Texas Contractor Exam — All Questions

A contractor is owed $40,000 on a genuinely disputed account, and the owner sends a check for $28,000 marked 'payment in full.' If the contractor deposits it without objection, the likely result is:

• a.The contractor keeps the right to sue for the $12,000 balance in every state
• b.The dispute is settled for $28,000 under an accord and satisfaction✓
• c.The check is void because the notation was added unilaterally
• d.The owner must pay the balance together with interest

Where the debt is genuinely disputed and the tender is clearly conditioned on full settlement, cashing the check accepts the accord and the claim is satisfied, which is why the correct move is to return the check or follow the state's procedure for reserving rights before negotiating it. The notation does not void the instrument. An owner who has settled owes neither the balance nor interest on it. The doctrine turns on a genuine dispute, since a plain undisputed debt is not discharged this way.

How does a statute of repose differ from a statute of limitations for construction defect claims?

• a.Repose applies to contractors and limitations applies to owners
• b.Repose is created by contract and limitations by state statute
• c.Repose runs from completion; limitations runs from discovery✓
• d.Repose reaches only personal injury claims, not property damage

A statute of limitations starts running when the claim accrues, often when the defect is or should have been discovered, so a hidden defect can keep it alive for a long time. A statute of repose sets an outer wall measured from substantial completion and can extinguish a claim before anyone knows there is one. Both are statutory rather than contractual, both are available to whoever is sued, and both reach property damage as well as injury. The length of each is set by each state and differs considerably.

A contractor wants another firm to take over its remaining obligations on a project and wants to be released from them. What does that require?

• a.A novation, consented to by all three parties✓
• b.An assignment, which the contractor may make on its own initiative
• c.A subcontract between the contractor and the incoming firm
• d.A change order signed by the owner and the original contractor

An assignment can transfer benefits but does not by itself relieve the assignor of its duties, so the original contractor would stay on the hook. Only a novation, agreed by the owner, the outgoing contractor and the incoming one, releases the original party and puts the new one in its place. Subcontracting delegates the work while leaving the prime fully responsible, and a change order alters scope, time or price rather than the identity of the party bound.

Two months before the start date, a subcontractor writes that it will not be performing the contract at all. The general contractor may:

• a.Wait until the start date passes and the subcontractor fails to appear
• b.Terminate only after giving the subcontractor a 30-day period to cure
• c.Recover only the deposit that has already been paid to the subcontractor
• d.Treat the contract as breached at once and cover with a replacement subcontractor✓

A clear and unequivocal refusal to perform before performance is due is an anticipatory repudiation, and the non-breaching party may act immediately rather than wait for a failure everyone can already see coming. Waiting can even conflict with the duty to mitigate. A cure period applies only where the contract's termination clause creates one, and damages are the cost of covering, meaning the difference between the replacement price and the original price, not merely a refund of a deposit.

A contract requires written notice of any claim for additional time or money within seven days of the event. The contractor mentions a delay verbally at a weekly meeting but sends nothing. What is the likely consequence?

• a.The meeting minutes automatically satisfy the written notice requirement
• b.Notice provisions of this kind are not enforceable against a contractor
• c.The claim may be waived, however good it was✓
• d.The seven days run from completion

Courts in most states enforce notice provisions, because timely written notice lets the owner investigate, mitigate and budget while the facts are still fresh, and missing it can forfeit an otherwise valid claim. Meeting minutes are not the written notice the clause calls for unless the contract says they are. The clock runs from the event rather than from completion, which is the entire point of a short notice period.

On many private projects a supplier who has no contract with the owner sends a preliminary notice soon after first delivering material. What is its purpose?

• a.To preserve the sender's right to claim a lien later✓
• b.To create a lien against the property as of the date it is delivered
• c.To demand payment of the first invoice within the statutory period
• d.To register the supplier with the building department for that permit

A preliminary notice, sometimes called a notice to owner, tells an owner who would otherwise have no idea that a party several tiers down is contributing to the improvement, and in states that require it, failing to send it forfeits lien rights no matter how good the underlying debt is. It is not itself a lien, since recording a lien claim is a separate later step, and it is not a demand for payment. Building departments have no role in it. Whether it is required at all, and by when, is set by each state's lien statute.