neither of those you have no business starting the job to begin with.