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Contracts practice questions

30 questions from the contractor business and law practice test.

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Contracts practice test

10 questions, graded as you go, with the reason for every answer. No sign-up.

What this covers

Sample questions

Which statement describes a cost-plus-fee contract?

  1. The owner pays one fixed price regardless of the actual costs incurred
  2. The owner pays a set price for each measured unit of work
  3. The owner pays only after a certificate of occupancy is issued
  4. The owner reimburses actual costs and pays the contractor a fee
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D. The owner reimburses actual costs and pays the contractor a fee

In a cost-plus contract the owner pays the documented cost of the work plus a fixed or percentage fee for overhead and profit, so the owner carries the cost risk. A fixed price regardless of cost is a lump-sum contract.

Reference: Contract types: cost-plus-fee contract

A contract is cost-plus-fee with a guaranteed maximum price (GMP) and no change orders have been issued. If the cost of the work plus fee ends up above the GMP, who pays the excess?

  1. The contractor, because the GMP caps what the owner owes
  2. The owner, because the contract reimburses all actual costs
  3. The architect, because the design set the scope of the work
  4. The owner and contractor, in equal shares under the GMP
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A. The contractor, because the GMP caps what the owner owes

A GMP puts a ceiling on the owner's payment for the defined scope; costs beyond it are the contractor's. The owner pays more only if the GMP is raised by change order. Savings below the GMP go to the owner or are shared as the contract states.

Reference: Contract types: cost-plus with guaranteed maximum price

For which kind of work is a unit-price contract best suited?

  1. Work with complete drawings and a fully defined scope, such as a warehouse
  2. Work whose quantities cannot be fixed in advance, such as rock excavation
  3. Work that must begin before any drawings have been started by the designer
  4. Work where the owner wants one price that will not change for any reason
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B. Work whose quantities cannot be fixed in advance, such as rock excavation

Unit pricing lets the parties agree on a price per cubic yard, linear foot or similar unit when the final quantity is uncertain. A fully defined scope is suited to a lump sum, since quantities are known.

Reference: Contract types: unit-price contract

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