CAC CAC Construction Law and Ethics 1 — Questions and Answers
Question 1: What is the purpose of a mechanic's lien in US construction law?
- To secure payment for contractors or suppliers by placing a claim against the property (Correct answer)
- To protect the owner from defective work
- To enforce warranty obligations
- To settle labor disputes
Correct answer: To secure payment for contractors or suppliers by placing a claim against the property
A mechanic's lien allows unpaid contractors, subcontractors, and suppliers to claim an interest in the property to secure payment for their work or materials.
Question 2: Which US federal law governs prevailing wage requirements on federally funded construction projects?
- Davis-Bacon Act (Correct answer)
- Sherman Antitrust Act
- Occupational Safety and Health Act
- Miller Act
Correct answer: Davis-Bacon Act
The Davis-Bacon Act requires contractors on federal or federally assisted construction contracts over $2,000 to pay workers prevailing local wages.
Question 3: The Miller Act requires prime contractors on federal construction projects over $150,000 to furnish:
- Both a performance bond and a payment bond (Correct answer)
- Only a bid bond
- A certificate of insurance
- A warranty bond
Correct answer: Both a performance bond and a payment bond
The Miller Act mandates performance and payment bonds on all federal construction contracts exceeding $150,000 to protect the government and subcontractors.
Question 4: What does 'indemnification' mean in a construction contract?
- One party agrees to hold the other harmless and cover losses or claims arising from the project (Correct answer)
- Both parties share all project risks equally
- The owner waives liability for site conditions
- A contractor guarantees zero defects
Correct answer: One party agrees to hold the other harmless and cover losses or claims arising from the project
An indemnification clause requires one party (usually the contractor) to defend and compensate the other for specified losses, claims, or damages.
Question 5: A statute of limitations in construction law refers to:
- The deadline by which a legal claim must be filed after a defect or breach is discovered (Correct answer)
- The time allowed to obtain a building permit
- The warranty period specified in the contract
- The maximum project duration allowed by a permit
Correct answer: The deadline by which a legal claim must be filed after a defect or breach is discovered
A statute of limitations sets a time limit within which a party must file a lawsuit; after that period expires, the legal claim is barred.
Question 6: Which form of dispute resolution in construction involves a neutral third party making a binding decision?
- Arbitration (Correct answer)
- Mediation
- Negotiation
- Dispute review board advisory opinion
Correct answer: Arbitration
Arbitration is a private adjudication where an arbitrator hears both sides and issues a binding award, typically faster and less formal than litigation.
CAC CAC Construction Law and Ethics 1
What is the purpose of a mechanic's lien in US construction law?