South Carolina Law and Business Management Examination

Under S.C. Code § 40-11-30, a South Carolina general or mechanical contractor license is required when the total cost of construction exceeds which amount?

• AUSD 5,000
• BUSD 10,000
• CUSD 25,000
• DUSD 50,000

S.C. Code § 40-11-20 defines working capital as which calculation?

• ATotal assets minus total liabilities
• BCurrent assets minus current liabilities
• CGross revenue minus cost of goods sold
• DCash plus accounts receivable only

A South Carolina general contractor wants Group Two. Which set matches S.C. Code § 40-11-260 and the LLR group table?

• ABids and jobs not to exceed USD 100,000; working capital USD 10,000 or net worth USD 20,0…
• BBids and jobs not to exceed USD 400,000; working capital USD 40,000 or net worth USD 60,0…
• CBids and jobs not to exceed USD 1,000,000; working capital USD 100,000 or net worth USD 1…
• DBids and jobs not to exceed USD 3,000,000; working capital USD 175,000 or net worth USD 2…

Under S.C. Code § 40-11-230(C), when may one individual serve as primary qualifying party for two licensed entities?

• AWhenever both entities hold the same license classification
• BOnly if both entities operate from the same physical location, the individual is involved…
• CIf the individual holds two separate qualifying-party certificates
• DNever; a qualifying party may serve only one licensee

In a commercial quantity takeoff, what is the estimator's first task?

• AApply the company's target profit percentage to last year's bid
• BMeasure and list the work quantities shown on the plans and specifications
• CAverage the last three successful bids for similar buildings
• DAsk each subcontractor to name a lump-sum price with no quantities

During bidding, the owner issues an addendum that changes a specified product. How should a bidder treat that addendum?

• AIgnore it unless the change exceeds 10 percent of the bid
• BIncorporate it into the bid and acknowledge it as the invitation requires
• CPrice the original product and negotiate the change after award
• DUse it only if the bidder's preferred vendor stocks the new product

On a public commercial bid, what is the difference between a responsive bid and a responsible bidder?

• AResponsive means the bid follows the invitation; responsible means the bidder can perform
• BResponsive means the bidder has a license; responsible means the bid is the lowest number
• CThe two terms are interchangeable under South Carolina bidding practice
• DResponsive means the bid bond is 10 percent; responsible means it is 5 percent

After bids are opened, a prime contractor discloses a subcontractor's quoted price to a competitor to obtain a lower number. What is that practice called?

• AValue engineering
• BBid shopping
• CBid peddling by the prime
• DA required public-bid leveling step

Which cost is a direct job cost rather than company overhead?

• AThe home-office bookkeeper's salary
• BGeneral liability insurance allocated to the company as a whole
• CCarpenters' wages and the framing lumber installed on this project
• DThe annual CPA fee to compile the company financial statement

Why does a commercial estimate include a contingency line?

• ATo replace the need for a quantity takeoff
• BTo cover known-unknowns that are not yet detailed but are reasonably expected
• CTo hide profit from the owner on a lump-sum bid
• DTo meet the South Carolina license-group net-worth test

A paving takeoff is 500 square yards. The estimator adds 8 percent waste. The unit price is USD 12.50 per square yard. What material cost should go in the bid?

• AUSD 5,000
• BUSD 5,400
• CUSD 6,250
• DUSD 6,750

A carpenter's wage is USD 22.00 per hour. Labor burden (taxes, insurance, and benefits) is 35 percent of wages. What loaded hourly rate should the estimator use?

• AUSD 22.00
• BUSD 24.20
• CUSD 29.70
• DUSD 35.00

Direct job cost is USD 180,000. Overhead is 12 percent of direct cost. Profit is 8 percent of total cost (direct plus overhead). What is the bid?

• AUSD 201,600
• BUSD 216,000
• CUSD 217,728
• DUSD 226,800

A unit-price bid lists 1,250 linear feet of 8-inch water main at USD 86.40 per linear foot. What is the extension?

• AUSD 10,800
• BUSD 86,400
• CUSD 108,000
• DUSD 1,080,000

An invitation requires a bid bond equal to 5 percent of the bid. The contractor's bid is USD 860,000. What bid-bond amount is required?

• AUSD 8,600
• BUSD 43,000
• CUSD 86,000
• DUSD 860,000

A Group Two South Carolina general contractor's license limit is USD 400,000 per job. The firm is preparing a lump-sum bid of USD 410,000 on a commercial building. What must the firm do?

• ASubmit the bid; a 2.5 percent overrun is within a customary tolerance
• BSplit the bid into two contracts of USD 205,000 so each stays under the group limit
• CObtain a Group Three (or higher) revision before bidding, because existing limits stay in…
• DBid as a construction manager so the group limit does not apply

An owner asks a Group One general contractor (USD 100,000 limit) to issue two contracts of USD 70,000 each for one warehouse so the work stays under the license cap. What does S.C. Code § 40-11-300 require?

