ECN Forum Forums General Topics of the Trade Business Related Discussion liability due to poweroutrage

this is the situation:

We have supplied a paralleling switchgear that synchronize a 2500kw Generator with the local utility. The first time they run the equipment using their actual loads, it did synchronized and run for several days already. Then due to bad weather the there was a power disturbance causes the utility mains circuit breaker to trip off ,same with the generator breaker. In other words there was total shudown inside the plant.
Productions and operation was stopped. Now the customer is charging us for the production loss , and machine's electronic parts were damaged due to power outage as what they were claiming.

Are we liable to pay for it? W e dont have a contract or agreement for such liability or damages. They only gave as Purchase Order for the supply of Paralleling switchgear.

What is your stand about it. In your opinion what will be my strong defense againts this kind of situation.

In addition , we have still 50% balance uncollected to this customer and the they are charging us a 48% percent of the total amount.

You need to call on some pros. There are many issues that need to be addressed, before an answer can be given.

Major issues include:
-Who designed the system?
-Who selected the equipment?
-Was the equipment used correctly, installed correctly?
-Were proper methods used to test the switch-over?
-How long has the equipment been in use?
-Was any other word performed on the system?
-What did the customer ask for? Did he get it?
-What promises were made?
-Did the customer accept the equipment, and the testing?
-Was there anything that would have prevented the power failure? Was they 'thing' part of the job?

If you have "errors and omissions" insurance, then you need to talk to your insurance carrier.

Otherwise, you need to get an attorney involved. You need his professional opinion as to what your area recognises as to express and implied warranties, damage limitations, etc.

There are literally centuries of experience that help us determine what is reasonable, and what is not. The "Uniform Commercial Code" offers some guidance- but you have to understand the context. Likewise, standard insurance policies are based upon this sort of litigation.

I would not place a lot of faith in their 'after the fact' second guessing. Were they competent enough to do this, they would also be competent enough to specify things correctly- and therefore be responsible for giving you a bad spec.

A lawyer really should be consulted... unless the 48% is of no consequence to you.

That being said, I do not believe you have any liability whatsoever since the only document for this transaction was a purchase order. In other words it was THEY that specified what was to be installed. All you did was the work, and apparently had nothing to do with the design (even if you did the design, they need to have proof). As long as you installed the switchgear properly and per the purchase order specification, you have a right to be paid. Hate to say it, but it's not your problem the equipment didn't work. There does not appear to be any warranties here, express or implied.

By the way, if their operations were so critical, why all this paralleling scheme? Why not just standby power, which in my opinion is more reliable? Were they just trying to get a couple of bucks back by selling power back to the POCO? Some folks think having the meter spin backwards is the best invention since sliced bread, but the nature of this beast is you could be out of power altogether... as this case situation clearly illustrates.

You should also consider a lawyer before they "find" more damages they think your liable for.

Joe

This is a good topic, how to avoid problems, with design build projects. When doing design build work, such as your switchgear installation, it is best to have a professional engineer, design, and spec. all the equipment, many contractors, try to avoid the cost of professional engineering, and end up in litigation, when problems arise, and to make matters worse, they are usually not insured, to do design work, which requires professional errors, and ommisions, libality insurance.

On the purchase order issue, that uaually has the customers terms on it, not yours, again, many contractors, are afraid, if they ask to have their contract signed, the customer will find someone else, at this point if they don't want to sign your terms, best to pass on the project, you need protection, and without a written contract your position is weak.

As posted above, you may need to get your attorney involved. "You need his professional opinion as to what your area recognises as to express and implied warranties, damage limitations, etc."





[This message has been edited by LK (edited 11-01-2006).]