Final Exam - Contracts

A project you are working on has a contract value of $16 million. For which of the following individual change order amounts would you need to notify the surety company? $1,200,000 $800,000 $1,750,000 $985,000

$1,750,000

A bidder made a judgement error on a bid for which they had submitted a 5% bid bond in the amount of $525,000. Their total bid for the project was $9,800,000. The second place bidder's bid price was $10,050,000. Bidder No. 1 has decided they can't financially afford to do the project because of the judgment error. If the owner elects to require bidder No. 1 to use their bid bond to make the owner whole, what total amount would bidder No. 1 be required to forfeit?

$250,000

To issue a Payment and Performance bond for a project, Surety Companies generally require ______________? from a company before they will issue the bond.

10% in net worth or cash

The elevator Subcontractor on your project is on the road and needs an electronic copy of the specification section emailed to them for review. Which specification section will you email to them?

14

For a soon to begin complex project, which of the following (Mark all the apply) are reasons you might choose to require bonding for a Subcontractor. 1. They have recently completed two large projects and may be forced to lay off employees if they aren't awarded this project. 2. The owner likes the subcontractor's bid price and the savings that could be realized by using that sub, but you don't have experience working with that particular contractor 3. You have experience with that contractor and they have always been managed extremely well and have always paid their bills on time. 4. You feel like they are capable, but from reviewing their resume this would be the largest project they have done. 5. The owner has required a bond for any Subcontractor whose contract amount exceeds $300,000.

2. The owner likes the subcontractor's bid price and the savings that could be realized by using that sub, but you don't have experience working with that particular contractor 4. You feel like they are capable, but from reviewing their resume this would be the largest project they have done. 5. The owner has required a bond for any Subcontractor whose contract amount exceeds $300,000.

Mark all of the following that might be a reason two or more companies would want to enter into a joint venture. 1. Simplify the Management Structure 2. Influence Politicians in Foreign Countries 3. Join forces so two smaller companies could compete with larger ones 4. Eliminate the Competition 5. Increase Bonding Capacity

3. Join forces so two smaller companies could compete with larger ones 4. Eliminate the Competition 5. Increase Bonding Capacity

What is the amount of the mechanic's lien? Mark all that apply. 1. A claim for anything in excess of $5,000 2. A claim for the value of materials or equipment Furnished or rented 3. A claim for the value of service rendered 4. A claim for two times the value of the remaining work to be performed

A claim for the value of materials or equipment Furnished or rented, A claim for the value of service rendered

Which of the following when working on public works projects would essentially be the equivalent of filing a mechanic's lien on a project in the private sector? Conditional Use Permit A Notice of Intent A Joint Check Agreement A Stop work notice A Notification of Promissory Estoppel

A stop work notice

Using which of the following is the entity not responsible for construction means and methods? Design-Bid-Build CM at Risk Agency CM General Contract Method Design-Build

Agency CM

If you as a General Contractor make arrangements to pay a Supplier's bill directly for a Subcontractor who is having financial difficulty, this could be described as ________________________ ?

An Assignment of Contract

If a Subcontractor is having trouble paying their bills to a supplier on one of your projects and you make arrangements to have the bill paid directly to the supplier, this action could be described as ____________________.

Assignment of Contract

Which of the following statements from the text did I take exception with or at least partial exception? 1. Bonds are a guarantee against unqualified and unscrupulous contractors. 2. The bid bond of the low bidder becomes null and void when the construction contract is signed and the payment and performance bonds are posted. 3. Denying a bond request on a low-risk project is not to the agent's or bond company's advantage, and so the contractor should heed the cautions given by the agent. 4. Once the surety bond is issued, the bond is regarded as irrevocable, even if the premium has not been paid.

Bonds are a guarantee against unqualified and unscrupulous contractors.

Which of the following is the document that gives the contractor not only the authorization to move forward with change order work immediately but also the obligation to in order to among other things possibly take advantage of lower prices ahead of a coming price increase or in order not to delay the project schedule etc.? ASI RFI RFP CCD

CCD

Which of the following (Mark all that apply) types of delivery methods often have a shared contingency savings between the owner and contractor for an agreed upon percentage? CM/GC Design-Build General Contract Method Separate Contracts Method Design-Bid-Build

CM/GC Design-Build

____________ refers to the ACTION being taken by a public entity when its right to take property from someone is exercised.

Condemnation

Even if the general contractor is an independent contractor the owner can still be responsible for damages to third parties under the rules of ___________________

Contingent Liability

If a Subcontractor caused damage to a neighboring property the owner and general contractor could be held responsible under the rules of ____________________?

Contingent Liability

Which of the following shields owners and pays taxes as a separate legal entity? Corporation Silent Partners Partnership Sole Proprietorship Sub S Corporation

Corporation

Under which of the following would the contractor be the least likely to be afforded any relief from the courts against an owner using the Spearin Doctrine? Design-Build Design-Bid-Build Separate Contract Method CM at Risk

Design Build

Which of the following delivery methods receives criticism for possibly setting the stage for General Contractors to "beat up" the Subcontractors due to low margins? Design-Bid-Build Construction Management at Risk Professional Construction Manag Separate Contracts Method Self-Performance Method

Design-Bid-Build

Which of the following project delivery methods is often described as "Turnkey" construction? General Contract Method CM/GC Separate Contracts Method Design-Build Design-Bid-Build

Design-Build

From our discussion regarding risk, what is it that we most want to know or what is it that we're driving at when we're attempting to manage risk?

Dollars. What is a particular risk going to cost.

Mark each one that could be considered an advantage to a sole proprietorship. Ability to Share the Management Responsibilities as you see fit Ease of Raising Funds for Projects Ease of ability to Dissolve Minimal Legal Costs to Set up Ability to be shielded from Liability

Ease of ability to Dissolve, Minimal Legal Costs to Set up

Mark the reasons (Mark All that apply) that two or more companies might enter into a joint venture Influence Politicians or elections in Foreign Countries Eliminate the Competition Gain Familiarity with Local Markets Increase Bonding Capacity To Establish a Principal / Agent Relationship

Eliminate the Competition, Gain Familiarity with Local Markets, Increase Bonding Capacity

If an employee acting as an agent for the general contractor had been purchasing misc. items at the hardware store such as small tools, saw blades, drill bits, fasteners, safety glasses etc. and then purchased some leather work gloves and a cordless drill that the general contractor then refused to pay for claiming the employee didn't have authorization to purchase those items, the hardware store would likely gain relief from the court and the general contractor would have to pay for them under the rules of _____________________.

Estoppel

What is the name used when the owner will attempt to shift responsibility to the contractor contractually?

Exculpatory Provision

When one party writes provisions into a contract to place liability onto another party the courts tend to look at these a little more closely and this is called ______________________?

Exculpatory Provision

A general contractor is fifty percent complete with a project. This month's work is progressing and an application for payment has been submitted for the work performed last month. The contract can be described as __________________ for both contracting parties (owner and contractor).

Executory

The owner has yet to issue a check to the General Contractor for the work completed last month for a project that is approximately 75% complete. Using legal terms the contract is described as _____________________ for both contracting parties.

Executory

A(n) __________________________ is one in which the terms of the agreement, whether verbal or written, are clear, concise, explicit, and definite. This is the case with most construction contracts.

Express Contract

The AIA recommends that a precedence of documents be established in the contract

False

The superintendent for one of your projects is pushing hard to get ready for a slab-on-grade pour in area "C" of a particular building. The superintendent discovers that the electrical contractor instead of working in area C is working in area D, an area that doesn't need to be ready for another two weeks. The electrical foreman blows off the superintendent when asked to get their work finished in area C so the superintendent calls the Subcontractor's main office and boss to let them know something has to be done. The electrical foreman's boss gets the foreman's attention and redirects the foreman and crews to get the work completed in area "C." True or False, this action would cause the electrical contractor to lose independent status and become an agent to the general contractor.

False

True / False As compared to a Payment and Performance bond, collecting money for a failed Subcontractor is a considerably more lengthy process using Subguard insurance.

False

True / False If the contract is silent on the subject of a priority of the documents, then the specifications rule over the plans by default.

False

True / False. Bonding companies will often attempt to require officers, key stockholders, and spouses to sign personal guarantees, but the protection offered by the corporation makes it so they cannot do that.

False

True / False. I recommended in class that you begin work on the closeout documents as soon as the submittals are all finished.

False

True / False. In order to reduce their risk in a Construction Manager at Risk delivery system owners will work to place the CM at Risk as an agent to the owner.

False

True / False. It makes the most sense for Owners to choose to self-perform work with in-house crews rather than hire a general contractor for larger complex projects so they can keep an eye on the work.

False

True / False. Large increases in privately financed construction projects typically would indicate a weak economy.

False

True / False. Owners cannot terminate a contract purely for convenience.

False

True / False. The Miller act of 1935 was put into place to ensure that on federal projects workers were being paid at the prevailing wage rates.

False

True / False. Under the attractive nuisance doctrine generally contractors can gain financial relief from parents of children who cause damages after trespassing onto a construction site.

False

True / False. Under the attractive nuisance doctrine, even though children aren't responsible for any damages caused, because it is considered a tort of strict liability contractors have generally been able to gain financial relief through the courts from the parents of the children.

False

True / False: According to this reading, when there is a discrepancy and the error is not discovered until after the work is completed the costs must be born by the contractor for proceeding with the work.

False

True / False: In order to keep the lines clear between an agent and an independent contractor, the owner or the owner's agents must clearly focus on directing the methods of the contractor.

False

True / False: The owner asked for a thickened concrete slab in a 20' x 20' area just inside a 10' x 10' overhead door so vehicles could be pulled inside the building to be worked on. A cross section of the plans clearly showed the slab thickness to be 6" thick. After the bid it was pointed out to the contractor that there was a sheet note calling for the slab thickness to be 60" (inches) thick. Needing to save money wherever they could the owner asked for a credit for the additional 54" of concrete not placed since that was clearly the more costly option. Based on the reading, mark "True" if the contractor is required to provide the deductive credit and "False" if they are not.

False

True or False: Dedication is classified as a "hostile acquisition" of property by use of Eminent Domain.

False

Which of the following is one of the ways in which public projects are funded? Issuing of additional shares of Stock Sale of Fixed Assets Issuing of a Bond Direct Loans from Outside Creditors

Issuing of a Bond

___________________defects are obvious or blatant defects that are readily observable.

Patent

After having used which of the following would the Contractor likely not receive relief from the courts based on past legal cases that had lasting implications in our industry?

Performance Specifications

Mark all of the following that would be considered a hostile acquisition when the public obtains property from private landowners Dedication Prescription Direct Purchase Eminent Domain

Prescription Eminent Domain

As a General Contractor you submit a bid on a project having used as the low bidder for the acoustic ceilings a price of $77,500 from xyz corporation. Abc Corporation also bid the acoustic ceilings and their price came in at $90,700 and were the 2nd place bid for the grid ceilings. Three days after you are awarded the project xyz company calls to say they will not be able to honor their bid having missed some high end wood ceilings that cost $15,000. You inform them that they will still need to honor their bid as you relied on it in good faith. They argue with you about it and say there's nothing they can do. You let them know the history of rulings by the courts will likely be in your favor. Which item below describes the principle that would be cited by the court in ruling in your favor? Sovereign Immunity Common Law Promissory Estoppel Assignment Competent Parties

Promissory Estoppel

Similar to a few of the cases studies, a General Contractor accepts a bid from a subcontractor and uses that as their low bid in that category in submitting its overall bid to the owner. After the General Contractor is awarded the project the subcontractor refuses to enter into an agreement for some reason and the General Contractor is forced to award the contract to the next highest bidder and has to absorb the difference in those two bid amounts. The General Contractor then sues the Subcontractor. In these situations the courts have generally ruled in favor of the General Contractor under the principle of ___________________________?

Promissory Estoppel

Owners will often view the bid bond as _________?

Protection to make up the difference between the low bid and 2nd place bid in case the General Contractor with the low bid pulls their bid

Some corporations such as natural gas companies etc. may be referred to as _____________________ and as such are often granted the power of eminent domain.

Quasipublic

Some corporations such as natural gas companies etc. may be referred to as________________ and as such are often granted the power of eminent domain.

Quasipublic

In a weak economy or recession a greater percentage of construction expenditures will be for ________________

Remodeling

Regarding eminent domain, what was the reason one mayor was voted out of office?

Seizing homes that were deemed "blighted" if they had less than a two-car garage, three bedrooms, and central air

Some owners feel that mechanic's liens are too ____________. An owner could conceivably suffer a serious blow if valuable property was foreclosed in order to satisfy a debt of a few hundred dollars.

Severe

Using general industry standards for a typical schedule, if a Subcontractor is allotted 30 working days on the schedule, that is equivalent to __________________ on the calendar?

Six Weeks

As a general rule, when there is a clear contract involving a governmental entity, courts have been reluctant to permit the public agency to claim _____________________

Sovereign Immunity

In dealing with States the laws will vary and there will be considerable differences. As a general rule, when there is a clear contract involving a governmental entity, courts have been reluctant to permit the public agency to claim ___________________.

Sovereign Immunity

When one person involved in a construction project is to have conduct that could be reasonably expected of other persons in a similar situation, this is referred to as ______________?

Standard Care

When one person involved in a construction project is to have conduct that could be reasonably expected of other persons in a similar situation, this is referred to as?

Standard of Care

Regarding Mechanic's Liens, what does the acronym "SCR" stand for?

State Construction Registry

When you need to have a number issued to your company that you can use to distribute to the Subcontractors and suppliers in order for them to be able to file pre-lien notices of work performed or materials supplied, you would contact the _________________________ for that information.

State Construction Registry

If I were to inadvertently cause injury to you, no matter how remorseful I was, the fact would remain that I had caused it. A tort of this nature would be referred to as ___________?

Strict Liability

With which type of Tort does it just need to be demonstrated that a tort occurred and that a certain person caused it?

Strict Liability

Which of the following shields the owners and yet generally does not pay taxes as a separate legal entity? Corporation Sole Proprietorship Partnership Sub S Corporation

Sub S Corporation

In some cases the _____________ could lose independent status and become an agent of the general contractor based on the amount and type of direction given by the general contractor's superintendent.

Subcontractor

After a project begins the company will contact ____________________________ to obtain a number and then notify the subcontractors and suppliers so they can issue pre-lien notifications

The State Construction Registry

Which of the following occurred in the case involving the city of Bremerton, Washington?

The city ended up selling the land to a car dealership

In discussing the article in class regarding 2011 updates to the mechanic's lien laws, what was the item mentioned by the author as arguably the only positive development or the only potentially advantageous change in the law?

The creation of a preconstruction service lien for those providing preconstruction services.

