Chapter 5 Quiz — Construction Law

C. The contract. Who pays for the differing site condition, how many days you get, when notice is due, how disputes are resolved — nearly all of it is decided by the document you signed. Statute overrides contract in specific, deliberate places (liens, prompt payment, licensing, prevailing wage), but those are the exceptions. This is why knowing your contract cold answers most of your own legal questions.

B. Make a claim against the prime contractor's payment bond. Public property generally cannot be liened, which is precisely why Congress created the Miller Act for federal work and every state enacted a "Little Miller Act" for state and local work. The payment bond is the statutory substitute for the lien. Note that bond claims carry their own notice and suit deadlines, which are not the same as lien deadlines — verify your state's.

C. An endorsement attached to the policy. The certificate says on its own face that it confers no rights and does not amend the policies. The subcontract clause creates a contractual obligation to provide the coverage, but it does not create the coverage. The description box is a broker's summary. Only the endorsement grants insured status — and you generally need two versions, ongoing operations and completed operations.

B. Insurance is a two-party arrangement where losses are priced into the premium pool. A surety bond is three-party — principal, obligee, surety — and the surety underwrites to zero expected loss. When it pays, it enforces the General Indemnity Agreement against the principal. A performance bond protects the owner, not the contractor, and the contractor ultimately pays.

C. An unconditional waiver releases your rights immediately, whether or not payment ever arrives. The conditional waiver does the same job for the current period but is effective only on clearance of the payment. Marginal notes on a statutory form are a poor substitute and may not be effective. The general rule: you are always one period behind on unconditional waivers, because you cannot honestly release rights for money you have not received.

B. 90 days of last furnishing labor or material. Suit on the bond must generally be brought within one year of last furnishing. Because the Miller Act is federal, these apply uniformly on covered federal contracts — but the statutory dollar threshold has been adjusted over time, so look up the current figure. State and local work runs on that state's Little Miller Act, which differs in nearly every detail.

D. The four standard options are takeover, tender, financing the principal, and payment of the cost to complete (or the penal sum). The surety selects the one that costs it least. What none of the options do is give you back the time — the surety investigates on its own schedule, typically weeks. A performance bond is a money instrument, not a schedule instrument.

C. CGL is a liability policy, not a warranty. Damage to "your work" arising out of it is generally excluded; damage to other property caused by the defect is the kind of thing liability coverage responds to. Standard forms also contain a subcontractor exception that can restore coverage for damage arising out of a subcontractor's work — which is why who performed the defective work matters so much. Whether faulty workmanship is even an "occurrence" has been decided differently in different states. Jurisdiction-specific.

B. Broad form — where the indemnitor covers even the indemnitee's sole negligence — is the most commonly targeted, and a substantial number of states go further and restrict intermediate form. Some states also limit additional-insured coverage that achieves the same result the statute just prohibited, because otherwise the insurance clause would simply reinstate the outlawed indemnity. Which rule applies depends entirely on where the project is.

B. Its genuine advantages are privacy, a decision-maker who understands construction, and control of the schedule. Its costs are frequently underestimated — a three-arbitrator construction arbitration with full expert testimony can rival a trial. And finality cuts both ways: the grounds to vacate an award are extremely narrow, so an arbitrator who gets it wrong usually stays wrong.

False. A lien attaches a security interest and clouds title; it proves nothing about the merits. It must still be foreclosed within the statutory window, and an overstated lien can expose the claimant to penalties, fee-shifting, or a slander-of-title claim in many jurisdictions.

False. "Certificate holder" means only that the certificate was sent to you. Coverage comes from the policy and its endorsements. Until you hold the additional-insured endorsement forms — ongoing and completed operations — treat the coverage as unproven.

False. Workers' compensation is generally the exclusive remedy against the employer, but the worker can typically sue third parties — the general contractor, the owner, the crane company, an equipment manufacturer. That is precisely why jobsite injuries become third-party liability claims against GCs, and why additional-insured status and indemnity clauses matter so much. (Some states extend exclusive-remedy protection to a GC that provides comp coverage to sub employees. Varies.)

False — and assume the worst. Most notice clauses require written notice from you, to a specified party, by a specified delivery method, within a specified number of days. Minutes drafted by someone else for another purpose satisfy none of those elements. Some jurisdictions excuse the defect where the owner had actual knowledge and was not prejudiced, but that is an expensive argument with an uncertain outcome. Send the letter.

False. The general contractor is the bond's principal. If the surety pays a valid claim, it seeks reimbursement under the General Indemnity Agreement. The bond protects the claimant and the public owner — not the GC. If the GC already paid the defaulting subcontractor for that work, it effectively pays twice.

The lien attaches a security interest to the owner's real property, which clouds title. A clouded title cannot be sold, refinanced, or drawn against by the construction lender. That makes the owner — who has money and needs clean title — highly motivated to get everyone paid, and the owner applies that pressure to the general contractor, whose contract obligates it to keep the property lien-free, and who applies it to the subcontractor. The lien converts a legal claim against an insolvent company into commercial pressure on a solvent one. It rarely results in an actual foreclosure sale; the leverage does the work.

There is a 14-day gap with no comp coverage of record during active work. If someone was injured in that window, the worker may have had no immediate medical benefits or wage replacement, the exclusive-remedy bar may protect nobody, and the claim likely lands on the general contractor as a third-party liability claim. Actions: demand evidence of a prior policy covering March 1–15; if none exists, notify your risk manager and counsel immediately; document what work occurred and whether any incidents were reported; and fix the mobilization gate so that no trade starts work without a current certificate in hand. The permanent control is a hard rule: no current comp certificate, no work that day.

(1) Preliminary notice, typically measured from first furnishing; (2) recording the lien, typically measured from last furnishing or from project completion, depending on how the state defines the trigger; (3) foreclosure, measured from recording. Missing any one generally destroys the right — these are walls, not targets, and there is usually no cure.

The habit: on every project, calendar the jurisdiction's deadlines at mobilization, re-verify them against current statute rather than memory or a textbook, and record where you looked and when. The same unforgiving structure appears in your contract's notice-and-claim provisions, where it costs contractors far more money.

Because the prime contract almost certainly obligates the GC to keep the owner's property free of liens arising from its work — including liens filed by companies it never hired and cannot control. The preliminary notice is therefore useful, not threatening: it identifies who is feeding the job, how much money rides on that relationship, and whose waivers must be collected before checks are released. Ignoring it means paying a subcontractor in full and then paying that subcontractor's supplier a second time when the sub fails.

(a) A claim against your payment bond under the state's Little Miller Act. Public property generally cannot be liened. The supplier's week-32 preliminary notice was likely the statutory prerequisite, but bond claims carry their own notice and suit deadlines — verify them.

(b) You are the bond's principal. If the surety pays the $41,800, it seeks reimbursement from you under the General Indemnity Agreement. Since you already paid the drywall sub $118,600 for this work, you pay for the same material twice and then join the line of an insolvent company's creditors. Add the surety's investigation costs and the longer-term damage to your bonding relationship, which is worth far more than $41,800.

(c) (1) The supplier's preliminary notice with certified-mail proof and delivery date; (2) the complete lien-waiver package for every pay application covering that work — the subcontractor's conditional and unconditional waivers and the supplier's, matched period by period, because a hole in the matrix is your loss; (3) the subcontract, specifically the lower-tier waiver requirement, the indemnity and lien-clearing obligations, whether a subcontractor bond or SDI enrollment was required at $412,000, whether joint checks are permitted, and the termination-and-setoff provisions. *(Bonus: proof of payment — canceled checks or ACH confirmations for the $118,600.)*

(d) (1) Lower-tier waiver discipline from the day the preliminary notice arrived — no check to the sub without the supplier's conditional waiver in the same envelope; and (2) joint checks to the sub and supplier the moment the sub's payments to its supplier slipped. A distant third is financial prequalification of the sub before award.