I85PREP
⌘ K
CA General Contractor study materials
CA General Contractor study resources

CA General Contractor practice questions

One question at a time. Build your CA General Contractor understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Business Organization and Financial Management

Which characteristic is true of a sole proprietorship operated by a licensed contractor?

  1. Formation requires filing articles of organization with the Secretary of State.
  2. The business must file a separate annual state income tax return.
  3. The owner has unlimited personal liability for business debts. Correct answer.
  4. Profits are taxed twice: once at the business level and once on the owner's return.

Explanation

A sole proprietorship is not a separate legal entity from its owner, so the owner answers personally for business obligations and reports business income on the owner's individual return. No formation filing or separate entity-level return is required, and profits are taxed only once.

Question 2Business Organization and Financial Management

Which statement describes a California contractor's workers' compensation obligation?

  1. Coverage is required only when the contract price exceeds $100,000 per job.
  2. Coverage is required only for employers with ten or more workers on payroll.
  3. Coverage is required for employees; owners with no employees file an exemption. Correct answer.
  4. Coverage is optional when the contractor carries general liability insurance.

Explanation

California requires a licensed contractor to maintain workers' compensation coverage for all employees, and a contractor with no employees must file a certificate of exemption with the CSLB. The obligation is not tied to headcount over ten or to any contract dollar threshold, and general liability coverage does not substitute for it.

Question 3Business Organization and Financial Management

A newly formed construction company wants to contract for work and advertise itself as a licensed contractor in California. What must it hold?

  1. A registration with the Department of Industrial Relations as an employer.
  2. A general liability insurance policy with limits set by the registrar.
  3. A contractor's license from the CSLB held by a qualifying person. Correct answer.
  4. A city business license for the office where the qualifying person works.

Explanation

Business and Professions Code provisions require a contractor's license issued by the CSLB before a person or entity may bid on, contract for, or advertise contracting work. An entity license depends on a qualifying individual who holds the license and is responsible for the firm's contracting operations.

Question 4Business Organization and Financial Management

A contractor's fixed costs are $60,000 per year, the average selling price per unit of work is $500, and variable costs are $350 per unit. What is the break-even volume in units?

  1. 400 units Correct answer.
  2. 120 units
  3. 300 units
  4. 171 units

Explanation

Break-even volume equals fixed costs divided by the contribution margin per unit. The contribution margin is $500 minus $350, or $150, and $60,000 divided by $150 equals 400 units.

Question 5Business Organization and Financial Management

Which form of business organization gives its owners limited liability while generally avoiding entity-level income tax?

  1. Sole proprietorship
  2. Limited liability company Correct answer.
  3. General partnership
  4. C corporation

Explanation

A limited liability company shields its members from personal liability for business debts and, by default, is taxed as a pass-through entity so profits are reported on the members' returns. A C corporation also offers limited liability but is taxed at the entity level, producing double taxation.

Question 6Business Organization and Financial Management

Under California law, a contractor's license is generally required for a project priced at which level?

  1. Any amount of $500 or more in combined labor and materials Correct answer.
  2. Any amount above $10,000, including materials and equipment
  3. Any amount above $2,500 in labor and materials
  4. Any amount at all, provided a written contract is signed

Explanation

The Contractors State License Law makes a license mandatory for any project with a total contract price of $500 or more, counting both labor and materials. Small jobs below that threshold fall outside the licensing requirement, and there is no higher dollar trigger.

Question 7Business Organization and Financial Management

A contractor estimates direct job costs of $200,000 and wants to recover 10% overhead and earn a 10% profit, both figured on the total selling price. What price should the contractor bid?

  1. $240,000
  2. $250,000 Correct answer.
  3. $220,000
  4. $242,000

Explanation

When overhead and profit are percentages of the selling price, they are divided out of the selling price rather than added to cost. Dividing $200,000 by (1 minus 0.10 minus 0.10), or 0.80, gives $250,000, of which overhead and profit each equal $25,000.

Question 8Business Organization and Financial Management

Which statement describes accrual-basis accounting as applied to a construction company?

  1. It may not be used by contractors who report under GAAP.
  2. Revenue is recorded when the contract is signed, regardless of performance.
  3. Revenue is recorded only when cash is collected and expenses are recorded when paid.
  4. Revenue is recognized as work is performed and costs are matched to it. Correct answer.

