CEP Contract Documentation & Legal Considerations 4

Question 1

When a contract contains a 'pay-when-paid' clause in a subcontract, the general contractor:

Accepted Answer

May delay subcontractor payment until the GC receives payment from the owner for that work

Answer

A pay-when-paid clause conditions the GC's obligation to pay subcontractors on first receiving payment from the owner, though enforceability varies by state.

Question 2

A 'mechanic's lien' filed on a construction project serves what primary purpose for unpaid contractors or suppliers?

Accepted Answer

Creates a security interest in the property to help ensure payment for labor and materials furnished

Answer

A mechanic's lien encumbers the property title, giving unpaid contractors and suppliers a legal claim against the real estate to secure payment.

Question 3

In estimating for a cost-plus-fixed-fee (CPFF) contract, what cost risk does the contractor bear?

Accepted Answer

Minimal cost risk since the owner reimburses allowable costs plus a fixed fee

Answer

Under CPFF contracts, the owner bears the cost risk because the contractor is reimbursed for all allowable costs; the contractor's risk is limited primarily to scope of work and indirect cost allocation.

Question 4

Which document formally incorporates all contract documents into a single legally binding agreement?

Accepted Answer

The agreement (e.g., AIA A101 or similar owner-contractor agreement)

Answer

The owner-contractor agreement (such as AIA A101) is the primary contract document that lists and incorporates all other contract documents by reference.

Question 5

What is the significance of the 'date of commencement' in a construction contract?

Accepted Answer

It is the starting point from which the contract time is measured for calculating substantial completion

Answer

The date of commencement starts the clock on the contract duration, establishing the baseline from which substantial and final completion dates are calculated.

(CEP) Certified Estimating Professional Practice Test

(CEP) Certified Estimating Professional Practice Test

CEP Contract Documentation & Legal Considerations 4