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LA General Contractor practice questions

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Question 1Business and Law (construction management and operating a construction-related business)

Under California Contractors State License Law, a general building (B) contractor's license authorizes the licensee to construct or repair any structure in a fixed location, but the work must involve at least how many unrelated trades?

  1. Two unrelated trades Correct answer.
  2. Four unrelated trades
  3. Three unrelated trades
  4. Five unrelated trades

Explanation

Business and Professions Code section 7057 defines a general building contractor as one whose work requires the use of two or more trades that are not related to each other. A contractor holding only a B license must actually perform or subcontract work spanning at least two unrelated trades on each project. If the work falls within a single trade, a specialty license is required.

Question 2Business and Law (construction management and operating a construction-related business)

A California general contractor has a judgment entered against the license bond. What is the most likely consequence for the license if the judgment is not satisfied?

  1. The license is automatically suspended until the judgment is paid or the bond is restored Correct answer.
  2. Nothing happens because the surety alone bears the liability
  3. The Registrar converts the license to a specialty classification
  4. The license remains active but the contractor must double the bond amount

Explanation

Business and Professions Code section 7071.7 requires that a licensee maintain a satisfactory bond; a judgment paid by the surety reduces bond coverage and, if not restored, results in suspension. The contractor must cure the deficiency to reinstate the license. The surety may also pursue the contractor for reimbursement.

Question 3Business and Law (construction management and operating a construction-related business)

A general contractor is preparing a contract for a residential remodeling project. Under California Business and Professions Code section 7159, which element must appear in the written contract to be enforceable?

  1. An arbitration clause designating a specific arbitrator
  2. A schedule of payments and the contract price Correct answer.
  3. The contractor's social security number
  4. A three-day right to cancel the contract for any reason

Explanation

Section 7159 requires home improvement contracts to include the contract price and a schedule of payments, among other disclosures. The payment schedule must comply with statutory limits on down payments and progress payments. Omission of required terms can render the contract unenforceable.

Question 4Business and Law (construction management and operating a construction-related business)

A California contractor receives a preliminary notice from a materials supplier on a private works project. The contractor should understand that the preliminary notice primarily serves to:

  1. Preserve the supplier's right to record a mechanic's lien Correct answer.
  2. Guarantee payment within ten days
  3. Transfer ownership of the materials to the owner
  4. Release the general contractor from all payment obligations

Explanation

On private works, a preliminary notice (20-day notice) preserves a potential claimant's lien rights by informing the owner, general contractor, and lender of the claimant's involvement. Failure to serve it generally bars lien enforcement. It does not itself create a payment obligation or transfer materials.

Question 5Business and Law (construction management and operating a construction-related business)

Which California agency administers contractor licensing and enforces the Contractors State License Law?

  1. Department of Industrial Relations
  2. Contractors State License Board Correct answer.
  3. Division of Labor Standards Enforcement
  4. Department of Consumer Affairs Legal Affairs Division

Explanation

The Contractors State License Board (CSLB), within the Department of Consumer Affairs, issues licenses and enforces the Contractors State License Law. It investigates complaints, conducts stings, and can suspend or revoke licenses. Other listed agencies handle wage, safety, or legal matters rather than licensing.

Question 6Business and Law (construction management and operating a construction-related business)

A general contractor wants to operate as a corporation in California. Which requirement applies to the contractor's license?

  1. A corporate license is not available to construction firms
  2. The corporation must hold its own license with a qualifying individual Correct answer.
  3. Only the corporation's president must hold a license
  4. The corporation may use any employee's individual license

Explanation

A corporation must obtain a contractor's license in its own name and designate a qualifying individual (often an officer or responsible managing employee) who holds the required experience and examination credentials. The qualifier must be actively engaged in the business. Individual licenses cannot simply be borrowed by the entity.

Question 7Business and Law (construction management and operating a construction-related business)

A contractor's license expired 18 months ago while the contractor continued to perform construction work. What is the most accurate statement about this situation?

  1. The contractor is subject to disciplinary action and possible criminal penalties for unlicensed contracting Correct answer.
  2. The contractor may perform only projects under $500
  3. The contractor is automatically reinstated if the bond remains in force
  4. The contractor may continue working because the license is renewable at any time

Explanation

Performing construction work without a valid license violates Business and Professions Code section 7028 and can lead to administrative citations, criminal penalties, and loss of the right to sue for compensation. A lapsed license is not automatically reinstated by a bond. The $500 threshold applies to the handyman exemption, which does not cover general construction work.

Question 8Business and Law (construction management and operating a construction-related business)

Under California law, a contractor's advertisement in a local newspaper lists a license number. Which statement about advertising rules is correct?

  1. Only contractors with employees must include a license number
  2. License numbers are required only on business cards
  3. Contractors must include their license number in all advertisements Correct answer.
  4. Contractors may never advertise a license number

Explanation

Business and Professions Code section 7030.5 requires licensed contractors to include their license number in advertisements, including print, broadcast, and online. This helps consumers verify licensure. Failure to include it can result in a citation.

Question 9Business and Law (construction management and operating a construction-related business)

A general contractor is preparing a bid for a public works project in California. Which requirement applies to the contractor's payment of workers on the project?

  1. Workers must be paid the applicable prevailing wage Correct answer.
  2. Wages are set by the contractor's collective bargaining only
  3. Workers may be paid the federal minimum wage
  4. Wages are set by the owner's discretion

Explanation

California Labor Code section 1771 requires that workers on public works projects be paid not less than the general prevailing rate of per diem wages for the work. The Department of Industrial Relations determines prevailing wage rates by craft and locality. Contractors must also maintain certified payroll records.

Question 10Business and Law (construction management and operating a construction-related business)

A contractor is required to maintain workers' compensation insurance as a condition of licensure. Which statement best describes this requirement in California?

  1. Coverage is required only for public works projects
  2. Only contractors with five or more employees need coverage
  3. Coverage is required for all contractors with employees, and exemptions exist for some sole proprietors Correct answer.
  4. Coverage is optional for all contractors

Explanation

Business and Professions Code section 7125 requires contractors with employees to carry workers' compensation insurance. Certain sole proprietors with no employees may file an exemption. The CSLB verifies coverage and can suspend a license for a lapse.

Question 11Business and Law (construction management and operating a construction-related business)

A homeowner refuses to pay a general contractor for completed work, claiming dissatisfaction with cosmetic details. The contractor has a signed contract and documented change orders. What is the contractor's best initial step under California practice?

  1. Record a mechanic's lien after serving required notices and within statutory deadlines Correct answer.
  2. Abandon the project and retain all materials
  3. Sue the homeowner in small claims court for the full amount
  4. Immediately file a criminal complaint for theft of services

Explanation

A contractor with unpaid work on a private project may record a mechanic's lien, provided preliminary notices were served and the lien is recorded within the statutory period after completion. The lien preserves the claim against the property. Other remedies may follow if the lien is not resolved.

Question 12Business and Law (construction management and operating a construction-related business)

A general contractor is cited by the CSLB for a violation and wishes to challenge the citation. Which avenue is available?

  1. Request an administrative hearing through the Office of Administrative Hearings Correct answer.
  2. File a lawsuit in federal district court as the first step
  3. Ignore the citation because it has no legal effect
  4. Appeal directly to the Governor's office

Explanation

A contractor may contest a CSLB citation by requesting an administrative hearing, which is conducted through the Office of Administrative Hearings under the Administrative Procedure Act. The contractor may present evidence and be represented. Judicial review may follow exhaustion of administrative remedies.

Question 13Business and Law (construction management and operating a construction-related business)

Under the California Business and Professions Code, a contractor's license is generally required for any project that exceeds which dollar amount?

  1. $200
  2. $2,500
  3. $1,000
  4. $500 Correct answer.

Explanation

Business and Professions Code section 7048 provides that a license is required for work valued at $500 or more in labor and materials. The $500 threshold is a combined figure, not labor alone. Below that amount, the handyman exemption may apply if no permit is required.

Question 14Business and Law (construction management and operating a construction-related business)

A contractor is preparing to file a lawsuit against a client for breach of contract on a project. Which statement about the contractor's licensing status at the time of the work is most accurate?

  1. Licensing status is irrelevant to the contractor's right to sue
  2. A contractor who was unlicensed during the work may still recover in court for the work performed
  3. A contractor must have been licensed during the work to sue for compensation for that work Correct answer.
  4. A contractor may sue if licensed by the time the lawsuit is filed, regardless of earlier status

Explanation

Business and Professions Code section 7031 bars a contractor from bringing or maintaining an action to recover compensation for work performed while unlicensed. The rule is strict and applies even if the contractor later becomes licensed. Limited exceptions exist for substantial compliance in narrow circumstances.

Question 15Business and Law (construction management and operating a construction-related business)

A general contractor is a sole proprietor with no employees and no qualifying RME. Which statement about the contractor's license is correct?

  1. The license must be held by an unrelated third party
  2. The business must be licensed as a corporation
  3. The owner must personally hold the license as the qualifier Correct answer.
  4. The contractor must hire a qualifier to obtain any license

Explanation

A sole proprietorship is licensed to the individual owner, who serves as the qualifier based on their own experience and examination. No separate qualifier is needed. The individual license number is used in contracts and advertisements.

Question 16Business and Law (construction management and operating a construction-related business)

A contractor's license is suspended for failure to maintain a bond. Which activity is prohibited during the suspension?

  1. Entering into contracts and performing construction work Correct answer.
  2. Advertising the business name only
  3. Maintaining a business bank account
  4. Bidding on future projects only

Explanation

A suspended license means the contractor may not enter into contracts or perform construction work for which a license is required. Doing so constitutes unlicensed contracting. The contractor must cure the bond deficiency and obtain reinstatement.

Question 17Business and Law (construction management and operating a construction-related business)

A contractor wants to add a new specialty classification to an existing license. Which step is generally required?

  1. Wait for the CSLB to add classifications automatically
  2. Obtain a separate business license from the city only
  3. Submit an application, document experience, and pass the trade examination for the classification Correct answer.
  4. Simply notify the CSLB by letter and begin work immediately

Explanation

Adding a classification requires an application to the CSLB, documentation of the required experience, and passage of the trade examination for that classification, along with the law and business examination if not already passed. The license is not expanded until the CSLB approves the addition.

Question 18Business and Law (construction management and operating a construction-related business)

A general contractor is reviewing a subcontract that contains an indemnity clause. Under California law, which statement about indemnity provisions in construction contracts is most accurate?

  1. A clause requiring a subcontractor to indemnify the general contractor for the general contractor's own active negligence is generally unenforceable Correct answer.
  2. Indemnity clauses only apply to public works projects
  3. Indemnity clauses are always enforceable as written
  4. Indemnity clauses are prohibited in all construction contracts

Explanation

California Civil Code section 2782 voids indemnity provisions that purport to indemnify a party against its own active negligence in construction contracts. The clause may still be enforceable for the indemnitor's own negligence. Contractors should review indemnity language carefully.

Question 19Business and Law (construction management and operating a construction-related business)

A contractor is bidding on a project and wants to use a payment bond instead of a performance bond. Which statement best describes the purpose of a payment bond on a construction project?

  1. It replaces the contractor's license bond
  2. It guarantees the contractor will complete the work
  3. It protects subcontractors and suppliers against nonpayment Correct answer.
  4. It insures the owner against property damage

Explanation

A payment bond secures payment to subcontractors, laborers, and suppliers who furnish labor or materials on the project. A performance bond, by contrast, secures completion of the work. The two are distinct and often issued together.

Question 20Business and Law (construction management and operating a construction-related business)

A contractor discovers that a competitor is advertising construction services without a license. What is the most appropriate action under California practice?

  1. File a complaint with the CSLB Correct answer.
  2. Ignore the issue because only consumers may complain
  3. Sue the competitor for defamation
  4. Report the competitor to the Better Business Bureau only

Explanation

The CSLB accepts complaints about unlicensed contracting from any source, including competitors. The Board may investigate and pursue administrative or criminal action. Filing with the CSLB is the appropriate regulatory channel.

Question 21Business and Law (construction management and operating a construction-related business)

A contractor is preparing a contract that includes a mandatory arbitration clause. Which statement about arbitration provisions in California construction contracts is most accurate?

  1. Arbitration clauses are unenforceable in construction contracts
  2. Arbitration clauses may be enforceable but must be conspicuous and meet disclosure requirements Correct answer.
  3. Arbitration clauses apply only to federal projects
  4. Arbitration clauses must always designate a judge as arbitrator

Explanation

Arbitration provisions in construction contracts are generally enforceable under California law, but home improvement contracts have specific disclosure requirements under Business and Professions Code section 7159. The clause must be conspicuous and cannot be used to waive statutory rights improperly.

Question 22Business and Law (construction management and operating a construction-related business)

A contractor is required to keep records of payroll on a public works project. Which record-keeping obligation applies?

  1. Payroll records are optional if workers are unionized
  2. Only total project costs must be recorded
  3. Certified payroll records must be maintained and available for inspection Correct answer.
  4. Records may be discarded after 30 days

Explanation

Labor Code section 1776 requires contractors on public works to keep certified payroll records showing each worker's name, classification, hours, and wages. Records must be available for inspection and retained for the statutory period. Noncompliance can result in penalties and withholding.

Question 23Business and Law (construction management and operating a construction-related business)

A contractor signs a contract with a homeowner that includes a clause waiving the homeowner's right to file a complaint with the CSLB. Which statement is most accurate?

  1. The clause is enforceable if both parties sign
  2. The clause is valid if notarized
  3. The clause is void as against public policy Correct answer.
  4. The clause is valid only for projects over $10,000

Explanation

Provisions that waive a consumer's right to complain to the CSLB or to pursue statutory remedies are generally void as against public policy. Contractors cannot contract around regulatory protections. Such clauses may also support disciplinary action.

Question 24Business and Law (construction management and operating a construction-related business)

A contractor is preparing to close a business and wants to notify the CSLB. Which statement about license inactivation is most accurate?

  1. The contractor must surrender the license to the county clerk
  2. The contractor may transfer the license to a family member automatically
  3. The license remains active indefinitely without renewal
  4. The contractor must notify the CSLB and may request inactive status Correct answer.

Explanation

A contractor may request inactive status with the CSLB, which suspends the right to contract while preserving the license number. The contractor must still comply with renewal and fee requirements. Licenses are not transferable to another person.

Question 25Business and Law (construction management and operating a construction-related business)

A general contractor is reviewing a subcontract that contains a 'pay-when-paid' clause. Which statement best describes how California courts generally treat such clauses?

  1. They are always void and unenforceable
  2. They automatically shift all risk to the owner
  3. They are enforceable only on public works projects
  4. They may be enforceable if they clearly express the parties' intent and do not violate public policy Correct answer.

Explanation

California courts have generally enforced clear pay-when-paid clauses as allocating timing risk, provided the language unambiguously expresses that intent. Ambiguous clauses may be construed against the drafter. Public policy limits exist, particularly for lower-tier claimants.

Question 26Business and Law (construction management and operating a construction-related business)

A licensed California general contractor wants to operate under a business name different from the personal name on the license. What must the contractor do with the CSLB?

  1. File a fictitious business name statement with the county and report the new name to the CSLB Correct answer.
  2. Obtain a separate contractor's license for each name used
  3. Notify the CSLB only after the first project under the new name is complete
  4. Request a duplicate pocket license showing both names

Explanation

A contractor may use a business name other than the licensed personal name only after filing a fictitious business name statement with the county and reporting that name to the CSLB. The license must reflect the name actually used in advertising and contracting. Operating under an unreported name can support discipline for misleading the public.

Question 27Business and Law (construction management and operating a construction-related business)

A contractor's license was issued with a qualifying individual who later leaves the company. How long may the license remain without a qualifier before it becomes subject to suspension?

  1. 180 days
  2. 30 days
  3. 90 days Correct answer.
  4. 365 days

Explanation

Under California contractor licensing rules, a licensee must replace a disassociated qualifying individual within 90 days. If no qualifier is in place after that period, the license is subject to suspension. Prompt replacement protects the entity's ability to contract lawfully.

Question 28Business and Law (construction management and operating a construction-related business)

A general contractor is forming a corporation to perform construction work in California. Which individual must hold the qualifier status for the corporate license?

  1. An officer or the responsible managing employee who meets the qualifying requirements Correct answer.
  2. The corporation's outside accountant
  3. Any shareholder holding at least one share
  4. Any full-time employee of the corporation

Explanation

A corporate contractor license must be qualified by an officer of the corporation or by a responsible managing employee who meets the experience and examination requirements. The qualifier must be actively engaged in the business. Merely being employed or holding shares does not satisfy the requirement.

Question 29Business and Law (construction management and operating a construction-related business)

A contractor submits a bid to a public agency and later discovers an error in the bid. Which statement best describes the contractor's ability to withdraw the bid after it is opened?

  1. The contractor may withdraw freely at any time before contract award
  2. Withdrawal after opening is generally limited to specific grounds such as clerical error, with prompt notice and proof Correct answer.
  3. Withdrawal is permitted whenever the contractor's profit margin falls below ten percent
  4. The contractor may withdraw only if the agency agrees to waive the bid bond

Explanation

Public contract law allows bid withdrawal after opening only on narrow grounds, typically clerical error shown by clear evidence and prompt notice to the agency. A contractor cannot withdraw simply because the bid was unprofitable. The bid bond and public bidding statutes constrain post-opening withdrawal.

Question 30Business and Law (construction management and operating a construction-related business)

A general contractor wants to use a design-build delivery method on a local agency public works project. Which condition generally applies under California law?

  1. Design-build requires the contractor to also hold an architect's license
  2. Design-build may be used only if the agency has statutory authority and follows the required procurement procedures Correct answer.
  3. Design-build is prohibited for all local agency public works
  4. Design-build may be used whenever the contractor proposes it in the bid

Explanation

California authorizes design-build for public entities only where the entity has statutory authority and complies with the applicable procurement rules, including selection procedures and bonding. A contractor cannot unilaterally convert a project to design-build. The contractor does not need an architect's license to build a design-build project.

Question 31Business and Law (construction management and operating a construction-related business)

A contractor is reviewing a contract with a homeowner for a residential remodel. Which contract element is required by California law for this type of home improvement contract?

  1. A clause requiring the homeowner to arbitrate all disputes
  2. A statement that the contractor's license number will be provided only on request
  3. A written contract containing specified terms and a notice of the homeowner's three-day right to cancel where applicable Correct answer.
  4. A provision barring the homeowner from hiring another contractor

Explanation

Home improvement contracts must be written and include specified terms such as the scope of work, price, and payment schedule, along with required notices. Where the contract results from a solicitation at the buyer's home, a three-day cancellation right applies. The license number must appear in the contract, not merely on request.

Question 32Business and Law (construction management and operating a construction-related business)

A general contractor maintains a surety bond as part of licensure. Which statement best describes the purpose of the contractor's bond?

  1. It provides a fund from which persons harmed by the contractor's license law violations may recover up to the bond amount Correct answer.
  2. It guarantees the contractor will complete every project on schedule
  3. It replaces the need for workers' compensation insurance
  4. It insures the contractor's tools and equipment against theft

Explanation

The contractor's bond is a consumer protection device that allows injured parties to recover for specified violations of the Contractors License Law, up to the bond amount. It is not a performance guarantee for project completion. It does not substitute for insurance or cover equipment losses.

Question 33Business and Law (construction management and operating a construction-related business)

A contractor's employee is injured on a job site and the contractor carries valid workers' compensation coverage. Which statement best describes the general effect of that coverage on the employee's claim against the employer?

  1. The employee must first exhaust the contractor's license bond before filing any claim
  2. The employee may recover only if the injury resulted from a licensed subcontractor's negligence
  3. The employee's recovery from the employer is generally limited to workers' compensation benefits Correct answer.
  4. The employee may sue the employer for full tort damages in addition to collecting benefits

Explanation

Workers' compensation is generally the exclusive remedy for an employee's work-related injury against the employer, providing benefits regardless of fault. Tort suits against the employer are largely barred except in narrow circumstances. The license bond is not a source of employee injury benefits.

Question 34Business and Law (construction management and operating a construction-related business)

A general contractor is preparing a bid for a public works project in California and must address prevailing wage obligations. Which statement best describes the contractor's duty?

  1. Pay the applicable general prevailing wage determinations to workers in each craft on the project Correct answer.
  2. Negotiate wage rates individually with each worker regardless of the determinations
  3. Pay prevailing wages only to employees who work more than forty hours per week
  4. Pay prevailing wages only if the project exceeds five million dollars

Explanation

Public works contractors must pay the applicable general prevailing wage determinations for each craft classification on the project. The obligation applies regardless of project dollar threshold under the prevailing wage law. Individual negotiation cannot displace the required rates.

Question 35Business and Law (construction management and operating a construction-related business)

A contractor is reviewing a subcontract that requires the subcontractor to indemnify the contractor for the contractor's own active negligence. Under California law, how is that provision generally treated?

  1. It is enforceable because indemnity clauses are freely negotiated
  2. It is unenforceable to the extent it shifts liability for the indemnitee's own active negligence Correct answer.
  3. It is enforceable only if the subcontract is notarized
  4. It is enforceable only on private projects

Explanation

California law limits construction indemnity clauses so that a subcontractor cannot be required to indemnify a contractor for the contractor's own active negligence. Such provisions are void to that extent. The restriction applies broadly and is not cured by notarization or by project type.

Question 36Business and Law (construction management and operating a construction-related business)

A general contractor on a private project is asked to provide a payment bond. Which statement best describes the function of a payment bond?

  1. It guarantees the owner will pay the contractor's invoices
  2. It protects subcontractors and suppliers by providing a source of payment if the contractor fails to pay them Correct answer.
  3. It replaces the contractor's liability insurance
  4. It ensures the contractor's license remains active

Explanation

A payment bond protects subcontractors, suppliers, and laborers by giving them a claim against the surety if the contractor does not pay them. It does not guarantee the owner's payment to the contractor. It is not a substitute for liability insurance or a licensing requirement.

Question 37Business and Law (construction management and operating a construction-related business)

A contractor wants to dispute a CSLB citation. Which statement best describes the general process available to the contractor?

  1. The contractor may appeal directly to the governor's office
  2. The contractor must pay the citation first and then request a refund
  3. The contractor must file a lawsuit in superior court within ten days
  4. The contractor may request an administrative hearing before the Office of Administrative Hearings within the time stated in the citation Correct answer.

Explanation

A contractor contesting a CSLB citation may request an administrative hearing, typically heard by the Office of Administrative Hearings, within the period specified in the citation. The process is administrative rather than a direct court action. The citation need not be paid before requesting a hearing.

Question 38Business and Law (construction management and operating a construction-related business)

A contractor is a sole proprietor who will hire employees for the first time. Which statement best describes the contractor's obligation regarding workers' compensation?

  1. Coverage is required only after the tenth employee is hired
  2. The contractor must obtain workers' compensation coverage for the employees as a condition of holding the license Correct answer.
  3. Coverage is optional if the contractor personally supervises the work
  4. Coverage may be deferred until the first injury occurs

Explanation

California contractors must maintain workers' compensation coverage for employees as a condition of licensure. Even sole proprietors must secure coverage once they have employees. Coverage cannot be deferred until an injury happens.

Question 39Business and Law (construction management and operating a construction-related business)

A contractor is considering a business structure and wants limited liability protection while also being able to raise capital from investors. Which structure generally provides limited liability for all owners and allows multiple owners?

  1. General partnership
  2. Joint venture of individuals with no written agreement
  3. Sole proprietorship
  4. Corporation Correct answer.

Explanation

A corporation provides limited liability to its owners and can issue shares to raise capital. Sole proprietorships and general partnerships expose owners to personal liability. An informal joint venture without a written agreement creates uncertainty and does not by itself provide limited liability.

Question 40Business and Law (construction management and operating a construction-related business)

A contractor is preparing a construction contract and wants to include a liquidated damages clause for delay. Which statement best describes when such a clause is generally enforceable?

  1. Whenever the parties agree to any amount, regardless of the anticipated loss
  2. Only when the delay is caused by the owner
  3. Only when the contract is for public work
  4. When the amount is a reasonable estimate of anticipated loss at the time of contracting and not a penalty Correct answer.

Explanation

Liquidated damages are enforceable when the amount is a reasonable forecast of anticipated harm at the time of contracting and is not so large as to operate as a penalty. Courts scrutinize the relationship between the stipulated sum and actual anticipated loss. The clause is not limited to public work or to owner-caused delay.

Question 41Business and Law (construction management and operating a construction-related business)

A general contractor wants to use a lien to secure payment for work on a private project. Which statement best describes a mechanic's lien in California?

  1. It may be recorded at any time before the project is finished
  2. It attaches only to the contractor's own equipment
  3. It attaches to the owner's property and generally requires preliminary notice and recording within statutory deadlines Correct answer.
  4. It is available only to the general contractor, not to subcontractors

Explanation

A mechanic's lien is a claim against the owner's real property that secures payment for labor, materials, or services. Enforcement generally requires giving preliminary notice where applicable and recording the lien within statutory deadlines. Subcontractors and suppliers may also hold lien rights.

Question 42Business and Law (construction management and operating a construction-related business)

A contractor is bidding on a project and must decide whether to submit a bid protest after award to a public entity. Which statement best describes the typical basis for a bid protest?

  1. The protester alleges the award violated the solicitation or applicable law, such as an improper bid evaluation Correct answer.
  2. The protester dislikes the design of the project
  3. The protester wants a lower price after opening
  4. The protester failed to submit a bid

Explanation

A bid protest typically asserts that the award violated the solicitation requirements or applicable procurement law, such as improper evaluation or an award to a nonresponsive bidder. Disagreement with project design or a desire to renegotiate price is not a valid basis. A party that did not bid generally lacks standing to protest.

Question 43Business and Law (construction management and operating a construction-related business)

A contractor is reviewing a subcontract that contains a pay-when-paid clause. Which statement best describes how such a clause generally operates under California law?

  1. It is void in all construction contracts
  2. It requires the owner to pay the subcontractor directly
  3. It shifts the risk of owner nonpayment to the subcontractor in all circumstances
  4. It may make payment timing contingent on the owner's payment but does not necessarily eliminate the contractor's ultimate obligation Correct answer.

Explanation

Under California law, pay-when-paid clauses can affect the timing of payment but generally do not eliminate the contractor's obligation to pay the subcontractor. The clause does not make the owner directly liable to the subcontractor. Its effect depends on the contract language and applicable law.

Question 44Business and Law (construction management and operating a construction-related business)

A contractor is required to maintain records on a public works project. Which record-keeping obligation generally applies to certified payroll records?

  1. Certified payroll records must be maintained and made available for inspection as required by prevailing wage law Correct answer.
  2. Records may be destroyed immediately after the first pay period
  3. Records are required only for projects over one million dollars
  4. Records must be kept confidential and unavailable to the awarding agency

Explanation

Public works contractors must maintain certified payroll records and make them available for inspection by the awarding agency and other authorized parties. The records document compliance with prevailing wage requirements. Retention is required for the statutory period, not discarded after the first pay period.

