Question 1

A lump-sum (fixed-price) contract means the contractor agrees to:

Accepted Answer

In a lump-sum contract, the contractor agrees to complete the defined scope for a fixed total price, bearing the risk of cost overruns. Changes to scope require written change orders to adjust the contract price.

Question 2

A mechanic's lien gives a contractor or subcontractor the right to:

Accepted Answer

A mechanic's lien (also called a construction lien or materialman's lien) allows unpaid contractors, subcontractors, and suppliers to place a claim against the owner's property title as security for the unpaid debt.

Question 3

Which document formally authorizes changes to the original contract scope, schedule, or price?

Accepted Answer

A change order is the formal written agreement between the owner and contractor authorizing modifications to contract scope, schedule, or price. Work outside the original contract should not proceed without an executed change order.

Question 4

Substantial completion in construction contracts means:

Accepted Answer

Substantial completion occurs when the work is sufficiently complete for the owner to use it for its intended purpose. It typically triggers the start of the warranty period, release of retainage, and shifts responsibility for the premises to the owner.

Question 5

A 'notice to proceed' (NTP) is issued by:

Accepted Answer

A notice to proceed (NTP) is issued by the owner or owner's representative (often the architect/engineer) to the general contractor, formally authorizing the contractor to begin work and establishing the contract start date.

Question 6

Liquidated damages in a construction contract are:

Accepted Answer

Liquidated damages are a pre-estimated, agreed-upon daily penalty that the contractor owes the owner for each day the project extends beyond the contract completion date. They must represent a reasonable estimate of actual damages, not a penalty.

Question 7

An indemnification (hold harmless) clause in a construction contract requires one party to:

Accepted Answer

An indemnification clause requires the indemnifying party (typically the contractor or subcontractor) to protect and defend the indemnified party (typically the owner) from specified claims, losses, or liabilities arising from the indemnifying party's work or negligence.

Question 8

Retainage in construction contracts refers to:

Accepted Answer

Retainage (typically 5–10% of each progress payment) is withheld by the owner as security to ensure the contractor completes all work and corrects deficiencies. It is released at substantial completion or after punch list completion.

Question 9

A statute of limitations in construction law sets the time period within which:

Accepted Answer

The statute of limitations establishes the maximum time a party has to file a legal claim after a cause of action arises (such as a construction defect or breach of contract). After this period, the claim is typically time-barred.

Question 10

A bid bond guarantees that the bidder will:

Accepted Answer

A bid bond guarantees that if the bidder is awarded the contract, they will sign the contract and provide the required performance and payment bonds. If the bidder refuses, the owner can claim the bond amount to cover the cost difference with the next bidder.

Construction Law and Contracts Practice Questions

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