CRC Client Relations & Contract Administration 2 — Questions and Answers
Question 1: A homeowner requests a verbal change order to add a deck during construction. What is the contractor's best practice?
- Proceed immediately to maintain client satisfaction
- Document the change in a written change order signed by both parties before starting work (Correct answer)
- Add the work and include it in the final invoice
- Refuse the request until the original contract is complete
Correct answer: Document the change in a written change order signed by both parties before starting work
Written change orders signed by both parties protect both the contractor and client by clearly defining scope, cost, and schedule impacts.
Question 2: Which contract clause specifies the consequences if the project is not completed by the agreed date?
- Indemnification clause
- Force majeure clause
- Liquidated damages clause (Correct answer)
- Arbitration clause
Correct answer: Liquidated damages clause
A liquidated damages clause establishes a pre-agreed penalty amount the contractor pays for each day the project exceeds the completion date.
Question 3: A client asks to use materials that do not meet local building code requirements. The contractor should:
- Use the materials since the client is paying
- Use the materials but note it in the contract
- Refuse and explain that code-compliant materials are legally required (Correct answer)
- Request a variance without telling the client
Correct answer: Refuse and explain that code-compliant materials are legally required
Contractors are legally obligated to comply with building codes regardless of client preferences, and non-compliance exposes both parties to liability.
Question 4: What does a 'cost-plus' contract mean in residential construction?
- The client pays a fixed price plus a design fee
- The contractor is paid actual costs plus a predetermined fee or percentage (Correct answer)
- The contractor adds a markup only on subcontractor costs
- The client pays costs plus a penalty for delays
Correct answer: The contractor is paid actual costs plus a predetermined fee or percentage
In a cost-plus contract, the owner reimburses the contractor for all actual project costs and pays an additional agreed-upon fee or percentage as profit.
Question 5: A homeowner refuses to pay a draw because they are dissatisfied with the pace of work. What is the contractor's first step?
- Stop work immediately and file a lien
- Review the contract draw schedule and meet with the client to resolve the concern (Correct answer)
- Accelerate work without further discussion
- Hire an attorney immediately
Correct answer: Review the contract draw schedule and meet with the client to resolve the concern
Reviewing the contract terms and communicating directly with the client is the first step to resolving a payment dispute before escalating to legal action.
Question 6: Which document transfers the risk of loss of materials from the supplier to the contractor at the point of delivery?
- Certificate of insurance
- Bill of lading (Correct answer)
- Lien waiver
- Notice of commencement
Correct answer: Bill of lading
A bill of lading documents the transfer of goods and establishes when ownership and risk pass from the supplier to the contractor upon delivery.
Question 7: Under most residential construction contracts, a 'substantial completion' date is significant because it:
- Marks when the final payment is due in full
- Triggers the warranty period and shifts remaining punch-list responsibility (Correct answer)
- Allows the contractor to abandon the project legally
- Starts the permit expiration countdown
Correct answer: Triggers the warranty period and shifts remaining punch-list responsibility
Substantial completion means the project is usable for its intended purpose, triggering the warranty period and defining remaining punch-list obligations.
CRC Client Relations & Contract Administration 2
A homeowner requests a verbal change order to add a deck during construction.
What is the contractor's best practice?