BCM Construction Law and Contracts 1 — Questions and Answers
Question 1: A performance bond in construction protects the owner by:
- Guaranteeing the contractor will complete the project per contract terms (Correct answer)
- Ensuring subcontractors are paid promptly
- Covering property damage during construction
- Providing warranty coverage after project completion
Correct answer: Guaranteeing the contractor will complete the project per contract terms
A performance bond is a surety guarantee that the contractor will fulfill all contractual obligations, protecting the owner if the contractor defaults.
Question 2: Under the Miller Act, federal construction projects exceeding what dollar threshold require performance and payment bonds?
- $150,000 (Correct answer)
- $100,000
- $250,000
- $500,000
Correct answer: $150,000
The Miller Act mandates performance and payment bonds on federal contracts exceeding $150,000 to protect taxpayers and subcontractors.
Question 3: A mechanic's lien in construction law gives unpaid contractors or suppliers the right to:
- Claim a security interest in the improved property (Correct answer)
- Sue the general contractor in federal court
- Stop construction immediately
- Demand immediate payment from the project owner's bank
Correct answer: Claim a security interest in the improved property
A mechanic's lien encumbers the property title, giving unpaid parties a legal claim against the real estate as security for payment.
Question 4: The AIA A201 General Conditions document primarily governs:
- The relationship and responsibilities among owner, architect, and contractor (Correct answer)
- Subcontractor payment schedules
- Material specifications and testing requirements
- OSHA safety compliance on job sites
Correct answer: The relationship and responsibilities among owner, architect, and contractor
AIA A201 is the standard general conditions document that defines duties, rights, and procedures for the construction contract triad.
Question 5: Liquidated damages in a construction contract are:
- Pre-agreed daily penalties for contractor-caused project delays (Correct answer)
- Actual damages calculated after project completion
- Penalties for construction defects discovered post-occupancy
- Fines imposed by government regulators
Correct answer: Pre-agreed daily penalties for contractor-caused project delays
Liquidated damages are a predetermined compensation amount per day of delay, agreed upon because actual delay damages are difficult to calculate.
Question 6: The difference between a lump sum contract and a unit price contract is:
- Lump sum fixes the total contract price, while unit price pays per measured quantity of work (Correct answer)
- Lump sum includes all profit and overhead, while unit price excludes overhead
- Lump sum is only used for residential projects, unit price for commercial
- Lump sum requires competitive bidding, unit price does not
Correct answer: Lump sum fixes the total contract price, while unit price pays per measured quantity of work
A lump sum contract has a fixed total price for a defined scope, while a unit price contract pays based on actual quantities of work installed.
BCM Construction Law and Contracts 1
A performance bond in construction protects the owner by: