CRC Client Relations & Contract Administration 3 — Questions and Answers
Question 1: Which method of dispute resolution in a construction contract requires both parties to present their case before a neutral third party whose decision is legally binding?
- Mediation
- Negotiation
- Arbitration (Correct answer)
- Litigation
Correct answer: Arbitration
Arbitration involves a neutral arbitrator who hears both sides and issues a binding decision, making it faster and less expensive than litigation.
Question 2: A contractor must provide a Notice to Owner in Florida primarily to:
- Inform the owner the project has started
- Preserve the contractor's right to file a mechanics lien if unpaid (Correct answer)
- Notify the owner of hazardous materials on site
- Confirm insurance coverage to the owner
Correct answer: Preserve the contractor's right to file a mechanics lien if unpaid
Serving a Notice to Owner (or preliminary notice) within the required timeframe preserves the contractor's or supplier's lien rights on the property.
Question 3: When a homeowner signs a contract in their home, federal law (FTC Cooling-Off Rule) gives them the right to cancel within:
- 24 hours
- 3 business days (Correct answer)
- 7 calendar days
- 10 business days
Correct answer: 3 business days
The FTC Cooling-Off Rule allows consumers to cancel contracts signed at their home or away from the seller's permanent place of business within 3 business days.
Question 4: An unconditional lien waiver on final payment means the subcontractor:
- Waives lien rights only after receiving full payment
- Waives all lien rights immediately upon signing, regardless of whether payment is received (Correct answer)
- Retains lien rights for 90 days after signing
- Waives rights to future work only
Correct answer: Waives all lien rights immediately upon signing, regardless of whether payment is received
An unconditional waiver releases all lien rights immediately upon execution, so contractors must ensure payment is received before signing.
Question 5: A punch list in residential construction serves primarily to:
- List materials ordered but not yet delivered
- Document incomplete or deficient work items to be corrected before final payment (Correct answer)
- Record safety violations found during inspection
- Summarize total costs incurred on the project
Correct answer: Document incomplete or deficient work items to be corrected before final payment
A punch list catalogs remaining deficiencies and incomplete items that must be resolved before the contractor can receive final payment.
Question 6: Which contract provision protects a contractor from liability for delays caused by hurricanes, floods, or other unforeseeable events?
- Liquidated damages clause
- Indemnification clause
- Force majeure clause (Correct answer)
- Retainage clause
Correct answer: Force majeure clause
A force majeure clause excuses a party from performance obligations when extraordinary events beyond their control prevent timely completion.
Question 7: Retainage in a construction contract refers to:
- A deposit the contractor holds for materials
- A percentage of each payment withheld until satisfactory project completion (Correct answer)
- Insurance premiums retained by the owner
- Contractor profit held in escrow
Correct answer: A percentage of each payment withheld until satisfactory project completion
Retainage (typically 5–10%) is withheld from each progress payment to ensure the contractor completes all work and corrects deficiencies before final payment.
CRC Client Relations & Contract Administration 3
Which method of dispute resolution in a construction contract requires both parties to present their case before a neutral third party whose decision is legally binding?