Explanation

Accrual accounting recognizes revenue as the contractor performs the work and matches the related costs to the same period, which is the basis required for GAAP and for percentage-of-completion reporting. Cash timing does not control recognition under the accrual method.

Question 9Business Organization and Financial Management

A direct contractor on a private project finishes the work and is unpaid, and the owner has not recorded a notice of completion. To preserve mechanics lien rights, the contractor must record a lien claim within what period?

  1. One year after a notice of completion is recorded
  2. 90 days after completion of the work of improvement Correct answer.
  3. 180 days after the contract was signed by the parties
  4. 30 days after the last day on which work was performed

Explanation

A direct contractor must record a lien after completing the direct contract and before the earlier of 90 days after completion of the work of improvement or 60 days after the owner records a notice of completion or cessation. With no notice of completion recorded, the 90-day period after completion controls.

Question 10Business Organization and Financial Management

On a California public works project, what primarily secures a subcontractor's right to be paid by the prime contractor?

  1. A stop notice recorded against the owner's real property
  2. A mechanics lien recorded against the public property
  3. A payment bond posted by the prime contractor Correct answer.
  4. A trust fund account held by the awarding public entity

Explanation

Public property cannot be liened, so the law requires a payment bond on public works contracts, and unpaid subcontractors and suppliers may pursue a claim against that bond. A stop notice may also be served on the public entity, but the bond is the principal security for payment.

Question 11Business Organization and Financial Management

A company reports current assets of $180,000, including $40,000 of inventory, and current liabilities of $120,000. What is its working capital?

  1. $20,000
  2. $40,000
  3. $100,000
  4. $60,000 Correct answer.

Explanation

Working capital equals current assets minus current liabilities, or $180,000 minus $120,000, which is $60,000. Inventory is included in current assets when computing working capital even though it is excluded from the quick ratio.

Question 12Business Organization and Financial Management

In a general partnership, what is the liability position of each partner?

  1. Shielded from liability for torts committed by other partners in the business
  2. Personally liable for partnership debts, including acts of other partners Correct answer.
  3. Treated as an employee of the partnership for federal payroll tax purposes
  4. Liable only to the extent of the capital each partner has contributed

Explanation

General partners are jointly and severally liable for partnership obligations, including obligations created by the acts of fellow partners within the ordinary course of business. A partner's exposure is not capped at the capital account.

Question 13Business Organization and Financial Management

A contractor reports revenue of $1,200,000, direct job costs of $900,000, and general overhead of $200,000. What is the gross profit margin?

  1. 16.7%
  2. 33.3%
  3. 25.0% Correct answer.
  4. 8.3%

Explanation

Gross profit equals revenue minus direct job costs, or $300,000, and the gross margin is $300,000 divided by $1,200,000, which is 25%. General overhead is deducted after gross profit to arrive at net profit.

Question 14Business Organization and Financial Management

Which cost belongs in the direct job cost ledger rather than in general overhead?

  1. Liability insurance premium for the home office
  2. Concrete delivered to and poured at the project site Correct answer.
  3. Salary of the company's full-time bookkeeper
  4. Depreciation on the owner's office building

Explanation

Direct job costs are those that can be identified with a specific project, such as materials incorporated into the work and field labor. Costs of running the business as a whole, such as office insurance, bookkeeping salaries, and office depreciation, are general overhead.

Question 15Business Organization and Financial Management

Which payroll tax is imposed only on the employer and is never withheld from the employee's wages?

  1. Social Security (FICA) tax
  2. Federal income tax withholding
  3. Federal unemployment (FUTA) tax Correct answer.
  4. State disability insurance withholding

Explanation

FUTA is an employer-only tax, while FICA is split between employer and employee and income tax and state disability insurance are withheld from the employee's wages. Only the employer bears the FUTA obligation.

Question 16Business Organization and Financial Management

What does a performance bond do on a construction project?

  1. Is purchased by subcontractors to guarantee their bids
  2. Guarantees the owner will pay the contractor for completed work
  3. Takes the place of the contractor's general liability insurance
  4. Protects the owner if the contractor fails to perform Correct answer.

Explanation

A performance bond is a three-party surety instrument under which the surety answers to the owner if the contractor defaults on the contract. A payment bond, by contrast, protects subcontractors and suppliers, and a bid bond secures the obligation to enter the contract if awarded.

Question 17Business Organization and Financial Management

A contractor carries annual fixed overhead of $450,000 and averages a 25% gross margin on revenue. What annual revenue must it produce to break even?

  1. $562,500
  2. $1,800,000 Correct answer.
  3. $1,125,000
  4. $2,250,000

Explanation

Break-even revenue equals fixed overhead divided by the gross margin ratio, because only the margin portion of each revenue dollar contributes to covering overhead. Dividing $450,000 by 0.25 gives $1,800,000.

Question 18Business Organization and Financial Management

A contractor bills $500,000 on a project that carries 10% retainage released at final completion, and finances the shortfall at 9% annual interest for nine months. Approximately what interest cost does the retainage create?

  1. $4,500
  2. $3,375 Correct answer.
  3. $6,750
  4. $1,125

Explanation

Retainage of 10% on $500,000 is $50,000, and the interest for nine months is $50,000 times 9% times 9/12, or $3,375. Retainage is a real financing cost that should be built into job pricing and cash-flow planning.

Question 19Business Organization and Financial Management

An owner-operator incorporates as an S corporation and takes a reasonable salary plus profit distributions. What is the main payroll tax benefit of this structure?

  1. Distributed profits are exempt from federal income tax entirely
  2. Distributed profit above a reasonable salary escapes FICA taxes Correct answer.
  3. The corporation stops paying the employer share of payroll taxes on salary
  4. The owner is no longer required to carry workers' compensation coverage

Explanation

An S corporation's profits pass through to the shareholder, and only the reasonable salary is subject to Social Security and Medicare taxes, so the distribution portion avoids those taxes. The salary must reflect reasonable compensation, and income tax still applies to the distributions.

Question 20Business Organization and Financial Management

A construction lender records a deed of trust after visible construction has begun on a private project. As between the lender and a mechanic's lien claimant, what is the correct priority rule?

  1. Priority depends only on which party recorded its document first
  2. The lien is subordinate because it was recorded after the deed of trust
  3. The lien relates back to commencement of the work and takes priority Correct answer.
  4. The lender has priority because construction loans are secured first

Explanation

A mechanic's lien attaches as of the commencement of the work of improvement, so it generally takes priority over encumbrancers whose interests are recorded later with notice of the construction. The relation-back rule protects lien claimants against lenders who record after work has visibly started.

Question 21Licensing and Business Law

Under California law, a contractor's license is required for a construction project whose combined labor and material cost reaches at least what amount?

  1. $2,500
  2. $500 Correct answer.
  3. $5,000
  4. $1,000

Explanation

Business and Professions Code section 7048 requires a license for any project of $500 or more in combined labor and materials. The threshold applies to the total job, not to each worker or each trade. Work below that amount by an unlicensed person is generally exempt.

Question 22Licensing and Business Law

Which California contractor classification covers construction that requires two or more unrelated building trades or crafts?

  1. Class C-10 – electrical
  2. Class B – general building Correct answer.
  3. Class C-36 – plumbing
  4. Class A – general engineering

Explanation

A Class B general building contractor takes projects involving two or more unrelated building trades or crafts. Class A covers fixed works of a engineering nature, and Class C licenses are limited to specific specialty trades.

Question 23Licensing and Business Law

Which license classification is required for fixed works such as roads, bridges, dams, sewers, and water systems?

  1. Class C-8 – concrete
  2. Class A – general engineering Correct answer.
  3. Class C-12 – earthwork and paving
  4. Class B – general building

Explanation

A Class A general engineering license covers fixed works that are engineering in nature, including highways, dams, irrigation systems, and sewer plants. Class B and the Class C trades are limited to building construction and individual specialty scopes.

Question 24Licensing and Business Law

How much qualifying experience must the individual who qualifies a contractor's license have?

  1. Two years of journey-level experience
  2. Three years, all in a supervisory role
  3. Six years of experience with no supervisory role
  4. Four years of experience, one of them supervisory Correct answer.

Explanation

The qualifier must document at least four years of journey-level experience gained within the last ten years, and at least one of those years must have been in a supervisory or managerial capacity. Experience is documented on the license application and verified by the CSLB.

Question 25Licensing and Business Law

What is the standard contractor's license bond amount required of an individual sole proprietor licensee?

  1. $15,000 Correct answer.
  2. $25,000
  3. $50,000
  4. $10,000

Explanation

Individual, partnership, and corporate licensees must maintain a $15,000 contractor's license bond. A higher $25,000 bond applies to limited liability companies. The bond protects consumers and employees who are harmed by license law violations.

