Let’s look back on the topics my column has covered over the past year and test your understanding. My answers to these questions appear at the end of this column.
1. You are awarded an electrical subcontract for a school project. Prior to the award, you solicited quotes from suppliers and sent each one a copy of the owner’s specifications. The proposal from the supplier you decided to use contained terms and conditions, with limitation of warranty and liability clauses. To confirm the acceptance of the supplier’s bid, you sent your standard purchase order. The supplier has not signed your purchase order.
A. There is no contract with the supplier. Neither of you formally accepted the other’s terms.
B. There is a contract with only your terms. As your purchase order was the last document exchanged, it takes precedence.
C. There is a contract, but all of the supplier’s terms are included.
D. There is a contract, but you will have to review and compare your purchase-order terms and the supplier’s terms to determine what the contract says.
2. At the end of a difficult and contentious job, a dozen unresolved change orders remain. You and the general contractor (GC) reach a compromise, and the final change order states that “all cost and time issues between the parties are finally resolved.” Three months later, the GC demands you to return to repair or replace allegedly defective work. The alleged defects were in the changed work that was part of the final compromise settlement.
A. You can ignore the general contractor’s demand letter. The settlement waived any rights it might have had.
B. You can ignore the general contractor’s demand, as the settlement did not reserve warranty rights for the general contractor.
C. You still have warranty obligations, as the settlement agreement did not waive all contract obligations.
D. You must return, but any repair effort is an extra for which you should be paid.
E. You need to determine whether the defect existed at the time of settlement or only arose later.
3. Your subcontract contains a standard provision that your installation must meet all applicable codes. The owner’s electrical drawings, prepared by a licensed engineer, show an installation that would violate the National Electrical Code, a problem you did not notice when you signed the contract.
A. The owner’s detailed drawings take precedence over the Code.
B. You must meet Code, but you are entitled to a change order because the drawings need to be amended.
C. You must meet Code, and there is no claim for the cost of compliance.
D. You must meet Code, and how you do it is totally up to you.
4. During the job, the owner ordered some changes, and other changes result from mistakes by the GC. At project completion, you have not received full payment.
A. You can only lien the job to the extent the unpaid amounts relate solely to the owner.
B. You can lien the job for all unpaid amounts.
C. You can sue the GC for all unpaid amounts.
D. You can only sue the GC for costs relating solely to the mistakes it made.
5. On a home renovation project, the GC’s project manager rarely visits the job site. You and the owner have regular conversations, and as a result, you perform extra work requested directly by the owner. The general contractor refuses to pay for these extras.
A. The general contractor has no legal obligation to pay you.
B. The owner has no legal obligation to pay you.
C. The general contractor and the owner are both legally obligated to pay you.
D. Only the owner is liable for the work it ordered.
6. Midway through the job, the owner terminates the general contractor, but he asks you to stay and complete your work. Because the owner promises to pay you, you continue.
A. The owner is obligated to pay you for all unpaid invoices.
B. The owner is only liable for your billings after the date of the termination of the general contractor.
C. The owner is liable for all your completion costs regardless of the price you gave to the general contractor.
7. Your subcontract is for all lighting and wiring on a big-box department store. The owner’s contract provides that the owner “reserves the right to early occupancy.” When about half of the lighting fixtures have been installed, the owner limits access to the building to the front doors only, as it is taking delivery of merchandise and storing it in the back of the store. Previously, your crews had access through all four sides of the building.
A. You have no claim for lost efficiency as you accepted the “early occupancy” language.
B. You have no claim because you never told the owner that you intended to use all entrances.
C. You have a claim under the changes clause.
D. You have a claim under the differing site conditions clause.
Note that these suggested answers do not account for variations in contract law among the states and will be influenced by the expressed language in an individual contract.
1. D. The U.C.C., which applies to the sale of goods, will create a contract consisting of all terms that are not contradictory. Limitation clauses do not contradict, but further define, so are likely to remain. This “battle of the forms” solution can be overridden if either your purchase order or the supplier’s acknowledgment of order form makes acceptance of the order “expressly conditioned” on acceptance of its terms.
2. C. Unless the change order language goes further (for example, it covers “all claims, known or unknown, arising out of the work”), the change order only amends the contract in terms of cost and time but does not amend the terms and conditions of the agreement.
3. C. There is a limit to the discretion allowed for a reasonable redesign to meet applicable codes. If the Code problem were obvious (patent), you should have brought it to the owner’s attention. If the problem were hidden (latent), meeting Code is still required but arguably is an extra.
4. B, C. A lien allows you to recover amounts that improved the value of the property, regardless of how that improvement came about. The owner, however, may have defenses (failure to follow change order procedures, for example). The general contractor is liable to you for all extra work ordered, subject to contract procedures, whether it gave the order or the owner did.
5. A, B. The owner had no contract authority to order extra work directly. You should have gotten a separate agreement with the owner or processed a change order through the general contractor.
6. B. The owner essentially has created a new contract with you, beginning with the termination of the general contractor. Unless this new contract provides otherwise, the first part of your work remains subject to your contract with the general contractor.
7. C. Although the effects of early occupancy would be considered part of your contract parameters, the courts will require the owner’s power to be used reasonably, without intentionally interfering with your performance. (Written “notice” requirements may still have to be met.)