General Contractor License General Contractor License Law 2 — Questions and Answers
Question 1: Under most state licensing laws, which action constitutes 'unlicensed contracting'?
- Bidding on a project without a license (Correct answer)
- Hiring a licensed subcontractor
- Purchasing building materials without a permit
- Filing a lien on a completed project
Correct answer: Bidding on a project without a license
Submitting a bid for work that requires a contractor's license, without holding that license, constitutes unlicensed contracting in most states.
Question 2: A general contractor's license bond primarily protects:
- The contractor's personal assets
- The public and project owners from contractor defaults (Correct answer)
- The bonding company from losses
- Subcontractors from non-payment by the owner
Correct answer: The public and project owners from contractor defaults
License bonds are required to protect the public and project owners if the contractor fails to fulfill contractual obligations or violates licensing laws.
Question 3: What is the typical consequence for a licensed contractor who allows another person to 'use' their license number for a fee?
- A small administrative fine only
- License revocation and potential criminal charges (Correct answer)
- A mandatory continuing education requirement
- Suspension of the license for 30 days
Correct answer: License revocation and potential criminal charges
License 'lending' or 'brokering' is a serious violation that typically results in revocation of the licensee's license and can carry criminal penalties.
Question 4: Which of the following is generally NOT grounds for disciplinary action against a general contractor's license?
- Abandoning a construction project
- Winning a competitive bid (Correct answer)
- Aiding an unlicensed person in evading licensing laws
- Committing fraud in obtaining the license
Correct answer: Winning a competitive bid
Winning a competitive bid through legitimate means is not a licensing violation; it is the expected outcome of the bidding process.
Question 5: When must a general contractor typically display or provide their license number?
- Only when requested by a state inspector
- Only on final invoices over $10,000
- On all contracts, bids, and advertising materials (Correct answer)
- Exclusively on permits pulled at the job site
Correct answer: On all contracts, bids, and advertising materials
Most state licensing laws require contractors to include their license number on all contracts, bids, advertisements, and business documents.
Question 6: A contractor's license is classified as a 'professional privilege.' This means:
- It can never be revoked once issued
- It is a right guaranteed by the U.S. Constitution
- It is granted by the state and can be taken away for cause (Correct answer)
- It transfers automatically to a new business entity
Correct answer: It is granted by the state and can be taken away for cause
A license is a privilege granted by the state, not a constitutional right, so it can be suspended or revoked if the licensee violates applicable laws.
Question 7: If a general contractor's license lapses due to non-renewal, contracts signed during the lapse period are typically:
- Fully enforceable because work was done in good faith
- Enforceable only if the contractor later renews
- Unenforceable and the contractor may not collect payment (Correct answer)
- Subject to a 10% penalty on the contract value
Correct answer: Unenforceable and the contractor may not collect payment
Most states render contracts entered into while a license was expired unenforceable, meaning the contractor cannot sue to collect payment for that work.