Question 26Licensing and Business Law

A homeowner signs a home improvement contract at the kitchen table after a sales presentation. How long does the homeowner have to cancel the contract?

  1. Five business days
  2. Three business days Correct answer.
  3. Seven calendar days
  4. One business day

Explanation

Home improvement contracts must give the buyer a three-business-day right to cancel, and the contract must include a detachable cancellation notice in the required form. The contractor may not start work or accept a down payment that violates the statutory limits during that period.

Question 27Licensing and Business Law

A home improvement contract is priced at $8,000. What is the maximum down payment the contractor may collect from the homeowner before work begins?

  1. $500
  2. Any amount written into the signed contract
  3. $1,000
  4. $800 Correct answer.

Explanation

A home improvement contract may not require a down payment greater than 10 percent of the contract price or $1,000, whichever is less. Ten percent of $8,000 is $800, so that is the cap. Any larger deposit violates the Contractors State License Board rules.

Question 28Licensing and Business Law

Under CSLB advertising rules, a contractor's license number must appear in which of the following?

  1. In advertisements offering contracting services Correct answer.
  2. Only on the contractor's written estimates
  3. Only on permits filed with the local building department
  4. Only on invoices sent to commercial clients

Explanation

Business and Professions Code section 7030.5 requires the license number to appear in advertising that offers contracting services, including print, broadcast, and online ads. The rule lets consumers verify that the advertiser is actually licensed.

Question 29Licensing and Business Law

A worker performs construction tasks under the direction and control of a licensed contractor, using that contractor's tools and schedule. How is this worker best classified?

  1. An owner-builder who is exempt from licensing
  2. An independent contractor who must be licensed
  3. An employee who does not need a personal contractor license Correct answer.
  4. A subcontractor who must hold a separate license

Explanation

Employees of a licensed contractor work under the licensee's direction and control and are covered by the employer's license, so they need no license of their own. A true subcontractor, by contrast, operates independently and must be separately licensed.

Question 30Licensing and Business Law

Within how many days after first furnishing labor or materials to a project must a subcontractor generally serve a preliminary notice to preserve mechanics lien rights?

  1. 30 days
  2. 90 days
  3. 10 days
  4. 20 days Correct answer.

Explanation

A subcontractor or material supplier generally must serve a preliminary notice within 20 days after first furnishing labor or materials. A late notice still preserves lien rights, but only for work furnished during the 20 days before the notice was served.

Question 31Licensing and Business Law

Which of the following is a required element of a home improvement contract governed by Business and Professions Code section 7159?

  1. A notarized signature from each homeowner
  2. A statement waiving the homeowner's right to cancel
  3. A schedule of payments and the contractor's license number Correct answer.
  4. A mandatory arbitration clause covering all disputes

Explanation

Section 7159 requires a written, signed contract that includes the license number, a schedule of payments, a description of the work, and the cancellation notice, among other items. Notarization and arbitration clauses are not required, and the right to cancel cannot be waived.

Question 32Licensing and Business Law

During a home improvement project, a homeowner asks for an upgrade that adds $2,000 to the price. The addition is enforceable only if:

  1. the added work is completed within seven days of the request
  2. the change order is written and signed before the added work begins Correct answer.
  3. the homeowner pays the added amount in cash before the work begins
  4. the contractor holds a current Class B license for the added work

Explanation

Changes to a home improvement contract must be documented in a written change order signed by the homeowner before the changed work is performed. An oral agreement to add work is not enforceable against the homeowner. Cash payment does not substitute for the signed writing.

Question 33Licensing and Business Law

A contractor's license expired in March while a job was still in progress, and the contractor finished the work in June without renewing. Under Business and Professions Code section 7031, the contractor generally:

  1. may collect the full contract price plus interest
  2. may collect because the contract predates the expiration
  3. cannot sue to collect for work performed while unlicensed Correct answer.
  4. may collect if the owner accepted the finished work

Explanation

Section 7031 bars an unlicensed contractor from suing to recover compensation for work performed while no license was in effect. The date the contract was signed does not matter; what matters is licensure at the time the work was performed. Limited exceptions, such

Question 34Licensing and Business Law

After a mechanics lien has been recorded on a private works project, within what period must the claimant generally file an action to foreclose the lien?

