General Contractor License General Contractor License Law 3 — Questions and Answers
Question 1: Under the doctrine of 'substantial compliance,' an unlicensed contractor may sometimes recover payment if they can show:
- They were licensed in another state at the time
- They substantially completed the work to an acceptable standard
- They held a license for most of the project duration (Correct answer)
- The owner knew about the license deficiency and accepted the work
Correct answer: They held a license for most of the project duration
Some states apply the substantial compliance doctrine when a contractor held a valid license for most of the contract period but had a brief lapse, allowing limited recovery.
Question 2: What does 'responsible managing employee' (RME) mean in contractor licensing law?
- A foreman who manages day-to-day site safety
- A licensed individual who qualifies a business entity for licensure (Correct answer)
- The owner of record on a contractor's license application
- An employee certified in OSHA 30-hour training
Correct answer: A licensed individual who qualifies a business entity for licensure
An RME is a licensed individual whose qualifications are used to obtain or maintain a contractor's license on behalf of a business entity.
Question 3: When an RME leaves a contracting company, the company typically must:
- Continue operating normally under the existing license
- Notify the licensing board and replace the qualifier within a set period (Correct answer)
- Surrender the license immediately upon the RME's departure
- Convert to a sole proprietorship license
Correct answer: Notify the licensing board and replace the qualifier within a set period
State laws generally require the company to report the change and designate a new qualifying individual within a specified timeframe or risk license suspension.
Question 4: Which federal law impacts contractor licensing by restricting the use of criminal records in licensing decisions?
- The Fair Housing Act
- The Fair Credit Reporting Act (FCRA)
- State-level occupational licensing reform laws (not a single federal law) (Correct answer)
- The Sherman Antitrust Act
Correct answer: State-level occupational licensing reform laws (not a single federal law)
There is no single federal law restricting criminal history in contractor licensing; this is governed by individual state occupational licensing reform statutes.
Question 5: A homeowner hires an unlicensed contractor and later suffers damages from faulty work. Which is most likely true?
- The homeowner has no legal recourse because they assumed the risk
- The homeowner may file a complaint with the licensing board
- The homeowner may pursue the contractor civilly even though no license existed (Correct answer)
- The contractor is shielded from liability because no license was required
Correct answer: The homeowner may pursue the contractor civilly even though no license existed
The homeowner can still pursue civil claims for negligence or breach of contract regardless of the contractor's licensing status.
Question 6: What is a 'home improvement' license, and how does it differ from a general contractor license?
- It covers only new residential construction, not remodels
- It is a specialized license limited to residential repair and renovation work (Correct answer)
- It is an informal credential with no legal standing
- It is equivalent to a general contractor license in all states
Correct answer: It is a specialized license limited to residential repair and renovation work
Many states issue separate home improvement contractor licenses that are limited in scope to residential repair, renovation, or remodeling rather than new construction.
Question 7: A contractor convicted of a crime 'substantially related' to contracting may face license denial. Which crime is MOST likely to qualify?
- A minor traffic violation
- Bid rigging or construction fraud (Correct answer)
- An unrelated misdemeanor from 20 years ago
- Failure to pay a personal credit card bill
Correct answer: Bid rigging or construction fraud
Bid rigging and construction fraud are directly related to contracting activities and are classic examples of crimes substantially related to the profession.
General Contractor License General Contractor License Law 3
Under the doctrine of 'substantial compliance,' an unlicensed contractor may sometimes recover payment if they can show: