Handy Dan is working on a highway project. Handy Dan however subcontracts Manny’s Manos to come and pour cement. When the sponsor shows up he doesn’t like the way the cement is being poured and tells Manny’s guys to stop, but they do not. What contractual concept best addresses the above situation?
Explanation
Answer: a - This subcontracting relationship is an example of privity. The entity that is obligated to stop the work in the above example is Handy Dan since they signed a contract with this sponsor. Manny is obligated to heed the instruction by Handy Dan because of the contract in place between them.
LOI, SLA and SOB are all abbreviations for terms that do not address the above situation. LOI stands for Letter of Intent - which is a written communication stating one’s desire to do something. SLA stands for Service Level Agreement, which basically addresses the expectations of the buyer, and SOB, well, addresses the pain in the neck that’d you’d rather have off your project.
Key Take Away: Be sure to address the possibility of subcontracting relationships when doling out work to vendors, especially on projects of a highly-sensitive nature. Good contracting is gold in these situations.
