Contracting Law and Regulations
This domain covers the legal framework a licensed contractor operates within: contract formation, licensing rules, lien law, and consumer protection. Understand the elements of a valid contract: offer, acceptance, consideration, and mutual assent, with capacity and legality. Know the difference between a lump-sum (fixed-price) contract, a time-and-materials contract, and a cost-plus contract, and which party bears the risk in each.
Master mechanic's lien basics. A lien secures payment for labor, materials, or services that improve real property. Deadlines are strict and vary by jurisdiction - preliminary notices, lien filing windows, and foreclosure periods are classic exam traps. Understand how a lien waiver (conditional vs. unconditional, progress vs. final) works and why contractors must not sign an unconditional waiver before funds clear.
Know payment bond and performance bond purposes, and the difference between a subcontractor and an independent contractor versus an employee for tax and liability purposes. Familiarize yourself with change orders - they must be in writing and signed to be enforceable - and with substantial completion, which triggers warranty and retainage milestones.
Worked example: A subcontractor finishes work but is unpaid. To preserve lien rights, they must typically serve a preliminary notice early (often within 20 days of first furnishing) and file the lien within a statutory window after last furnishing. Missing either deadline can extinguish the right entirely.
Traps: assuming verbal change orders are always enforceable; signing final waivers too early; missing notice deadlines.