ASO Contract Types & Administration 2 — Questions and Answers
Question 1: A security contract clause states the client may terminate services with 30 days written notice. This is known as a:
- Indemnification clause
- Termination for convenience clause (Correct answer)
- Liquidated damages clause
- Force majeure clause
Correct answer: Termination for convenience clause
A termination for convenience clause allows either party to end the contract with proper notice without citing a breach.
Question 2: Which contract type places the greatest financial risk on the security contractor?
- Cost-plus contract
- Time-and-materials contract
- Fixed-price (lump sum) contract (Correct answer)
- Unit-price contract
Correct answer: Fixed-price (lump sum) contract
In a fixed-price contract, the contractor bears all cost overruns, so if expenses exceed the bid, profit margins shrink or losses occur.
Question 3: A security officer discovers a contract amendment was verbally agreed upon by management but never signed. What is the legal status of that amendment?
- Fully enforceable because management agreed
- Unenforceable if the original contract requires written modifications (Correct answer)
- Automatically incorporated after 30 days
- Valid only if witnessed by a third party
Correct answer: Unenforceable if the original contract requires written modifications
Most contracts include a clause requiring that all amendments be in writing and signed to be binding.
Question 4: The section of a security services contract that lists specific duties, patrol schedules, and post orders is typically called the:
- Indemnification schedule
- Statement of Work (SOW) (Correct answer)
- Insurance rider
- Liquidated damages schedule
Correct answer: Statement of Work (SOW)
The Statement of Work details exactly what services the contractor must perform, including schedules and post orders.
Question 5: A client withholds payment claiming the security company breached the contract. The security company disagrees. The next appropriate step per most contract terms is:
- File a police report immediately
- Initiate the dispute resolution or arbitration process outlined in the contract (Correct answer)
- Stop all services without notice
- Sell the debt to a collection agency
Correct answer: Initiate the dispute resolution or arbitration process outlined in the contract
Most contracts include a dispute resolution mechanism — such as mediation or arbitration — that must be used before litigation.
Question 6: What does a 'hold harmless' agreement in a security contract primarily do?
- Guarantees the contractor will not raise prices
- Shifts liability from one party to another for certain claims (Correct answer)
- Requires the client to provide armed backup
- Mandates background checks for all officers
Correct answer: Shifts liability from one party to another for certain claims
A hold harmless clause protects one party from legal liability for injuries or damages caused by the other party's actions.
Question 7: A security services contract specifies a 'per-post' pricing structure. This is an example of a:
- Fixed-price contract
- Unit-price contract (Correct answer)
- Cost-plus contract
- Indefinite delivery contract
Correct answer: Unit-price contract
Unit-price contracts set a rate for each defined unit of service (e.g., per post, per hour, per patrol), and the total cost varies with usage.
ASO Contract Types & Administration 2
A security contract clause states the client may terminate services with 30 days written notice.
This is known as a: