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PGMP · Question #285

Eric is the project manager of the NQQ Project and has hired the ZAS Corporation to complete part of the project work for Eric's organization. Due to a change request the ZAS Corporation is no longer

The correct answer is C. It depends on what the termination clause of the contract stipulates.. Payment obligations when a contract is terminated early are determined by the specific terms of the contract's termination clause, not by completion status alone.

Procurement Management

Question

Eric is the project manager of the NQQ Project and has hired the ZAS Corporation to complete part of the project work for Eric's organization. Due to a change request the ZAS Corporation is no longer needed on the project even though they have completed nearly all of the project work. Is Eric's organization liable to pay the ZAS Corporation for the work they have completed so far on the project?

Options

  • AIt depends on what the outcome of a lawsuit will determine.
  • BNo, the ZAS Corporation did not complete all of the work.
  • CIt depends on what the termination clause of the contract stipulates.
  • DYes, the ZAS Corporation did not choose to terminate the contract work.

How the community answered

(28 responses)
  • A
    4% (1)
  • B
    18% (5)
  • C
    71% (20)
  • D
    7% (2)

Why each option

Payment obligations when a contract is terminated early are determined by the specific terms of the contract's termination clause, not by completion status alone.

AIt depends on what the outcome of a lawsuit will determine.

Defaulting to a lawsuit is premature and incorrect - the contract itself is the proper and first place to determine liability before any legal action is considered.

BNo, the ZAS Corporation did not complete all of the work.

Incomplete work does not automatically void payment obligations - the contract's termination terms, not the completion percentage alone, determine what is owed.

CIt depends on what the termination clause of the contract stipulates.Correct

Contracts typically include a termination for convenience clause that specifies exactly what compensation the contractor is entitled to when the buyer stops the work before completion. This clause governs payment for work completed, costs incurred, and any applicable fees owed. Without reviewing those specific contractual terms, no determination of liability can be made unilaterally.

DYes, the ZAS Corporation did not choose to terminate the contract work.

The fact that ZAS did not choose to terminate is irrelevant - a buyer-initiated termination is governed by the contract's termination clause regardless of which party initiated it.

Concept tested: Contract termination clause and contractor payment liability

Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok

Topics

#Contract Management#Procurement Management#Termination Clause#Contractual Liability

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