Contract Administration & Legal Issues Flashcards

An owner issues a unilateral change order without the contractor's agreement on price. Under most standard construction contracts, the contractor must:

Answer: Perform the work and preserve its right to additional compensation through the claims process

Standard contracts (e.g., AIA, ConsensusDocs) require contractors to proceed with directed work and pursue compensation through the dispute resolution process to avoid default.

The 'economic waste' doctrine in construction defect law holds that a court may award diminution in value rather than cost-of-repair damages when:

Answer: The cost to repair a defect would be grossly disproportionate to the benefit gained

Courts apply the economic waste doctrine to award the lesser diminution-in-value measure when repair costs would be disproportionate to any functional or aesthetic benefit.

Under OSHA multi-employer worksite doctrine, a controlling employer (general contractor) may be cited for a subcontractor's safety violation if the GC:

Answer: Failed to exercise reasonable care to detect and correct the violation

OSHA's multi-employer citation policy holds controlling employers liable when they fail to exercise reasonable care to detect and correct hazards created by other employers on the site.

A 'flow-down' clause in a subcontract is designed to:

Answer: Incorporate prime contract terms and obligations into the subcontract relationship

Flow-down (or pass-through) clauses incorporate prime contract terms into the subcontract, ensuring subcontractors are bound by the same obligations the GC owes the owner.

In construction arbitration, the doctrine of 'functus officio' means that after an arbitrator issues a final award, the arbitrator:

Answer: Has exhausted their authority and cannot modify or reconsider the award

Functus officio ('having performed his office') means the arbitrator's authority ends once the final award is issued, preventing unilateral modification.

Which of the following is NOT typically a valid defense to a mechanic's lien claim?

Answer: The owner paid the general contractor in full before the lien was filed

Payment to the GC is not a defense to a sub's mechanic's lien in most states; payment must reach the subcontractor or supplier to extinguish lien rights.

A construction manager at-risk (CMAR) differs legally from a traditional general contractor primarily because the CMAR:

Answer: Provides preconstruction services and holds subcontracts directly, but under a guaranteed maximum price

A CMAR provides preconstruction advisory services and then acts as the constructor holding subcontracts under a GMP, taking financial risk for overruns beyond the guaranteed maximum price.