New Mexico Contractor License Exam Practice Test
Sample practice questions
A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.
- 1. Business Organization & Licensing
A construction business is organized as a corporation. If the corporation is sued and cannot pay a judgment, what is generally at risk?
- a.The personal homes and bank accounts of every shareholder
- b.The personal assets of the highest-paid officer only
- c.The corporation's own assets
- d.Only assets the corporation pledged as collateral
Answer: c
Explanation: A corporation is a separate legal entity from its owners (shareholders). This separation creates limited liability: creditors and judgments generally reach only the assets the corporation owns, and shareholders risk losing only what they invested — not their personal homes or savings. That protection can be lost only in unusual cases such as fraud or 'piercing the corporate veil.'
- 2. Contracts & Contract Law
What is 'consideration' in contract law?
- a.The politeness the parties show one another during negotiations
- b.Something of value exchanged by each party
- c.The amount of time the parties take to think before signing
- d.The signatures of both parties on the document
Answer: b
Explanation: Consideration is the bargained-for exchange of value that makes a promise legally binding — for example, the contractor promises to build, and the owner promises to pay money. Each side must give something of value. Without consideration, a promise is generally just a gift and is not an enforceable contract. It is a core element required for a valid contract.
- 3. Estimating & Bidding
A parking pad 45 ft by 36 ft receives a 4-inch compacted gravel base. How many cubic yards of gravel does that base require?
- a.20 cubic yards
- b.240 cubic yards
- c.60 cubic yards
- d.540 cubic yards
Answer: a
Explanation: Area = 45 x 36 = 1,620 square feet, and 4 inches = 0.3333 ft, so the volume is 1,620 x 0.3333 = 540 cubic feet. Divide by 27 to get 20 cubic yards. Leaving the answer at 540 skips the conversion to cubic yards, 60 comes from dividing by 9, and 240 comes from using 4 feet of depth instead of 4 inches.
- 4. Contracts & Contract Law
In a payment dispute, an owner tries to prove the parties orally agreed before signing that landscaping was included in the price. The parol evidence rule generally:
- a.Bars that earlier oral term from contradicting the complete written contract
- b.Admits any oral statement, because spoken promises outweigh a printed form
- c.Requires the court to hear every person who was present at the signing
- d.Applies only to contracts a notary public has acknowledged and stamped
Answer: a
Explanation: The parol evidence rule keeps prior or contemporaneous oral agreements from being used to contradict or add to a written contract the parties intended as their complete and final expression. Its practical lesson is blunt: if a promise matters, put it in the document before signing. The rule does not depend on notarization, and courts do not treat side promises as superior to the signed writing.
- 5. Business Organization & Licensing
A contractor sells the entire business, including its trade name and equipment, to a buyer. What generally happens to the contractor's license?
- a.It stays with the seller, and the buyer must qualify for a license of its own
- b.It transfers automatically with the assets like any other item of company property
- c.It is held by the state for the buyer to claim within a year of the sale closing
- d.It converts into a temporary permit that lets the buyer operate indefinitely
Answer: a
Explanation: A contractor license is a personal privilege granted on the basis of the qualifying individual's experience, examination, and record, so it is generally not an asset that can be sold or transferred with the business. The buyer must qualify in its own right, whether by employing a qualifier or by having an owner qualify. Some states allow a limited continuation period after certain events, so the licensing authority should be contacted before closing.
- 6. Safety & OSHA
A serious hazard exists on a job site, but no specific OSHA standard addresses it. What allows OSHA to cite the employer anyway?
- a.The Hazard Communication Standard, which reaches every hazard on the site
- b.The General Duty Clause, Section 5(a)(1) of the OSH Act
- c.The employer's own written safety manual, once it has been filed with OSHA
- d.The state building code adopted by the local jurisdiction where the site sits
Answer: b
Explanation: Section 5(a)(1) of the Occupational Safety and Health Act requires each employer to furnish employees a place of employment free from recognized hazards that are causing or are likely to cause death or serious physical harm. OSHA relies on it when a recognized hazard exists and no specific standard covers the situation. A company's own manual is an internal document rather than a federal enforcement tool, and hazard communication reaches chemical hazards specifically.
- 7. Building Codes & Permits
A contractor believes the building official has misapplied a provision of the adopted code. What is the usual formal remedy?
- a.Continue the work as planned and raise the issue only if a violation notice is issued
- b.Ask that an inspector from a neighboring jurisdiction be assigned to review the work
- c.Apply for a zoning variance, which permits construction that departs from the adopted code
- d.File an appeal with the jurisdiction's board of appeals, which reviews the official's ruling
Answer: d
Explanation: Adopted codes generally establish a board of appeals to hear claims that the code was wrongly interpreted, that the provisions do not apply, or that an equally good alternative is being refused. The board reviews the official's determination; it is not empowered to waive requirements it simply dislikes. A zoning variance addresses land-use rules such as setbacks or height, which is a different body of regulation entirely.
- 8. Employment & Labor Law
A contractor short on cash uses the federal income tax and FICA amounts withheld from employees' checks to buy materials. What is the exposure?
- a.Nothing, because the withheld amounts belong to the company until the return is filed
- b.Only the employees are penalized, since the tax came out of their own wages
- c.The company simply pays the shortfall with the next payroll and owes nothing more
- d.The withheld money is a trust fund, and a responsible person can be personally liable
Answer: d
Explanation: Amounts withheld from a worker's pay are held in trust for the federal government, not working capital the business may borrow. An employer must deposit them on the schedule the IRS assigns and report them on its payroll returns. When trust-fund taxes go unpaid, the government can assess a penalty personally against the owners, officers, or bookkeepers responsible for the decision, and that liability follows the individual even if the company later fails.
- 9. Employment & Labor Law
A journeyman leaves to serve a three-year tour in the National Guard and then asks for his job back. Under USERRA, the employer generally must:
- a.Rehire him only if a vacancy happens to exist when he reports back
- b.Reemploy him in the position he would have attained had he not served
- c.Rehire him at entry level, because his trade skills have gone stale
- d.Do nothing, because service longer than one year ends reemployment rights
Answer: b
Explanation: The Uniformed Services Employment and Reemployment Rights Act protects reemployment for cumulative service of up to five years and applies the escalator principle: the returning worker steps back onto the seniority escalator where it would have carried him. That right does not depend on a vacancy, so the employer must make room. There is no one-year cut-off, and demoting a returning servicemember is precisely what the statute forbids.
- 10. Contracts & Contract Law
A subcontractor is asked to sign an unconditional waiver and release in exchange for a progress check. What is the risk?
- a.The waiver applies only to work performed after the date it is signed
- b.The waiver takes effect even if the check never clears
- c.The waiver releases the general contractor but not the owner
- d.The waiver cannot be enforced unless it has been notarized
Answer: b
Explanation: An unconditional waiver gives up lien and claim rights on its own terms, without regard to whether payment was actually received, which is why a conditional waiver, effective only when the check clears, is the safer document to trade for money not yet in the bank. Waivers release rights for work already performed through a stated date, not for future work. They run in favor of the property and the paying parties generally, and notarization is a formality some states require rather than the thing that makes the release dangerous.