Contracts & change orders: Alabama Contractor Business & Law Practice Questions

Which set lists the basic elements of an enforceable contract?

A contract needs a definite offer, acceptance of that offer, consideration (something of value exchanged), parties with legal capacity and a legal purpose. Notarization and deposits are not general requirements.

What is consideration in a contract?

Consideration is the bargained-for exchange: the owner promises money, and the contractor promises work. Without it, a promise is usually not enforceable as a contract.

An owner answers a contractor's proposal by accepting it but changing the completion date. What is the legal effect under general contract law?

Under the common-law mirror-image rule, an acceptance must match the offer. A response that changes a material term is a counteroffer, which the contractor may accept or reject.

Under the statute of frauds, which contract generally must be in writing to be enforced?

The statute of frauds requires a writing for contracts involving interests in land, contracts that cannot be performed within one year, and sales of goods of $500 or more under the UCC. Many states also require written home-improvement contracts.

Under UCC Article 2, a contract for the sale of goods at what price generally needs a signed writing to be enforceable?

UCC 2-201 requires a signed writing for sales of goods for $500 or more, with exceptions (for example, specially manufactured goods, or goods received and accepted). Construction services are not goods, but material purchases are.

A signed contract says it is the entire agreement. The owner later claims an oral promise, made before signing, of free landscaping. What rule usually bars that evidence?

When a written contract is meant to be the complete agreement (an integration or merger clause helps show this), earlier or same-time oral agreements generally cannot be used to add to or change its terms.

In a lump-sum (stipulated-sum) contract, who carries the risk that the work costs more than estimated?

The contractor agrees to do the defined work for a fixed price. If costs run over, the contractor absorbs them; if costs come in under, the contractor keeps the savings. Price changes come only through change orders.

What best describes a cost-plus-fee contract?

In a cost-plus contract the owner reimburses actual job costs and pays the contractor a fixed or percentage fee. The owner carries most of the cost risk, so it usually gets open-book access to the contractor's records.

A cost-plus contract has a guaranteed maximum price (GMP). Costs exceed the GMP with no owner changes. Who usually pays the overrun?

A GMP caps what the owner pays for the defined scope. Costs above the cap (absent owner changes) fall on the contractor. Savings below it are often shared as the contract states.

In which delivery method does one entity hold a single contract with the owner for both design and construction?

Design-build gives the owner one point of responsibility for design and construction. In design-bid-build, the owner hires a designer first and then bids the construction separately.

What is the traditional delivery method where the owner completes the design first and then takes bids from contractors?

Design-bid-build is sequential: design, bid, then build. The owner holds separate contracts with the designer and the contractor.

What is a change order?

A change order modifies the contract scope, sum or time and is signed by the owner and contractor (and often the architect). It becomes part of the contract.

An owner verbally asks for extra outlets, and the contract requires written change orders. What is the contractor's safest course?

Extra work done without the written change order the contract requires may not be paid. Documenting the change, price and time impact first protects both parties.

What is a constructive change?

Constructive changes arise when the owner's conduct (such as demanding work beyond the contract or a stricter interpretation) effectively changes the work. The contractor must usually give timely notice to recover.

What does a construction change directive (CCD) generally allow?

Many standard contracts let the owner direct a change so work continues, with the price and time adjustment settled later. The contractor keeps records of the actual costs of the directed work.