• AThe split is lawful if each contract is signed on a different day
• BThe split is lawful if different qualifying parties sign each contract
• CThe total cost of construction must be used, so the USD 140,000 project is above Group One
• DThe split is lawful if each contract is under USD 100,000 and no bond is required

A Group Three general contractor (USD 1,000,000 limit) and a Group Two general contractor (USD 400,000 limit) want to submit a joint-venture bid of USD 850,000. Under S.C. Code § 40-11-330, is the bid allowed?

• ANo, because a joint venture may not exceed the lowest member's group limit
• BYes, because the contract does not exceed the highest member's group limit and both firms…
• CYes, but only if each firm bids a separate prime contract
• DNo, unless an unlicensed investor is added to increase net worth

A firm submits a commercial bid while unlicensed. After opening, it obtains a license and asks the owner to reconsider the same bid. What does S.C. Code § 40-11-200(B) provide?

• AThe bid may be reconsidered if the license is issued within 10 days
• BThe bid may not be reconsidered or resubmitted if the contractor was not properly license…
• CThe bid is valid if a qualifying party sat for the exam before opening
• DThe owner may accept the bid if the firm posts a Group Five bond

On a bid form, what is the difference between an allowance and an alternate?

• AAn allowance is a stated sum in the base bid for undefined work; an alternate is a priced…
• BAn allowance is always deducted; an alternate is always added
• CThey are the same line and may be used interchangeably
• DAn allowance is only for permits; an alternate is only for landscaping

Direct costs are USD 40,000 (materials USD 31,080, labor USD 6,400, equipment USD 2,520). Overhead is 15 percent of direct cost. Profit is 10 percent of total cost. What bid should be submitted?

• AUSD 46,000
• BUSD 48,000
• CUSD 50,600
• DUSD 52,000

A contractor can rent a scissor lift for USD 1,800 per month or own one. Annual ownership cost (depreciation, interest, tax, insurance, and storage) is USD 9,600, plus USD 15 per operating hour. The job will use the lift 80 hours in one month. Which statement is correct?

• AOwnership is cheaper this month because 80 × USD 15 = USD 1,200, which is less than USD 1…
• BRental is cheaper this month because ownership cost allocated to the month is USD 800 plu…
• CThe two options cost the same, so ownership is always preferred
• DRental is forbidden on commercial work in South Carolina

A bidder on a unit-price site package raises early earthwork unit prices and lowers later paving unit prices so the lump-sum total still looks competitive. What is that tactic, and what is the main risk?

• AValue engineering; the owner must accept the reallocated units
• BUnbalanced bidding; the owner may reject the bid, and a quantity overrun on front-loaded…
• CRequired bid leveling; public owners rewrite unit prices after opening
• DA lawful way to avoid the South Carolina group limit

Bid recap: labor USD 18,000, materials USD 42,500, equipment USD 6,200, subcontracts USD 15,000. Overhead is 12 percent of those directs. Profit is 10 percent of total cost. What is the bid, to the nearest dollar?

• AUSD 91,504
• BUSD 98,824
• CUSD 100,654
• DUSD 108,824

Which set lists the classic elements of an enforceable construction contract?

• AOffer, acceptance, and consideration, plus parties with capacity and a lawful purpose
• BA handshake, a job-site sign, and a building permit
• CA bid bond, a performance bond, and a payment bond
• DAn estimate, an addendum, and a punch list

Under a lump-sum (stipulated-sum) contract, the contractor is generally paid which amount?

• AActual cost plus a fixed fee, with no ceiling
• BThe agreed total, adjusted only by change orders, regardless of the contractor's actual c…
• CMeasured quantities times unit prices for every item on the job
• DThe owner's lender draws, whether or not work is in place

The owner asks the contractor to add a storefront that is not in the contract documents. What is the proper instrument?

• AAn addendum issued after award
• BA written change order (or construction change directive) adjusting price and time
• CA verbal field instruction with no price, because extras are implied
• DA new bid bond

What is the purpose of a liquidated-damages clause in a commercial construction contract?

• ATo punish the contractor with a penalty unrelated to delay harm
• BTo pre-agree a reasonable daily amount for owner delay damages so actual delay loss need…
• CTo replace the contractor's obligation to finish the work
• DTo set the South Carolina license-group bond amount

A commercial contract states that "time is of the essence." What does that generally mean for the contractor?

• AMilestone and completion dates are material, and unexcused delay can be a breach
• BThe contractor may finish whenever crew availability allows
• COnly the owner's dates are binding; contractor dates are goals
• DSouth Carolina law automatically adds 30 days to every contract duration

Substantial completion typically means which project condition?

