General Contractor License Contracts, Laws, and Agreements 5 — Questions and Answers
Question 1: A general contractor includes an indemnification clause requiring subcontractors to indemnify the GC even for the GC's own negligence. In many states, this type of clause is:
- Always fully enforceable if in writing
- Void or limited by anti-indemnity statutes (Correct answer)
- Required by law for public projects
- Only valid if the subcontractor carries professional liability insurance
Correct answer: Void or limited by anti-indemnity statutes
Many states have enacted anti-indemnity statutes that prohibit or limit construction contract clauses requiring one party to indemnify another for their own negligence.
Question 2: Under the Spearin Doctrine, if an owner provides defective plans and specifications that cause construction problems, who is liable?
- The contractor, for failing to detect errors before bidding
- The owner, for impliedly warranting the adequacy of the plans (Correct answer)
- The architect, regardless of whether they are a party to the contract
- Both parties share equal liability for plan defects
Correct answer: The owner, for impliedly warranting the adequacy of the plans
The Spearin Doctrine holds that when an owner provides plans and specifications, there is an implied warranty that following them will produce the intended result, making the owner liable for defects in those documents.
Question 3: A contractor who is owed money files a mechanics lien. What is the deadline typically tied to for filing a mechanics lien in most states?
- 30 days after the contractor is hired
- A fixed period after the last date of furnishing labor or materials (Correct answer)
- The date the contractor submits a final invoice
- 90 days after the building permit is issued
Correct answer: A fixed period after the last date of furnishing labor or materials
Most state mechanics lien statutes require filing within a specified number of days (commonly 30-90) after the claimant last furnished labor or materials to the project.
Question 4: What is the purpose of a 'scope of work' provision in a subcontract agreement?
- To establish the subcontractor's hourly billing rate
- To precisely define the work the subcontractor is and is not responsible for performing (Correct answer)
- To list all materials the general contractor will supply
- To set the subcontractor's insurance coverage limits
Correct answer: To precisely define the work the subcontractor is and is not responsible for performing
A scope of work provision clearly delineates the specific tasks, responsibilities, and boundaries of the subcontractor's work to prevent disputes over what was included in the contract price.
Question 5: Under contract law, what makes a construction contract 'void' rather than merely 'voidable'?
- A contract is void when one party is a minor; voidable when both parties are adults
- A void contract lacks an essential element (e.g., illegal purpose) and cannot be enforced by anyone; a voidable contract can be enforced until disaffirmed (Correct answer)
- A voidable contract has no consideration; a void contract lacks mutual assent
- A contract is void when unsigned; voidable when signed under duress
Correct answer: A void contract lacks an essential element (e.g., illegal purpose) and cannot be enforced by anyone; a voidable contract can be enforced until disaffirmed
A void contract has no legal effect from the outset (e.g., contracting for illegal work), while a voidable contract is valid but may be rescinded by one party due to duress, fraud, or incapacity.
Question 6: A contractor's license is automatically suspended in most states when which of the following occurs?
- The contractor fails to renew within 60 days of expiration
- The contractor's required surety bond or insurance lapses (Correct answer)
- The contractor takes on a project in another state
- The contractor changes business entity type
Correct answer: The contractor's required surety bond or insurance lapses
Most state licensing boards automatically suspend a contractor's license when required bonds or insurance lapse, because these protections are conditions of licensure.
Question 7: What legal concept allows a contractor to recover the reasonable value of work performed when no valid contract exists but the owner has been unjustly enriched?
- Liquidated damages
- Quantum meruit (Correct answer)
- Promissory estoppel
- Res judicata
Correct answer: Quantum meruit
Quantum meruit (Latin for 'as much as deserved') allows recovery of the reasonable value of services rendered when there is no enforceable contract, to prevent unjust enrichment.
General Contractor License Contracts, Laws, and Agreements 5
A general contractor includes an indemnification clause requiring subcontractors to indemnify the GC even for the GC's own negligence.
In many states, this type of clause is: