Construction Law - Final Exam Questions With Complete
Solutions
According to AIA A312-2010, $ 3, what are the three steps the
owner should take in order to trigger the surety's bond
obligations? Correct Answers 1. Hold a conference with the
surety and contractor.
2. Declare the contractor in default and terminate the contract.
3. Offer the remaining construction funds to surety.
According to the AIA A312-2010 document, who may sue on a
payment bond? Correct Answers Unpaid subs, suppliers and
labor
According to the Restatement (Second) of Contracts, $ 241,
what are the significant factors in determining whether a
particular breach is material? Correct Answers 1. The extent of
injury caused by the breach.
2. Whether the injured party can be adequately compensated.
3. Whether the nonperforming party will suffer forfeiture.
4. The likelihood of cure by the nonperforming party.
5. Whether the nonperforming party acted in conformity with
the standards good faith and fair dealing.
After unconscionability, what are the main attacks on the
validity of an arbitration provision in a construction contract?
Correct Answers 1. "mutuality"
2. The effect of termination of the underlying construction
contract.
,3. Frustration of the disputes process due to nonoccurrence of a
condition precedent to arbitration.
As a general rule, construction projects engender which types of
insurable risks? Correct Answers • Bodily injury (including
death)
• Property damage
Bid peddling Correct Answers Subcontractors attempting to
undercut the sub-bid to the prime-in essence engaging in a
second round of bidding.
(Other subs trying to undercut low bidder)
Bid shopping Correct Answers Contractor uses the lowest sub-
bid to "shop around" with the hope of getting still lower sub-
bids.
(Post-award shopping)
How could an economically more powerful party arbitration
exert undue influence over the disputes process? Correct
Answers The arbitration contract could control the jurisdiction
of the arbitrator, the cost of the arbitrator's fee, the identity of
the arbitrator, the place and structure of the hearing, the nature
of the award, the remedies allowed, and the finality of the
award.
, If a contractor has a time extension that is justified, how is the
amount of time determined? Correct Answers Project schedule
coupled with an analysis of any float
If there are several lien claimants with security interests in a
property, which claimant has priority? Correct Answers The
party who shows interest first
Line Item Retention Correct Answers Gives the subcontractor
the right to be paid after it has fully performed.
(Subs want line item retainage)
Payment bond Correct Answers Surety guarantees contractor
will pay subs/suppliers/labor.
Payment conditions Correct Answers Makes paying the
contractor a condition of the contractor's obligation to pay the
subcontractor.
(Subs don't want payment conditions)
Stop notice Correct Answers A lien on the unpaid contract
funds.
The FUNCTION of Insurance Correct Answers To transfer the
risk of financial loss from various perils.
Under the Federal Acquisition Regulations {FAR}, when may
the government terminate the contract completely or partially?
Correct Answers *If the contractor does not perform the
Solutions
According to AIA A312-2010, $ 3, what are the three steps the
owner should take in order to trigger the surety's bond
obligations? Correct Answers 1. Hold a conference with the
surety and contractor.
2. Declare the contractor in default and terminate the contract.
3. Offer the remaining construction funds to surety.
According to the AIA A312-2010 document, who may sue on a
payment bond? Correct Answers Unpaid subs, suppliers and
labor
According to the Restatement (Second) of Contracts, $ 241,
what are the significant factors in determining whether a
particular breach is material? Correct Answers 1. The extent of
injury caused by the breach.
2. Whether the injured party can be adequately compensated.
3. Whether the nonperforming party will suffer forfeiture.
4. The likelihood of cure by the nonperforming party.
5. Whether the nonperforming party acted in conformity with
the standards good faith and fair dealing.
After unconscionability, what are the main attacks on the
validity of an arbitration provision in a construction contract?
Correct Answers 1. "mutuality"
2. The effect of termination of the underlying construction
contract.
,3. Frustration of the disputes process due to nonoccurrence of a
condition precedent to arbitration.
As a general rule, construction projects engender which types of
insurable risks? Correct Answers • Bodily injury (including
death)
• Property damage
Bid peddling Correct Answers Subcontractors attempting to
undercut the sub-bid to the prime-in essence engaging in a
second round of bidding.
(Other subs trying to undercut low bidder)
Bid shopping Correct Answers Contractor uses the lowest sub-
bid to "shop around" with the hope of getting still lower sub-
bids.
(Post-award shopping)
How could an economically more powerful party arbitration
exert undue influence over the disputes process? Correct
Answers The arbitration contract could control the jurisdiction
of the arbitrator, the cost of the arbitrator's fee, the identity of
the arbitrator, the place and structure of the hearing, the nature
of the award, the remedies allowed, and the finality of the
award.
, If a contractor has a time extension that is justified, how is the
amount of time determined? Correct Answers Project schedule
coupled with an analysis of any float
If there are several lien claimants with security interests in a
property, which claimant has priority? Correct Answers The
party who shows interest first
Line Item Retention Correct Answers Gives the subcontractor
the right to be paid after it has fully performed.
(Subs want line item retainage)
Payment bond Correct Answers Surety guarantees contractor
will pay subs/suppliers/labor.
Payment conditions Correct Answers Makes paying the
contractor a condition of the contractor's obligation to pay the
subcontractor.
(Subs don't want payment conditions)
Stop notice Correct Answers A lien on the unpaid contract
funds.
The FUNCTION of Insurance Correct Answers To transfer the
risk of financial loss from various perils.
Under the Federal Acquisition Regulations {FAR}, when may
the government terminate the contract completely or partially?
Correct Answers *If the contractor does not perform the
