NASCLA Contracts and Project Documentation 2 — Questions and Answers
Question 1: What is the purpose of a 'retainage' provision in a construction contract?
- To retain the contractor's license during the project
- To withhold a percentage of payment as security until project completion (Correct answer)
- To set aside funds for future change orders
- To reserve the right to hire additional contractors
Correct answer: To withhold a percentage of payment as security until project completion
Retainage is a percentage (typically 5–10%) of each progress payment withheld by the owner to ensure the contractor completes the project and corrects deficiencies.
Question 2: Which document formally establishes the scope of work, materials, and construction methods for a project?
- The notice to proceed
- The project specifications (Correct answer)
- The certificate of occupancy
- The performance bond
Correct answer: The project specifications
Project specifications are detailed written documents that define the quality, materials, workmanship standards, and construction methods required for the project.
Question 3: If a contractor discovers unexpected subsurface conditions (like rock instead of soil), they should:
- Continue work and absorb the extra cost
- Issue a change order request to address the differing site conditions (Correct answer)
- Stop work permanently and abandon the project
- Hire a new subcontractor at their own expense
Correct answer: Issue a change order request to address the differing site conditions
Most contracts include a differing site conditions clause that allows contractors to seek additional compensation through a change order when unforeseen subsurface conditions are encountered.
Question 4: What does 'substantial completion' mean in a construction contract?
- When 50% of the work is finished
- When the project is sufficiently complete for the owner to use it for its intended purpose (Correct answer)
- When the final inspection is passed
- When all punch list items are resolved
Correct answer: When the project is sufficiently complete for the owner to use it for its intended purpose
Substantial completion occurs when the project is sufficiently complete for the owner to use it for its intended purpose, even if minor items remain.
Question 5: A contractor's 'warranty' on construction work typically covers:
- Defects in materials or workmanship for a specified period after completion (Correct answer)
- The contractor's business license renewal
- Protection against natural disasters
- Future price increases in materials
Correct answer: Defects in materials or workmanship for a specified period after completion
A contractor's warranty is a guarantee that the work is free from defects in materials and workmanship for a defined period, typically one year after substantial completion.
Question 6: Which of the following is an example of a contractor's breach of contract?
- Requesting a change order for additional work
- Failing to complete the project by the specified date without cause (Correct answer)
- Hiring licensed subcontractors
- Submitting progress billing invoices
Correct answer: Failing to complete the project by the specified date without cause
Failing to complete work by the contract deadline without a valid legal excuse constitutes a breach of contract, exposing the contractor to liability for damages.
NASCLA Contracts and Project Documentation 2
What is the purpose of a 'retainage' provision in a construction contract?