Below you will find questions relating to actual lawsuits, with some shortening of the facts. My past articles address all of the presented questions. Take this test to see if you can confidently select the best answer. I'll talk about the answers next month.
1. There is a section in the specifications that refers to materials “furnished by” the electrical contractor. That section, in turn, referenced a drawing that notes certain fixtures will be “supplied by the owner.”
a. Is there a patent ambiguity here?
b. Is there a difference between “furnished” and “supplied”?
c. Is there an “order of precedence” issue?
d. Should the designer's license be revoked?
2. The contract requires a notice, in writing, within 10 days of any cause of delay or the time extension request will be denied. You encounter delays and discuss them with the general contractor who tells you a plan is being devised to recapture lost time. As a result of this conversation, you do not send the notice because the delay may be recovered.
a. Ten days in writing means just that. You lose.
b. The oral notification substitutes for the note.
c. The general contractor has waived the writing requirement.
d. Send a late note in hopes the general contractor will treat you fairly.
3. The owner of a multimillion-dollar home is consistently late in making payments to your general contractor (you have a verbal cost-plus agreement with the general). About halfway through the project, the owner starts to find fault with the electrical installation. The general contractor is on your side but doesn't want to antagonize the owner.
a. Set up a meeting with all parties to discuss the problems.
b. Pull off the job and tell the general contractor you will return once you are paid to date.
c. Your verbal subcontract is unenforceable.
d. Continue with the job and hope all will work out in the end.
4. You find that your foreman has been embezzling funds by overcharging your clients for work that was not performed. Some clients are becoming suspicious because the invoices don't match up with the amount of work done. The stolen funds have accumulated to more than $10,000.
a. Fire the foreman immediately.
b. Meet with the clients individually, explain the problem and offer restitution.
c. Keep the fraud quiet but adjust your books so your clients will not be overcharged.
d. Call the police.
5. On a school project, the first electrical contractor was default terminated, and your company has been asked by the owner to complete the work.
a. Make sure the first electrical contractor's bonding company will stand behind your contract.
b. Perform a thorough investigation of the quality and quantity of work already performed and report to the owner.
c. Do not, under any circumstances, take the completion work as a lump-sum contract.
d. Start making vacation plans based on all the profits you will rake in.
6. You and the owner had many disputes on a commercial project. He criticized your work quality, your late completion, and the validity and pricing of your proposed extra work items. Finally, you reached an agreement and the owner sent you the final payment. Months later, the owner finds other problems for you to fix.
a. Tell the owner to pound sand-you have received final payment and it's all over.
b. Go back for the fix and help preserve your company's reputation.
c. Go back, but only with a written purchase order for the “repairs.”
d. Do nothing. The owner will probably not pursue this.
7. Your company has a long-term “time and material” maintenance contract for an industrial facility. Among other things, the agreement provides for compensation for your equipment based on a depreciation and maintenance schedule. However, you billed your equipment at published rental rates because it was more convenient. After three years, the owner, suspecting overcharges, now wants an audit.
a. The contract does not provide for an audit, so ignore the request.
b. Open your books, but explain the difference in price was not substantial.
c. Open your books, but explain that the owner had to have known of your pricing method and thus waived that part of the contract.
d. Talk to a lawyer because you might get sued for fraud.
8. Your contract contains a bonus clause, granting you $10,000 if you complete your work on or ahead of schedule, and a flat $10,000 deduct if you are late in completion for any reason. You are late.
a. Because there is a balance between the bonus and the penalty, you are flat out of luck.
b. The $10,000 deduct is a “penalty” and therefore unenforceable because it is not related to the owner's actual costs.
c. A schedule analysis should be performed to show why you are entitled to a time extension as well as the bonus.
d. Because the deduct/penalty is large in relation to contract value, it is unconscionable.
9. You are the electrical subcontractor on a department store. A few months into the job, your general contractor changes its letterhead to show a new name on correspondence, checks, etc. Payments remain timely and there is no problem with the job.
a. Don't worry about it. Companies change their names all the time.
b. Accept the general contractor's explanation that the name change is just administrative.
c. Demand written assurances that the newly named company has accepted all obligations of the old company.
d. Walk off the job. You never agreed to contract with this new company.
10. You signed a “partial waiver of lien” form every month for the entire job. The form contains language that you acknowledge payment in full to the date of the partial waiver and waive all mechanic's lien rights through that date.
a. This partial waiver does not cover unapproved changes and claims.
b. This partial waiver does not cover contract retention.
c. The form is ambiguous and waives nothing.
d. Sign up for a course on contract law.
Next month, there will be a brief discussion of each of these problems. Until then, consider what you have read in these legal columns and ask yourself whether you have understood them enough to have confidence in your answers. You might want to have an in-house meeting to discuss them. If you were to actually confront any of these problems, thousands of dollars could be at stake. EC