Maryland Home Improvement Test: NASCLA Contractors Guide (6th Edition), Exams of Contract Law

Download Maryland Home Improvement Test: NASCLA Contractors Guide (6th Edition) and more Exams Contract Law in PDF only on Docsity! Maryland Home Improvement Test NASCLA Contractors Guide MD 6th Edition Questions and Answers. Define home improvement - Correct Answer The addition, alteration, conversion, improvement, modernization, remodeling, repair or replacement of a building or part of a building that is used or was designed to be used as a residence or dwelling place or structure adjacent to that building or an improvement to land adjacent to that building Is a building of a swimming pool, deck, pier or porch included in Home Improvement? - Correct Answer Yes Is work done on apartment complexes of more than 4 units considered home improvement? - Correct Answer No Is work done on individual condominium units considered home improvement? - Correct Answer Yes Is installation in a residence of alarm, awning or fire alarm considered home improvement? - Correct Answer Yes Is now removal or grass cutting home improvement? - Correct Answer No Define contractor - Correct Answer A person who performs or offers or agrees to perform a home improvement for an owner Define Subcontractor - Correct Answer A subcontractor enters into contracts with contractors or other subcontractors to perform home improvement. A subcontractor is not authorized to enter into agreement directly with the owner Define salesperson - Correct Answer A person who sells a home improvement Define Home Improvement contract - Correct Answer An agrement between a homeowner and a contractor to perform a home improvement. The law requires contracts to be in writing and be signed by the parties to the agreement. Define Owner - Correct Answer Owner, owner's agent , tenant or other person authorized to enter into a home improvement contract Define license - Correct Answer is either a contractor or salesperson license that is issued by the Home Improvement Commission. Does a handyman need a license? - Correct Answer Yes True or False: Home Improvement law does not apply if one of the parties is a government agency - Correct Answer True Work done a residence inside a military base is excluded from licensing requirements - Correct Answer True Can local jurisdictions issue home improvement lincenses - Correct Answer No, only MD Home Improvement Commission is authorized to issue a license to solicit, sell, or perform home improvement services in Maryland Can two or more individuals (such as homeowner and contractor) lawfully agree to ignore the Home Improvement licensing requirement? - Correct Answer No, waiver is prohibited What is Actual Loss? - Correct Answer Actual Loss means the cost to correct or complete a home improvement that is inadequate, unworkmanlike or incomplete. How much can homeowners recover? - Correct Answer Homeowners may recover up to $20,000 per contract, though they are not eligible to recover more than the amount paid to the contractor against whom the claim is based. Certain costs like: legal fees, interest, consequential damages are not covered by the Fund. What is the max amount that can be awarded from the Guaranty Fund for the acts or omissions of a contractor? - Correct Answer $100,000 How is the Fund maintained? - Correct Answer $100 by each contractor at the time of applying for a license. The Commission may also assess each contractor a fee of $50 if the Fund falls below $250,000 How many days does the contractor have to respond to claims from a homeowner once it has been received by the commission? - Correct Answer Once the Commission receives a claim, it send a copy to the contractor who has 10 days to respond back to the Commission. Who is not eligible to collect from the Fund? - Correct Answer Spouse, relative, or employee of the contractor, or an officer of the corporation. Similarly, an owner may only receive compensation if she/he resides in the house where the work was performed or does not own more than 3 residences. What happens to the license of the contractor after a claim has been paid? - Correct Answer The licensed is suspended, unless the commission determines that contractor did not know the wrongful conduct or it could had not been avoided What is required in a home Improvement contract? - Correct Answer Date Contractors name, address, and MHIC number Consumer Notice Dates Description of work Deposit and Payment information What is Consumer Notice? - Correct Answer It provides phone of the Commission and states that "each contractor and subcontractor must hold a current MHIC license and anyone can ask MHIC about a contractor" The contract also needs to inform homeowners of the following: 1) Formal mediation disputes between homeowners and contractors are available through the Commission 2) The Commission administers the Fund which can compensate owners for certain actual losses caused by acts or omissions of licensed contractors 3) The homeowner may request