CBC CBC Contract Law & Legal Responsibilities 1 — Questions and Answers
Question 1: Which element is NOT required to form a legally enforceable construction contract?
- Offer and acceptance
- Consideration
- Notarization by a public notary (Correct answer)
- Competent parties
Correct answer: Notarization by a public notary
A valid contract requires offer, acceptance, consideration, competent parties, and legal purpose — notarization is not a general requirement for enforceability.
Question 2: What is a 'mechanic's lien' in the context of Florida construction law?
- A lien placed on a contractor's license for safety violations
- A security interest on real property filed by unpaid contractors or suppliers (Correct answer)
- A court order stopping construction activities
- A bond required before pulling a building permit
Correct answer: A security interest on real property filed by unpaid contractors or suppliers
A mechanic's lien (construction lien in Florida) gives unpaid contractors, subcontractors, and material suppliers a claim against the property to secure payment.
Question 3: In Florida, a contractor must serve a Notice to Owner (NTO) within how many days of first furnishing labor or materials to preserve lien rights?
- 15 days
- 30 days
- 45 days (Correct answer)
- 90 days
Correct answer: 45 days
Under Florida's Construction Lien Law, contractors not in privity with the owner must serve a Notice to Owner within 45 days of first furnishing to preserve lien rights.
Question 4: A 'liquidated damages' clause in a construction contract specifies:
- The contractor's right to stop work if unpaid
- A pre-agreed daily dollar amount the contractor pays for each day of delay (Correct answer)
- Penalties for using non-union labor
- The owner's obligation to pay interest on late payments
Correct answer: A pre-agreed daily dollar amount the contractor pays for each day of delay
Liquidated damages clauses establish a fixed per-day amount the contractor owes for each day the project exceeds the contractual completion date.
Question 5: What does 'indemnification' require of a contractor under most construction contracts?
- To purchase a performance bond before starting work
- To hold the owner harmless from claims arising out of the contractor's work (Correct answer)
- To provide health insurance for all subcontractors
- To guarantee materials for 10 years after completion
Correct answer: To hold the owner harmless from claims arising out of the contractor's work
An indemnification clause obligates the contractor to defend, indemnify, and hold harmless the owner against losses caused by the contractor's negligence or breach.
Question 6: Under the AIA A201 General Conditions, what is the effect of 'substantial completion'?
- The contractor receives full final payment immediately
- The owner takes beneficial occupancy and the warranty period typically begins (Correct answer)
- All retainage is released automatically
- The contractor's liability for defects ends
Correct answer: The owner takes beneficial occupancy and the warranty period typically begins
Substantial completion marks the point when the project is sufficiently complete for the owner's intended use, triggering beneficial occupancy and starting the warranty clock.
CBC CBC Contract Law & Legal Responsibilities 1
Which element is NOT required to form a legally enforceable construction contract?