  1. 90 days Correct answer.
  2. One year
  3. Six months
  4. 30 days

Explanation

The claimant must commence an action to enforce the lien within 90 days after the lien is recorded, unless the owner records a notice of contest or the parties agree to extend the period. Missing the deadline generally extinguishes the lien.

Question 35Licensing and Business Law

Which statement about a responsible managing employee (RME) is correct?

  1. An RME may qualify several licenses at once
  2. An RME must be actively engaged in the business Correct answer.
  3. An RME may qualify a competitor's license too
  4. An RME must own at least 20 percent of the company

Explanation

An RME must be a bona fide employee who is actively engaged in the licensee's business and generally may qualify only one license. Ownership is not required for an RME; that distinguishes the role from a responsible managing officer.

Question 36Licensing and Business Law

In which situation may a person have construction work performed without hiring a licensed contractor?

  1. The person is building a home for a relative at no charge
  2. The person owns three homes and is renovating one for resale
  3. The person is remodeling a rental property they own
  4. The person is improving a home they own and will occupy Correct answer.

Explanation

The owner-builder exemption applies when an individual builds or improves a residence for their own use and occupancy. It does not cover rental property, work for others, or property being improved for resale, and special disclosure rules apply if the home is sold soon after completion.

Question 37Licensing and Business Law

A licensed sole proprietor has no employees. What must the licensee do about workers' compensation insurance?

  1. Carry coverage only while working on public works
  2. Take no action, since no filing is needed
  3. Buy a minimum $1 million liability policy
  4. File a workers' compensation exemption with the CSLB Correct answer.

Explanation

Contractors with no employees must file an exemption with the Contractors State License Board certifying that they do not employ anyone. A licensee who later hires employees must obtain workers' compensation coverage. Failure to maintain coverage or a valid exemption can lead to license suspension.

Question 38Licensing and Business Law

A licensed contractor moves their business to a new address. Within what period must the contractor notify the Contractors State License Board?

  1. Within 10 days
  2. Only at the next license renewal
  3. Within six months
  4. Within 90 days Correct answer.

Explanation

Licensees must report changes of address, business name, or personnel to the CSLB within 90 days of the change. Keeping the record current ensures that official notices and citations reach the licensee.

Question 39Licensing and Business Law

Which statement about a California contractor's license is true?

  1. It is issued to a specific entity and cannot be transferred Correct answer.
  2. It may be sold along with the business
  3. It may be leased to another contractor
  4. It may be transferred with CSLB approval for a fee

Explanation

A contractor's license is issued to a specific person or business entity based on that qualifier's experience and is not transferable. When a business changes ownership, the new owners must generally obtain their own license. Lending or borrowing a license number is a violation.

Question 40Licensing and Business Law

A licensed general contractor knowingly hires an unlicensed subcontractor for a project. What is the most likely consequence?

  1. The general contractor may be disciplined by the CSLB for the violation Correct answer.
  2. Only the subcontractor is at risk, since the general contractor is licensed
  3. The general contractor must pay the sub's fee into escrow
  4. No consequence, because the sub worked under the general contractor's license

Explanation

A licensee who knowingly contracts with or uses an unlicensed contractor is subject to discipline by the CSLB, including fines and suspension. The unlicensed subcontractor also faces penalties and generally cannot collect for the work. The general contractor's own license does not shield the arrangement.

Question 41Contracting Requirements, Plans, and Specifications

A specification section describes the required cooling capacity, efficiency, and sound limits for a rooftop unit but leaves the selection of materials and methods to the contractor. This is best described as which type of specification?

  1. Reference standard specification
  2. Proprietary specification
  3. Performance specification Correct answer.
  4. Prescriptive specification

Explanation

A performance specification states the required end result and leaves the means and methods of achieving it to the contractor. Prescriptive, proprietary, and reference specifications all dictate materials, brands, or published standards rather than outcomes.

Question 42Contracting Requirements, Plans, and Specifications

Which state agency issues contractor licenses and enforces the Contractors License Law in California?

  1. Division of Labor Standards Enforcement
  2. Contractors State License Board Correct answer.
  3. Department of Industrial Relations
  4. California Building Standards Commission

Explanation

The Contractors State License Board administers licensing, examinations, and enforcement of the Contractors License Law under the Business and Professions Code. The other agencies handle wage enforcement, workplace safety, or building code adoption.

Question 43Contracting Requirements, Plans, and Specifications

A floor plan is drawn at a scale of 1/4 inch = 1 foot. A wall measures 3 inches on the drawing. What is the actual length of the wall?