that the contractor purchase a performance bond for additional protections against losses not covered by the Fund What is the maximum a contractor may ask for downpayment? - Correct Answer 1/3 of the contract How long does a homeowner have to rescind a contract? - Correct Answer 3 days after signing, and notification must be in writing. Who can make changes to a home improvement contract? - Correct Answer Only the contractor is authorized to make changes for a homeowner. The commission recommends changes to be in writing. True or False: Before the performance of a home improvement coontract, the owner shall be given a copy of the home improvement contract signed by the contractor - Correct Answer TRUE What is cancellation under Door to Door Sales Act - Correct Answer The Door to Door sales act gives consumers certain rights, including the right to cancel the contract without any penalty or obligation, by sending a notice of cancellation to the seller by midnight of the fifth business day following the sale, or the seventh business day of the buyer is at least 65 years old. If the homeowner cancels the contract, contractor must return the deposit within 10 business days following receipt of cancellation. What is the NOTICE OF CANCELLATION requirement for Door to Door Sales Act? - Correct Answer Each contract must include Notice of Cancellation attached to the contract and contractor must obtain a signed written acknowledgement that the buyer has been informed of his/her cancellation rights. The information must include where to send the cancellation notice, by which date. If this information is not included or given to homeowner, the buyer may cancel in any manner and by any means. Notice of cancellation - good available to buyer - Correct Answer If goods are made available to the contractor and the contractor does not pick them up within 20 days of the date of your notice, you may dispose of the goods without any further obligation When is a Home Improvement Job NOT covered? - Correct Answer The Door to Door sales act does NOT cover a home improvement project made: Lists exceptions to HI License - Correct Answer - Individual who works for a contractor or suib who is paid by salary and is not a salesperson - A celrical employee, retail clerk, to a licensed contractor - A solicitor for a contractor who calls an owner by phone only - An architect, electriciam, plumber, HVAC contrator (who is reuired by state to meet standards of competency in their profession) - a licensed secuity system tecitian under Title 18 of the Business Occupations Article - A licensed Marine contracor under Title 17, Subtitle 3 The commission may issue a license to an applicant who has violated 8-601 if - Correct Answer 1 year has passed since the conviction What is term of license - Correct Answer unless a license is renewed for a 2 year term as provided in this section, the license expires: - If the Sec staggers the term of the licenses, on the date that the Secretary set - If the Sec does not stagger the licenses, on the first June 30 that comes after the effective date of the license in an odd number year How long does a licensee have to notify the Commission of change in business ownership or control - Correct Answer 10 days How many people in a Hearing Board - Correct Answer 3 Decision of Hearing Board - Correct Answer Decision of the Hearing Board shall be: - by majority of votes - in writing - submitted to the Commission Unless, within 15 days after the hearing board submitted its decision to the Commission, the Commission or a member of the Commission finds that a full hearing by the Commission is required: - Correct Answer - the decision of the Board is final - The decision is a final decision of the Commission - a party who is aggrieved by the decision may take an appeal provided in 8-314 How long after being denied after a hearing can a peson reapply for license - Correct Answer 6 months What are the conditions for an owner to put a claim against the Fund? - Correct Answer - Resides in the home as to which the claim is made - Does not own more than 3 residences - Limitation period - a claim shall be made against the fund whitin 3 years after the claimant discovers it, or by use of ordinary diligence, should have discovered the loss or damage Inducements - Tangibel items for advertisement - Correct Answer To advertise or to promote sales, a contractor or salesperson may give to a propestive customer a tangible item if the cost to the contractor does not exceed $25 Miss-representation - A person MAY NOT make a false promise that is likely to influence, persuade or induce in connection with a home improvement contract - Correct Answer True Violations: Failure to include name or license number in advertisement - Correct Answer First $100; Subsequent $300 Violations: Publishing a false or misleading adversitement - Correct Answer First $300, Subsequent $1000 Violations: Failure to display license number on vehicle - Correct Answer First $100; Subsequent $300 Violations - perform or sell HI contract with or through unlicensed person - Correct Answer First $1500; Subsequent $5000 Violations - Failure of a contractor to notify commission of change of ownership or control - Correct Answer First $500, subsequent $1000 Check of other VIOLATIONS and fines page 1-57 to 1-59 - Correct Answer Check book "Consumer goods" or "consumer services" mean - Correct Answer (1) good or services purchased, leased or rented primarily for personal, family or househol dpurposes; and (2) courses of instruction or training regardless of the purpose for which they are taken What does "Door to Door" sales mean - Correct Answer Door to door sales mean a sle, lease, or rental of consumer goods or consumer services under single or multiple contracts with a purchase price of $25 or more Check DOOR TO DOOR SALES - Correct Answer Pages 1-60 - 1- 64 Ethic in Bidding - Correct Answer Good ethical conduct is necessary to maintain the integrity of the bidding process T or F - A good estimate will fall within 1 to 2 percent of actual construction costs - Correct Answer True Define Specifications - Correct Answer details that determine the type of materials or methods to be used in construction. if there is How to calculate/add overhead - Correct Answer Lets say you calculated direct costs $100,000 Project OH 9%, Co OH 11% --> Direct costs are 80% of the total bid price - SINCE OH IS PERCENTAGE OR REVENUE, dive direct costs by 80% (0.80) $100,000/.80= $125,000 Add markup and determine profit - Correct Answer Usually 15% Steps for Quantity Take off Method - Correct Answer 1) Determine labor cost for each task 2) Add labor burden 3) Determine material costs 4) Determine project equipment costs 5) Add subcontractor fees 6) Add allowances 7) Add contingencies 8) Add project overhead 9) Add company overhead 10) Add markup and determine profit Define conceptual estimate - Correct Answer Generally prepared by architects using costs models from previous projects. The contractor may arrive at a much different cost because of the projects unique characteristics Define square foot method of estimating - Correct Answer project cost is calculated by square footage multiplied by a unit costs What are fist steps to develop a cost code system? - Correct Answer Project number Activity classification code distribution code (Material M; Labor L; Equipment E; Project Overhead P) Some questions that could lead to legal action and are off limits when interviewing a potential employee - Correct Answer - How old are you? - Do you have an disabilities? - Are you pregnant? - Are you married? - Do you have any children? - What is your religious affiliation? - What is your sexual orientation? - What is your ethnic background? Questions should be ask in a job interview - Correct Answer - Ability to work in team - ability to handle conflict - expectations of job (salary, benefits, working hours, etc) - past work history and reasons for leaving previous job - level of expertise or skill - training or education - safety record - questions about the job Reporting new hires to MD in how many days? - Correct Answer 20 Working hours for minor 16-17 are - Correct Answer 8 hrs of non school land non work time in each 24 hour period Prohibited tasks for minors - Correct Answer cleaning or adjusting of any power driven machine with exception of office machines T or F - All minors are prohibited from employment in occupations considered hazzrdous - Correct Answer True What are hazzardous tasks - Correct Answer Specific tasks outlined as hazardous or detrimental that apply to the construction industry (with the exception of apprentices as described by law) include but are not limited to: - operating power driven machines such as woodworking machines, power driven circular saws, guillotine shears - elevator or power driver hoisting apparatus - metal forming punching or shearing machines - driving any motor vehicle and being outside helper - exposure to radioactive substances and ionizing radiations - manufacturing brick, tile or related products - roofing operations - excavating operations Employee documentation and files - Correct Answer Once an employee is hired a file should be set up and include: I-9 W-4 W-5 State tax form Employment application Policy sign off Emergency notification form What is in I-9 - Correct Answer Documents that shows that the employee has the legal immigration status to work in the US What is W-4 - Correct Answer Form to determine proper federal tax withholding What is W-5 - Correct Answer Form to receive EIC (Earned income credit) in advance Fair Labor Standards Act (FLSA) which define standards for basic min wage and OT pay covers what? - Correct Answer - Min wage Workers Comp requirements? - Correct Answer An employer who has one or more employees must carry workers comp insurance Unemployment requirements? - Correct Answer Program that provides unemployment benefits top eligible workers who become unemployed through no fault of their own. Required postings by