• AEvery punch-list item, including attic stock, is finished
• BThe work is sufficiently complete that the owner can occupy or use it for its intended pu…
• CThe contractor has cashed the first progress payment
• DThe building permit has been applied for

Under S.C. Code § 40-11-370, what happens if an entity without a required contractor license sues to enforce its construction contract?

• AThe court must award the contractor the full contract balance
• BThe entity may not bring an action at law or in equity to enforce the contract
• CThe contract is automatically assigned to the qualifying party personally
• DThe contractor may enforce the contract if it pays a USD 500 citation

S.C. Code § 40-11-370(B) requires a licensee to engage in construction under which name?

• AAny trade name the marketing department prefers
• BThe exact name that appears on the license, including on contracts, advertising, and site…
• COnly the qualifying party's personal name
• DThe project owner's name

Under S.C. Code § 29-6-30, when a contractor has performed in accordance with the contract, when must the owner pay the undisputed amount of a pay request?

• AWithin 7 days of receipt of the pay request
• BWithin 21 days of receipt of the pay request
• CWithin 90 days of substantial completion only
• DThere is no statutory timing; payment is whenever the lender funds

If an owner delays an undisputed periodic payment more than 21 days, S.C. Code § 29-6-50 generally imposes interest at which rate, if the payee notified the payer of that section when payment was requested?

• AOne-half percent a month
• BOne percent a month, or a pro rata fraction, on the unpaid balance
• CTwelve percent a day
• DNo interest; the only remedy is a mechanics' lien

S.C. Code § 29-6-40 allows an owner or contractor to withhold application and certification for payment for which reason, among others?

• AAny reason, including a desire to improve cash flow
• BA reasonable amount for retainage, or for defective construction not remedied, disputed w…
• COnly if a mechanics' lien has already been filed
• DOnly on residential projects of 16 or fewer units

A subcontract says the sub will be paid only if and when the owner pays the prime. Under S.C. Code § 29-6-230, how is that clause treated?

• AIt is fully enforceable as a condition precedent
• BPayment by the owner is not a condition precedent to paying the subcontractor, and an agr…
• CIt is enforceable only on public jobs over USD 50,000
• DIt is enforceable if the sub signed in blue ink

Under the South Carolina Notice and Opportunity to Cure Nonresidential Construction Defects Act, how long does a contractor generally have after service of the initial notice of claim to inspect, offer to remedy or settle, or deny the claim?

• A15 days
• B30 days
• C60 days
• D90 days

A claimant's nonresidential defect notice is too vague to understand. Under S.C. Code § 40-11-530(B), when must the contractor request clarification?

• AWithin 15 days of receipt of the claim
• BWithin 60 days of substantial completion
• CWithin 90 days of last furnishing labor
• DThere is no duty to seek clarification

When a South Carolina governmental body contracts to improve real property for more than USD 50,000, S.C. Code § 29-6-250 requires the contractor to provide which bond?

• AA bid bond only, in any amount the contractor chooses
• BA labor and material payment bond in the full amount of the contract
• CA license-group financial bond under § 40-11-262 instead of a payment bond
• DNo bond if the contractor's net worth exceeds USD 350,000

How does a guaranteed-maximum-price (GMP) cost-plus contract differ from an open cost-plus contract?

• AA GMP sets a ceiling the owner will pay for the defined scope; an open cost-plus has no s…
• BA GMP forbids change orders; cost-plus requires them
• CThey are identical pricing methods
• DA GMP is legal only for Group Five licensees

A prime contract requires liquidated damages of USD 2,000 per day. The subcontract's flow-down clause makes the sub bound to the prime contract as it applies to the sub's work. What is the practical effect?

• AThe sub automatically owes the owner USD 2,000 per day for any project delay, even delays…
• BThe sub assumes the prime's duties and time risk as they relate to the subcontract scope,…
• CFlow-down clauses are unenforceable in South Carolina
• DThe prime cannot backcharge the sub because only the owner may assess liquidated damages

A commercial site contractor encounters rock that the bid documents did not indicate and that a reasonable site investigation would not have revealed. What contract theory typically supports extra time and money if the contract has a differing-site-conditions clause?

• AA Type I differing site condition: actual conditions differ materially from those indicat…
• BSubstantial completion
• CLiquidated damages against the owner
• DAn automatic Group Five upgrade

A subcontract requires the subcontractor to indemnify the prime for damages arising from the sub's negligence. What is the function of that clause?

• AIt transfers specified third-party risk from the prime to the sub to the extent of the su…
• BIt replaces the need for commercial general liability insurance
• CIt is an illegal penalty in every South Carolina construction contract
• DIt automatically makes the sub the qualifying party

A contract assesses liquidated damages of USD 1,500 per calendar day. The contractor finishes 12 calendar days after the adjusted completion date, with no excusable delay. What LD amount is due?

• AUSD 1,500
• BUSD 12,000
• CUSD 18,000
• DUSD 21,000