Licensed Electrical Contractor Business and Law Practices 3

Question 1

A contractor receives a change order that increases the project scope. The contractor should:

Accepted Answer

Execute a written change order signed by both parties before starting the additional work

Answer

All scope changes should be documented with a signed written change order before work begins to protect both parties and ensure proper payment.

Question 2

Under IRS rules, which factor most strongly indicates a worker is an employee rather than an independent contractor?

Accepted Answer

The business controls how and when the work is performed

Answer

The IRS 'behavioral control' test focuses on whether the company controls how and when work is done — a key indicator of employee status.

Question 3

Which lien release form confirms that a contractor has received partial payment and waives lien rights only for the amount paid to date?

Accepted Answer

Unconditional partial lien waiver

Answer

An unconditional partial lien waiver confirms receipt of a specific partial payment and permanently waives lien rights for that amount.

Question 4

When calculating a project bid, 'overhead' typically includes which of the following?

Accepted Answer

Office rent, insurance premiums, and administrative salaries

Answer

Overhead includes indirect costs of running the business — rent, insurance, admin staff — not direct job costs like materials or field labor.

Question 5

A contractor who discovers a latent defect in an existing structure that creates a safety hazard should first:

Accepted Answer

Immediately notify the owner and stop work in the affected area if necessary

Answer

Discovering a latent safety defect requires immediate notification to the owner and potentially stopping work to prevent harm.

Licensed Electrical Contractor Practice Test