Business Law and Finance Flashcards
7 cards from real General Contractor License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Law and Finance flashcards as text
A contractor discovers that a subcontractor is misclassifying employees as independent contractors. What is the primary risk to the general contractor?
Answer: The GC could face joint employer liability for unpaid wages and benefits
In many jurisdictions, general contractors can be held jointly liable for subcontractor wage violations under joint employer or responsible contractor doctrines.
What is 'bid shopping' and why is it considered unethical?
Answer: Using a subcontractor's bid price to solicit lower competing bids after being awarded a contract
Bid shopping occurs when a GC uses a sub's price to pressure competing subs to underbid, undermining trust and the integrity of the bidding process.
A contractor wants to purchase equipment for a project. Which financing approach preserves the most cash while spreading the cost over the equipment's useful life?
Answer: Equipment financing loan
An equipment loan allows the contractor to own the asset while spreading payments over its useful life, preserving working capital for operations.
Which construction insurance policy covers property in transit and stored materials not yet incorporated into the project?
Answer: Inland marine insurance
Inland marine insurance covers tools, equipment, and materials while they are being transported or stored off-site before installation.
Under contract law, what is the 'parol evidence rule'?
Answer: Prior oral or written negotiations cannot be used to alter the terms of a final written contract
The parol evidence rule bars the use of prior negotiations or oral agreements to contradict or vary the terms of a fully integrated written contract.
A contractor's 'overhead' costs include all of the following EXCEPT:
Answer: Direct materials used on a specific project
Direct materials are a direct job cost assigned to specific projects, not overhead — overhead consists of indirect costs that support the business as a whole.
Which of the following constitutes a valid contract modification under standard contract law?
Answer: A written change order signed by authorized representatives of both parties
A valid contract modification requires mutual agreement and, on construction projects, is typically formalized through a written change order signed by both parties.