CC Contract Law and Lien Rights 2

Question 1

What does 'indemnification' mean in a construction contract?

Accepted Answer

One party agrees to compensate another for certain losses or damages

Answer

An indemnification clause transfers financial responsibility for specified losses, claims, or damages from one party to another.

Question 2

What is a 'liquidated damages' clause in a construction contract?

Accepted Answer

A pre-agreed daily penalty for project delays beyond the contract completion date

Answer

Liquidated damages are a pre-estimated, agreed-upon amount charged to the contractor for each day work is not completed by the specified deadline.

Question 3

What is the difference between a 'fixed-price' and a 'cost-plus' contract?

Accepted Answer

Fixed-price sets one total amount; cost-plus reimburses actual costs plus a fee

Answer

In a fixed-price contract the contractor bears cost risk, while in cost-plus the owner pays actual expenses plus a predetermined profit margin.

Question 4

What is a 'change order' in a construction contract?

Accepted Answer

A written amendment that modifies the original contract scope, cost, or schedule

Answer

A change order is a formal, signed document that alters the originally agreed-upon work, timeline, or price in a construction contract.

Question 5

What does 'substantial completion' mean in construction law?

Accepted Answer

The point at which the project is sufficiently complete for its intended use, even if minor items remain

Answer

Substantial completion is a legal milestone triggering final payment and the start of warranty periods, even if a punch list of minor items remains.

CC - Contractor Certificate Practice Test