CBP Contract Administration and Legal 1 — Questions and Answers
Question 1: Which document legally binds a contractor to perform specific work for an agreed-upon price and timeline?
- Construction contract (Correct answer)
- Work order
- Bid proposal
- Project schedule
Correct answer: Construction contract
A construction contract is the legally binding agreement that obligates the contractor to complete defined work under specified terms.
Question 2: What is a mechanic's lien in the context of construction?
- A legal claim against a property by unpaid contractors or suppliers (Correct answer)
- A warranty on installed mechanical systems
- An insurance policy for equipment damage
- A permit required for HVAC work
Correct answer: A legal claim against a property by unpaid contractors or suppliers
A mechanic's lien is a security interest in a property filed by contractors, subcontractors, or suppliers who have not been paid for their work or materials.
Question 3: What type of bond guarantees that a contractor will complete a project according to the contract terms?
- Performance bond (Correct answer)
- Payment bond
- Bid bond
- Maintenance bond
Correct answer: Performance bond
A performance bond protects the project owner by guaranteeing the contractor will fulfill all contractual obligations.
Question 4: In construction contracts, what does 'substantial completion' typically mean?
- The project is complete enough for its intended use, with only minor items remaining (Correct answer)
- All punch list items have been resolved
- The contractor has been paid in full
- 50% of the work has been finished
Correct answer: The project is complete enough for its intended use, with only minor items remaining
Substantial completion is the stage at which the work is sufficiently complete for the owner to occupy and use the project for its intended purpose.
Question 5: What is a change order in a construction contract?
- A written amendment modifying the original contract scope, price, or schedule (Correct answer)
- An order to replace defective materials
- A request to change subcontractors
- A notice to stop work temporarily
Correct answer: A written amendment modifying the original contract scope, price, or schedule
A change order is a formal written document that modifies the original contract by adding, deleting, or revising work and adjusting cost or time accordingly.
Question 6: What are liquidated damages in a construction contract?
- A pre-agreed dollar amount the contractor pays for each day the project is delayed past the completion date (Correct answer)
- Compensation for materials damaged on site
- Penalties for defective workmanship
- Court-ordered damages after litigation
Correct answer: A pre-agreed dollar amount the contractor pays for each day the project is delayed past the completion date
Liquidated damages are a pre-established daily penalty amount specified in the contract that the contractor owes the owner for failing to meet the completion deadline.
CBP Contract Administration and Legal 1
Which document legally binds a contractor to perform specific work for an agreed-upon price and timeline?