GCC Lien Laws & Construction Finance 2

Question 1

In a construction surety bond, which party is the 'obligee'?

Accepted Answer

The party who requires and benefits from the bond, typically the project owner or government agency

Answer

The obligee is the entity that requires the bond for its protection; the principal (contractor) purchases the bond and the surety (bonding company) guarantees the principal's obligations to the obligee.

Question 2

What is the primary purpose of prompt payment laws in construction?

Accepted Answer

To require timely payment down the contracting chain and impose interest penalties on parties who pay late

Answer

Prompt payment statutes set specific deadlines for owners to pay general contractors and for general contractors to pay subcontractors, and they impose automatic interest or penalties on late payers to protect lower-tier firms.

Question 3

What is a 'stop notice' (stop payment notice) in construction law?

Accepted Answer

A legal remedy requiring the owner or construction lender to withhold funds from the contractor until a disputed payment claim is resolved

Answer

A stop notice targets the construction funds rather than the property itself, making it useful for claimants on public projects or when a lien on the property would be ineffective, by freezing funds held by the owner or lender.

Question 4

What is the primary benefit of a joint check agreement for a material supplier?

Accepted Answer

It ensures the supplier is paid directly by requiring checks to be made payable to both the general contractor and the supplier jointly

Answer

Because both parties must endorse the joint check, the general contractor cannot cash it without the supplier also endorsing it, protecting the supplier from having funds diverted by the contractor.

Question 5

Under most U.S. state lien statutes, when does the deadline to file a mechanics lien typically begin to run?

Accepted Answer

From the date the claimant last furnished labor or materials to the project

Answer

The lien filing clock generally starts from the claimant's last day of furnishing labor or materials (though some states also use a recorded notice of completion as a trigger), so stopping work restarts the countdown.

(GCC) General Contracting Certification Practice Test

(GCC) General Contracting Certification Practice Test

GCC Lien Laws & Construction Finance 2