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Forgot to write this: I omed out the breaker and it seems to be working fine.If you have voltage at the lugs with the breaker off it is likely the contacts are fused.
I'm not good with electrical can you explain Meg and vom?I would MEG the contactor and not trust a standard VOM for this one.
The other thing I would do is flip the breaker open and close 15-20 times and see if things change.
Cool thanks. Do I need any jumpers to run 120v only? Also what color wires goes to which lugs?Sure.
VOM is a Volt Ohm Meter. It will test restance (ohms) with a very low voltage signal. Perfectly OK for testing electronic circuits but can be fooled in "POWER" circuits. An old Simpson analog meter can be better than a nice digital Fluke for some problems. Residual voltage across a contactor is one of them.
A Megger is a Ohm meter on steroids. It will test a circuit with a much higher voltage (500v). These will show you the things that can hide from VOMs.
An alternate test is to put a small load on the generator. A 60w lamp is ideal. If the contacts are fused they will pass enough power to light up the lamp. The brightness of the lamp can help you understand what is going on. If the lamp lights with the breaker off you have a serious problem. If it doesn't you may have some dirt in there. Exercising the breaker will clean its contacts.