  1. 3 feet
  2. 48 feet
  3. 12 feet Correct answer.
  4. 6 feet

Explanation

At 1/4 inch per foot, each inch on the drawing represents 4 feet. Multiplying 3 inches by 4 feet per inch gives 12 feet.

Question 44Contracting Requirements, Plans, and Specifications

Under which contract type does the contractor agree to perform the entire described scope for a single fixed price stated in the agreement?

  1. Lump sum contract Correct answer.
  2. Time and materials contract
  3. Cost-plus-fixed-fee contract
  4. Unit price contract

Explanation

A lump sum contract sets one price for the complete scope, so the contractor bears the risk of quantity and productivity. Cost-plus, time and materials, and unit price arrangements all price the work by actual cost or measured quantity.

Question 45Contracting Requirements, Plans, and Specifications

Under California law, a subcontractor with no direct contract with the owner must generally serve a preliminary notice within how many days after first furnishing work?

  1. 90 days
  2. 30 days
  3. 60 days
  4. 20 days Correct answer.

Explanation

A claimant without a direct contractual relationship with the owner must give preliminary notice no later than 20 days after first furnishing labor, services, or materials. A late notice is still effective but limits the claimant to work performed in the 20 days before the notice was served.

Question 46Contracting Requirements, Plans, and Specifications

On a California public works project, retention withheld from progress payments is generally limited to what percentage of the contract price?

  1. 10 percent
  2. 2 percent
  3. 15 percent
  4. 5 percent Correct answer.

Explanation

Public Contract Code provisions allow a public entity to withhold 5 percent of progress payments as retention, with the contractor permitted to substitute securities in place of the withheld cash. Higher percentages exceed the statutory limit.

Question 47Contracting Requirements, Plans, and Specifications

During bidding, a general contractor finds that a dimension on the structural drawings conflicts with a note in the specifications. The architect agrees a correction is needed. What is the proper way to notify bidders?

  1. Issue a request for information to the bidders who attend the pre-bid conference
  2. Notify the apparent low bidder after the bids have been opened
  3. Issue a written addendum to every party that holds the bid documents Correct answer.
  4. Post a revised sheet in the plan room for anyone who asks to review it

Explanation

A clarification or correction issued during the bid period must go to all prospective bidders at the same time as a formal addendum, so every bidder prices the same documents. Selective or after-the-fact communication gives some bidders an advantage and undermines bid responsiveness.

Question 48Contracting Requirements, Plans, and Specifications

A prime contractor listed a subcontractor in its bid for a California public works project. Which circumstance supports substituting a different subcontractor after bid opening?

  1. Another subcontractor quoted the prime a lower price for the same work
  2. The listed subcontractor did not hold a license when the bid was submitted Correct answer.
  3. The listed subcontractor's proposed schedule does not suit the prime
  4. The prime prefers to consolidate the work into a different bid package

Explanation

The Subletting and Subcontracting Fair Practices Act permits substitution only for specified grounds, and failure to hold a required license at bid time is one of them. Price shopping and contractor convenience are not statutory grounds.

Question 49Contracting Requirements, Plans, and Specifications

On a private works project in California, an owner withholds a progress payment amount that is undisputed and has no good-faith basis for withholding. What is the result under the prompt payment statutes?

  1. The owner forfeits the right to require retention on any future payments
  2. The owner owes a flat penalty equal to 10 percent of the contract price
  3. The contractor may stop work but has no monetary remedy for the delay
  4. The owner owes a charge of 2 percent per month on the amount wrongfully withheld Correct answer.

Explanation

California's prompt payment statutes impose a charge of 2 percent per month on amounts wrongfully withheld from a progress payment. The remedy is calculated on the withheld amount, not on the contract price.

Question 50Contracting Requirements, Plans, and Specifications

A contract requires written change orders for extra work. The owner's superintendent orally directs the contractor to add a required drain line that is not shown on the plans, and the contractor builds it. What is the contractor's strongest position?

  1. The contractor may recover only if it stopped work until a change order was issued
  2. The contractor cannot recover because no written change order was signed
  3. The contractor must absorb the cost as a routine field adjustment
  4. The contractor may recover on a constructive change theory because the owner directed the work Correct answer.

Explanation

When the owner directs work outside the contract scope, the direction itself supports a constructive change even if the written change order process was not followed. The contractor should still document the direction promptly and submit a cost proposal.