Contract Administration and Legal Flashcards

In a lump sum (fixed-price) contract, who bears the financial risk if actual costs exceed the contract amount?

Answer: The contractor

In a lump sum contract, the contractor agrees to complete the work for a fixed price and absorbs any cost overruns above that amount.

What is the primary purpose of a Certificate of Occupancy (CO)?

Answer: To certify that a building meets code requirements and is safe for occupancy

A Certificate of Occupancy is issued by the local authority having jurisdiction and confirms the building complies with applicable codes and is safe to occupy.

What does Errors and Omissions (E&O) insurance cover in a construction context?

Answer: Professional mistakes or negligence in design or consulting services

E&O insurance (also called professional liability insurance) protects design professionals and consultants against claims arising from errors, omissions, or negligence in their professional services.

What is a subcontract agreement?

Answer: A contract between a general contractor and a specialty contractor for a defined portion of the work

A subcontract is a binding agreement in which the general contractor delegates a specific portion of the project work to a specialty subcontractor.

What is the purpose of a Notice of Completion filed after construction?

Answer: To officially notify lienholders that the project is finished and start the clock on their lien filing deadline

A Notice of Completion is a recorded document that signals project completion and shortens the window during which subcontractors and suppliers can file mechanic's liens.

In a unit price contract, how is the total contract price determined?

Answer: By multiplying the agreed unit price for each item by the actual quantities installed

Unit price contracts establish a price per unit of work (e.g., per cubic yard of concrete), and the final contract amount is calculated based on actual measured quantities.