Which of the following most closely describes how the court ruled in the case of Vance v. Ingram? 1. The skating rink was deemed not to be a going concern and therefore the partnership had to be dissolved by court order 2. The rate of return was insufficient to cover the initial investment by Ingram 3. Any and all proceeds from the skating rink were inadmissible evidence in the lawsuit 4. The fact that monthly payments had been made by Vance to Ingram did not mean those payments could be applied towards the $9,000 purchase option

The fact that monthly payments had been made by Vance to Ingram did not mean those payments could be applied towards the $9,000 purchase option

Select the items below (Mark all that apply) that describe examples of zoning restrictions that can be imposed by a municipality. 1. The maximum number of children a family can have 2. The minimum offset distance of a house from the street or sidewalk 3. The bathroom fixture manufacturer required for all indoor plumbing 4. Lots for houses may be limited to a stated minimum square footage

The minimum offset distance of a house from the street or sidewalk, Lots for houses may be limited to a stated minimum square footage

True / False A Subcontractor that you had take out a bond goes out of business on a project and then the bonding company they were using argues that in securing the bond the Subcontractor lied to them about their assets and so they won't be honoring the bond. True or false, the bonding company would still have to honor the bond?

True

True / False Establishing a hierarchy of documents has never been embraced by the committees of architects that author the AIA General Conditions

True

True / False The AIA recommends that it should be provided that all documents are complementary

True

True / False. Because a Surety company expects that there will be no losses incurred, they are more like a bank than they are like an insurance company.

True

True / False. Bid alternates can cause serious dilemmas for owners and particularly for public agencies because there may be multiple low bidders depending upon whether only the base bid is accepted or the base bid plus a combination of the base bid plus various other alternates.

True

True / False. Differing state laws from state to state is one reason why courts may rule differently on similar cases where little history exists for a case and precedent has not been established.

True

True / False. In a partnership each partner assumes unlimited personal liability to third parties for the full amount of all debts of the partnership.

True

True / False. In addition to other indicators, an increase in the number of building permits issued is a good sign of a stronger economy.

True

True / False. In an effort to ensure the independent status of the general contractor, in many contracts with owners the term "supervision" has been replaced by "observation."

True

True / False. Lien laws such as the duration of the filing period for mechanics liens are not consistent from state to state.

True

True / False. There are many advantages to a sole proprietorship with only one person making the decisions. Among the advantages is that the owner only pays taxes once and isn't hit twice like those managing corporations where the business is taxed each year and again when personal taxes are submitted.

True

True / False. While it does seem like good insurance to have key subcontractors bonded, often it can take two years or more to finalize because the surety company for the subcontractor will attempt to show that you were partially responsible.

True

True / False: If the CM in a CM/GC Contracting Method were an agent to the owner they would not be "at Risk" but because they are an independent contractor that is why they are "at Risk" and Thus a "CM at Risk."

True

True / False: To avoid discrepancies in construction documents one of the most important aspects of document review is to coordinate the engineering drawings with the design drawings. This is not one of the favorite tasks and is often assigned to junior staff who are not fully qualified to recognize things like errors of omission and can lead to costly errors.

True

True / False: When the AIA guidelines do establish a precedence of documents in the Supplementary Conditions, they state that when there are inconsistencies between the drawings and specifications, the one having the higher cost should govern.

True

True or False. Common Stock is more variable than Preferred Stock.

True

True or False. If an engineer misrepresented their ability to perform the services the owner required they can be held in breach of contract even though the owner should have done their due diligence in selecting the engineering firm as an agent to represent them.

True

True or False. On a typical project the General Contractor will not work as an agent to the owner.

True

True or False. One of the primary advantages of a corporation is that the owners can be shielded from personal lawsuits.

True

True or False: Lien laws are not always consistent from state to state and this could result in a worker losing valuable lien rights if it was assumed that the laws were the same as those of another state.

True

A principal in a non-profit corporation makes a commitment and enters into an agreement on behalf of the company that the principal does not have the authority to make by agreeing to a profit-making enterprise. This action would be an example of _________________________?

Ultra Vires Activity

A decrease in _____________ among construction companies would indicate a favorable change in the economy.

Unemployment

Workers are generally barred from suing their employers because of the protection provided employers by ______________________.

Worker's Compensation Laws

Workers are generally not allowed to sue their employers because of the protection provided by ___________________________________?

Worker's Compensation Laws

A city might enact control over or guide its growth and development through the use of

Zoning Restrictions