General Contractor License Contracts, Laws, and Agreements 2 — Questions and Answers
Question 1: A subcontractor walks off the job without cause after completing 60% of the work. Under common law, what is the general contractor's most appropriate legal remedy?
- Accept the partial work and pay in full
- Sue for breach of contract and recover cost to complete (Correct answer)
- Terminate all other subcontracts on the project
- File a mechanics lien against the owner
Correct answer: Sue for breach of contract and recover cost to complete
When a subcontractor abandons work without justification, the general contractor can sue for breach and recover the additional cost to complete the work.
Question 2: Which clause in a construction contract typically protects the owner by requiring the contractor to remove and replace defective work discovered after project completion?
- Force majeure clause
- Defects and warranty clause (Correct answer)
- Substantial completion clause
- Indemnification clause
Correct answer: Defects and warranty clause
A defects and warranty clause obligates the contractor to correct defective work or materials discovered within a specified period after completion.
Question 3: Under the Miller Act, a payment bond on federal construction projects protects which party?
- The federal government against contractor default
- Subcontractors and suppliers who are not paid (Correct answer)
- The general contractor against owner nonpayment
- Surety companies from excessive claims
Correct answer: Subcontractors and suppliers who are not paid
The Miller Act requires payment bonds on federal projects over $150,000 to protect subcontractors and material suppliers who cannot file mechanics liens on federal property.
Question 4: What is a 'time is of the essence' clause in a construction contract?
- A clause that extends the project schedule automatically
- A provision making completion deadlines strict contractual obligations (Correct answer)
- A requirement to submit daily time cards
- A clause limiting overtime work
Correct answer: A provision making completion deadlines strict contractual obligations
A 'time is of the essence' clause makes the completion date a material term of the contract, meaning delays can constitute a breach even if the owner suffers no actual damages.
Question 5: A general contractor submits a bid that contains a clerical error making it significantly lower than intended. Before the contract is signed, can the contractor withdraw the bid?
- No, all submitted bids are irrevocable
- Yes, if the error is proven and withdrawal is prompt (Correct answer)
- Only if the owner agrees to re-bid the project
- Only if the bid bond is forfeited first
Correct answer: Yes, if the error is proven and withdrawal is prompt
Most states allow bid withdrawal based on a material clerical error if the contractor promptly notifies the owner before contract execution and can prove the mistake.
Question 6: What distinguishes an 'express warranty' from an 'implied warranty' in a construction contract?
- Express warranties are oral; implied warranties are written
- Express warranties are explicitly stated; implied warranties arise by law or custom (Correct answer)
- Implied warranties last longer than express warranties
- Express warranties only cover materials, not workmanship
Correct answer: Express warranties are explicitly stated; implied warranties arise by law or custom
An express warranty is one the contractor explicitly states in the contract, while an implied warranty arises automatically by law, such as the implied warranty of habitability.
Question 7: Under the AIA A201 General Conditions, what must an owner do before terminating a contractor for cause?
- Obtain a court order first
- Give the contractor written notice and a 7-day cure period (Correct answer)
- Notify the surety and wait 30 days
- Withhold final payment for 60 days
Correct answer: Give the contractor written notice and a 7-day cure period
AIA A201 requires the owner to give the contractor written notice and a 7-day opportunity to cure the default before terminating for cause.
