Business Law and Finance Flashcards
7 cards from real General Contractor License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Law and Finance flashcards as text
What does 'indemnification' mean in a construction contract?
Answer: An agreement by one party to protect another from specified losses or claims
An indemnification clause requires one party (typically the contractor) to defend and compensate the other party against specified claims or liabilities.
Which entity is responsible for issuing a W-2 form to employees?
Answer: The employer
Employers must issue W-2 forms to employees by January 31 each year, reporting annual wages and taxes withheld.
A contractor discovers hidden conditions on a job site that significantly increase costs. Which contract clause typically addresses this situation?
Answer: Differing site conditions clause
A differing site conditions clause allows contractors to seek additional compensation when unexpected subsurface or hidden conditions are encountered.
Which type of business entity provides personal liability protection for all owners while allowing pass-through taxation?
Answer: Limited liability company (LLC)
An LLC shields members from personal liability for business debts while profits pass through to members' personal tax returns.
A contractor's bid is accepted but they later claim the bid contained a material error. The contractor's best legal recourse is generally:
Answer: Rescission based on unilateral mistake if the owner knew or should have known of the error
Courts may allow rescission of a contract if the contractor can prove a significant clerical or mathematical error that the owner had reason to know about.
What is 'retainage' in a construction contract?
Answer: A percentage of each progress payment withheld until project completion
Retainage (typically 5-10%) is withheld from each payment to ensure the contractor completes all work satisfactorily before receiving full payment.
Under the Davis-Bacon Act, contractors on federal construction projects must pay workers:
Answer: Prevailing wages and fringe benefits for the locality
The Davis-Bacon Act requires federal construction contractors to pay the locally prevailing wages and fringe benefits determined by the Department of Labor.