Jones Hired Smith, a General Contractor, to Build a Garage

question 30

Multiple Choice

Jones hired Smith, a general contractor, to build a garage as an addition to Jones' home. Smith hired Adam to do the roofing work on this garage. All the work was done satisfactorily, and at the completion of the work, Jones paid Smith the agreed price. However, Smith never paid Adam for his work. Three weeks after Adam finished his work, he filed a mechanics' lien against the property and demanded that Jones pays him for his work. Which of the following is most correct?

• A) Jones need not pay Adam because he has already paid in full for the garage.
• B) Jones need not pay Adam because Adam's contract is actually with Smith in this case.
• C) Jones should pay Adam because Adam has the right of redemption.
• D) Jones should pay Adam because Adam can enforce his lien claim against the property.

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how many times a business can collect its average accounts receivable during a period, indicating how efficiently it manages credit extended to customers.

Average Sale Period

The average time it takes for a company to complete a sales cycle from the initial contact to the final sale.

Average Sale Period

A financial metric that calculates the average time it takes for a company to sell its inventory, indicating the efficiency of sales and inventory management.

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers, indicating the efficiency of the company’s credit and collection policies.