Question 45Business and Law (construction management and operating a construction-related business)

A contractor is closing its business and wants to notify the CSLB. Which statement best describes license inactivation?

  1. The contractor should notify the CSLB and may request inactivation to avoid continued obligations while not contracting Correct answer.
  2. The contractor must transfer the license to another person
  3. The contractor must surrender all tools to the CSLB
  4. The contractor may simply stop working and let the license lapse without notice

Explanation

A contractor that stops contracting should notify the CSLB and may request that the license be inactivated to avoid ongoing obligations such as bond and insurance requirements. The license is not transferable to another person. Tools are not surrendered to the CSLB.

Question 46Business and Law (construction management and operating a construction-related business)

A contractor signs a contract with a homeowner that includes a clause waiving the homeowner's right to file a complaint with the CSLB. How is that clause generally treated?

  1. It is unenforceable because the right to complain to the CSLB cannot be waived by contract Correct answer.
  2. It is enforceable because the parties agreed to it
  3. It is enforceable only if the homeowner is represented by counsel
  4. It is enforceable only on commercial projects

Explanation

A provision that waives a consumer's right to file a complaint with the CSLB is generally unenforceable as against public policy. The CSLB's consumer protection function cannot be contracted away. Representation by counsel or the type of project does not make such a waiver valid.

Question 47Business and Law (construction management and operating a construction-related business)

A contractor is reviewing a contract clause that requires the parties to arbitrate disputes. Which statement best describes arbitration compared with litigation?

  1. Arbitration is available only for public works disputes
  2. Arbitration is a public court proceeding with a jury trial
  3. Arbitration awards cannot be enforced in court
  4. Arbitration is a private process, generally binding, with limited judicial review of the award Correct answer.

Explanation

Arbitration is a private dispute resolution process that generally produces a binding award with limited grounds for judicial review. It is not a public jury proceeding. Arbitration awards can be confirmed and enforced through the courts.

Question 48Business and Law (construction management and operating a construction-related business)

A contractor discovers a competitor is advertising construction services without a license. What is the most appropriate action for the contractor to take?

  1. Ignore it because only consumers may report unlicensed activity
  2. File a mechanic's lien against the competitor's property
  3. Report the unlicensed activity to the CSLB Correct answer.
  4. Confront the competitor and demand payment

Explanation

Reporting suspected unlicensed contracting to the CSLB is the appropriate step because the CSLB investigates and enforces licensing law. Contractors and members of the public may report unlicensed activity. Self-help demands or liens against a competitor are not proper responses.

Question 49Business and Law (construction management and operating a construction-related business)

A general contractor is bidding a project and the owner requires a bid bond. Which statement best describes the function of a bid bond?

  1. It guarantees the contractor will complete the project
  2. It pays the contractor's subcontractors if the owner defaults
  3. It protects the owner if the successful bidder fails to enter the contract and provide required bonds Correct answer.
  4. It replaces the contractor's performance bond

Explanation

A bid bond protects the owner if the low bidder refuses to execute the contract or fails to furnish required performance and payment bonds. It does not guarantee completion of the work. It is distinct from a performance bond and does not pay subcontractors.

Question 50Business and Law (construction management and operating a construction-related business)

A contractor is evaluating whether a project requires a contractor's license. Which statement best describes the general California rule for projects over the statutory threshold?

  1. A license is required for any project over the statutory threshold, regardless of whether the work is construction
  2. A license is generally required when the contractor undertakes to construct or alter a building or improvement for compensation Correct answer.
  3. A license is required only if the contractor hires employees
  4. A license is required only for projects involving electrical work

Explanation

California requires a contractor's license for persons who construct or alter buildings or improvements for compensation when the project exceeds the statutory threshold. The requirement is not limited to electrical work or to contractors with employees. It applies broadly to construction contracting.