Published In July 2001
Since I began writing this column, I have addressed a broad array of issues in contract law. I wrote these articles to encourage you to learn more about your legal rights and obligations. Now is the appropriate time for a quiz to test your knowledge and help you recall some of the legal problems that have been presented in this space. All of the following problems are based on actual cases decided by judges. Guides to the solutions to the problems can be found in prior articles. At the end of each problem there is a reference by month to the pertinent article. Check “Back Issues” at www.ecmag.com. Good luck! Send me an e-mail and let me know how you scored. Question 1: The electrical work on a new middle school is behind schedule. You have heard complaints that other contractors contributed to the situation, but you are not certain how much. As you review the updated schedules issued by the construction manager over the previous four months, you notice for the first time that the completion date has been shortened by 30 days. What should you do? (a) Dissolve your corporation. (b) Don’t worry. The CM’s schedules show a direct order to accelerate, which preserves your claims. (c) You’re dead. You didn’t send any written notices as required by contract. (d) Immediately start documenting your claims and notify the owner immediately. Ref: July 1999 Question 2: Disputes arise between you and the general contractor over the quality of your installation. Although your work meets the specifications and code, there are questions over how long the work will last. There is a one-year contract warranty. The contractor issues a unilateral change order under the changes clause extending the warranty two years. What are your rights? (a) The changes clause cannot be used to modify the terms of the contract. (b) Accept the two years. It’s a cheaper way to go than re-doing the work. (c) The change order is valid, so you should submit your estimate for the modified warranty. (d) Fire your project manager. Ref: June 1999 Question 3: The design drawings are not complete when your electrical subcontract is issued. The construction manager guesses that design is at 75 percent. You raise no objections. As the job progresses, you find that there are errors in the original design, and the rest of the design drawings are late. What best describes your obligations? (a) You must tell your management: “No bonuses this year.” (b) By giving a fixed price for a job with incomplete design, you have accepted design/build responsibilities. (c) (You are entitled to extra payments for redesign and a time extension for delays. (d) You should have detected the design flaws at bid, so there is no extra money, but you can get a time extension. Ref: February 1998 Question 4: While excavating down 4 feet for an underground ductbank, you encounter rock. The soil borings only indicated clay. What are your rights? (a) You have none. The site inspection clause bars this kind of claim. (b) You must stop your work until the owner issues a change order. (c) You should submit a claim under the differing conditions clause. (d) This is a force majeure event, giving you a right to time, but not money. Ref: February 2001 Question 5: Halfway through the job, you order some specified equipment, only to find that the manufacturer has discontinued that line. Quickly, you locate another vendor that can provide comparable equipment, but with somewhat different electrical characteristics and a manufacturer who is not well known. What describes your contract remedy? (a) It was your mistake not to order the equipment earlier. The owner can pick any substitute he wants, within reason. (b) You can stop work because of impossibility of performance. (c) The specifications are defective. You have a right to stop work. (d) You have a right to a substitution under the “or equal” clause in the contract. Ref: September 1999 Question 6: Your subcontract with the general contractor does not contain a “no damages for delay” clause, but it does incorporate the owner’s terms and conditions. The owner’s contract bars claims for delays. Which clause takes precedence? (a) You were never given the owner’s contract so you cannot be bound by all its terms. (b) You suddenly realize that all of your problems arise from interferences, not delays. (c) You have essentially agreed to the “no damages for delay” provision. (d) Your subcontract always governs over other documents. Ref: August 2000 Question 7: A major design/build bid package for an electrical distribution system requires you to expend over $10,000 in design and estimating time for your proposal. After you are awarded the job, you spend another $8,000 in engineering and management time negotiating supply agreements, and you committed $15,000 in noncancellable rental agreements. The contract provides payment only for work in place. After achieving 10 percent complete, the project is terminated for convenience. How much are you entitled to for your termination costs? (a) Bid preparation costs, start-up costs, construction billings, and lost profits. (b) Construction billings and lost profits. (c) Start-up costs and construction billings. (d) Construction billings only. Ref: April 1998 Question 8: Which of the following best describes the concept of liquidated damages? (a) All damages that can readily be converted to cash. (b) The cost of liquidating a business. (c) Actual delay damages. (d) Supposed delay damages. Ref: October 1998 Question 9: Your contract has a standard indemnity clause. During construction, a delivery company employee trips and falls in the area of your work and then sues you for personal injury. What are your obligations? (a) Nothing. Your work was totally unrelated to the injury. (b) Nothing. The contractor responsible for temporary roads is most likely the cause of the slip and fall. (c) Enter an appearance in court on behalf of the owner to defend against the claim and pay if necessary. (d) Pay the owner’s attorney fees to defend the action. Ref: February 1999 Question 10: Within the first month on a jail renovation project, you find that the routing of existing conduit is different from the plans. The contract requires you to give 21 days’ notice of an event, which causes added costs, and to give continuing notices every 21 days until the problem is solved. The owner rejects your first notice, citing the site inspection clause, and adds that it will not pay for any extra work. No additional notices are sent. Where do you stand? (a) Because the problem is continuing, the first notice is sufficient. (b) You can only claim for the first 21 days of extra costs. All other claims are waived. (c) The site inspection clause condemns your claims. (d) Stop work and abandon the contract. The routing change is a cardinal change. Ref: Upcoming Article ITTIG, of Ittig & Ittig, P.C., in Washington D.C., specializes in construction law. He can be contacted at (202) 387-5508, e-mail: USBuildlaw@aol.com, or his Web site, www.ittig-ittig.com.