law - Correct Answer See page 3-11 Basics to include in Company handbook - Correct Answer - Company history - Compensation guidelines (introductory period, full time requirements etc) - Payroll distribution dates and times - Benefits - Normal working hours - Overtime pay - Vacation time - Sick days - Policy on sexual harassment - Policy on use of illegal drugs - Non discrimination policy - Rules of conduct (disciplinary action for insubordination, fighting, etc) - Safety policies - Equipment and tool policies - Disciplinary actions procedures Ways to motivate employees - Correct Answer - provide formal and informal opportunities for employees to learn new skills - Empower employees to make decisions and give positive and constructive feedback - provide clear expectations for your employees - Conduct performance reviews on a regular basis - Mentor your employees and tell them about advancement opportunities - Recognize and reward good work What does Workers Compensation provide? - Correct Answer monetary compensation to employees who are injured or disabled on the job What does At Will Employee mean? - Correct Answer The employer or the employee may terminate employment at any time without notice or cause. An employer may not terminate employment due to discriminatory reasons, for taking time off to serve on a jury, for reporting health or safety violations What is a lien - Correct Answer Mechanic's or materialmen's lien "cloud" the title to real property and it can be an effective method for securing payment for labor or materials. Who is entitled to a Mechanics lien? - Correct Answer States designate lien rights for contractors, subcontractors or material suppliers who provide labor or furnish material for construction, repairs or improvements of any building machine, wharf or bridge. Amount subject to a lien - Correct Answer Lien may be established up to 15% of the building's value regardless of the amount contracted for labor and materials. Additionally, if work is done on an existing building does not increase the value of the property by 15%, then MD will not permit establishment of the mechanics lien. This does not apply to newly constructed building. Whats the deadline to file a lien? - Correct Answer No later than 180 days after last furnishing labor or materials What properties are subject to a lien? - Correct Answer Buildings Water,lines, sewers, drains, and street developments Machines, wharves and bridges Exemptions - the land of which the building is erected may not be subjected to a lien under this subtitles if prior to the establishment of the lien in accordance with this subtitle, legal title has been granted to a bona fide purchaser for value Filing of a petition constitutes notice to purchaser Notice to Owner by Sbcontractor - Correct Answer A subcontractor doing work or furnishing materials or both for or about a building other than a single family dwelling being erected on the owners land for his own residence is not entitled to a lien under this subtitle unless, within 120 days after doing work or furnishing the materials, the subcontractor gives written notice of an intention to claim a lien substantially in the form specified in subsection (b) of this section (See page 4-5) How to deliver a lien - Correct Answer Mail or personal delivery To file lien claim, time ? - Correct Answer In order to establish a lien under this subtitle, a person entitled to lien shall filed proceedings in the court for the county where the land or any part of the land is located within 18- days after the work has been finished or the materials furnished. T or F - Is it the employers responsibility to understand the OSHA standards and quickly correct any violations? - Correct Answer True What is the advantage of establishing a safety program? - Correct Answer Putting together a safety program with these standards in mind can help maximize employee safety and prevent violations What is MSDS - Correct Answer Material Safety Data Sheet and are a OSHA requirement of Hazard Communication Standard What is MSDS For at jobsites - Correct Answer Employers must keep MSDS on hand for all chemicals used in the workplace. The MSDS provides emergency information in case of contact with the chemical internally or externally. The compliance officer will confirm that all MSDS are at the jobsite Employee rights - Retaliation - Correct Answer Retaliation is prohibited! Private sector employees who exercise their right under OSHA can be protected against employer reprisal. Employees must notify OSHA within 30 days of the time they learn of the alleged discriminatory action. OSHA penalties - Correct Answer See pages 5-9 Failur to abate prior violation - Civil penalty of up tp $7000 for each day Programmed and Unprogrammed OSHA Inspections - Correct Answer Programmed inspections - are perfromed on establishments with high injury rates Unprogrammed inspections - are used in response to fatalities, catastrophes and complaints MD Department of the Enviroment responibilities - Correct Answer Enforcement of federal and state environmental laws and regulations and for the issuing of permits, licenses and certifications for activities that may affect the environment. The MDE published the MDE guide to environmental permits and approvals that provide guidance on permit applications and approval requirements What is the clean water act - Correct Answer establishes the basic structure for regulating discharges of pollutants into the waters of the US What are several Evironmental Laws that may affect your construction activities? - Correct Answer The Clean water act Clean Air Act Endangered species act (ESA) National Environmental Policy Act (NEPA) National Historic Preservation Act (NHPA) What is the required notification under Lead PRE - Correct Answer Under Lead PRE, federal law requires that contractors provide lead info to residents before renovating pre- 1978 housing. The EPA publishes a pamphlet titled Protect your family from lea din your home, which must be distributed to the owner and occupants before starting work. Confirmation of receipt of the lead pamphlet or a certificate of mailing must be kept for 3 years Sole proprietors and taxes - Correct Answer Your net income from the business is reported as ordinary income. Sole proprietors do not pay corporate income taxes What are disadvantages of Sole proprietorship - Correct Answer Unlimited personal liability less available capital Possible difficulty getting long term financing dissolution of business in the even of owners death MHIC does not transfer What are advantages of solo propriertorship - Correct Answer Minimal legal restriction simple ownership form low startup costs sole ownership of profits freedom in decision making process What is a partnership? - Correct Answer Relationship between two or more persons who join to carry a trade or business. Each person contributes money, labor or skill and each partner expects to share in the profits or losses Advantages of partnership - Correct Answer - Ease of formation - Direct profit rewards - Larger management base that a sole proprietorship Disadvantages of partnership - Correct Answer - Unlimited personal liability of general partners - Multiple decision makers - Limited life of business - Changes of partners or partnership may be difficult - Partnership dissolves in the event of a general partner's death Use caution with partners - things to discuss: - Correct Answer - Do the partners want to grow and operate a company long term? - To the partners want to grow a short term company to sell? - How will the profits be distributed? - Do the partners agree on the nature of the business, including types of jobs the business will accept? C Corps - Correct Answer Ownership of corp by stockholders and a corporation is considered its own legal entity. The corporation is responsibly for all assets and debts and not the stockholders. Key Characteristics of C Corp - Correct Answer - Existence - A corporation lasts as long as stockholders determine it should - Financial Management - Separate bank account and separate records List 4 time manamente tips - Correct Answer - Prioritize daily tasks - delegate effectively as possible - Use T or F - Top management has the strongest influence on employees' ethical behavior. - Correct Answer True - If top managers demonstrate unethical behavior, employees are likely to do the same T or F - Technology is an essential tool - Correct Answer True What is all risk builder's insurance? - Correct Answer is a form of property insurance that covers owners and builders for buildings under construction. This insurance typically covers machinery, equipment, materials, supplies, fixtures that are part of the structure or will become part of the structure. Additional coverage can be added for temp structures like scaffold. In general, major construction defects ,such as poor workmanship ad faulty design are not covered. What is Libility Insurance - Correct Answer design to protect against 3rd party claims that arise from alleged negligence resulting in bodily injury or property damage. What is Commercial Liability Insurance (CGL) - Correct Answer CGL insurance offers basic liability coverage. CGL covers four types of injuries, including 1- bodily injury that results in actual physical damage or loss for individuals who are not employees 2- damage or loss to property not belonging to the business 3- personal injury including slander or damage to reputation 4- advertising injury, including charges of negligence that result from promotion of goods an services What is Professional Liability Insurance - Correct Answer Sometimes called Errors and Omissions, protects contractors from negligence resulting from errors or omissions of designers and architects What is key Man life Insurance - Correct Answer Available as life insurance, disability insurance or both What is Workers Comp insurance - Correct Answer Required to be carried by any company that has one or more employees. It is 100% paid by employer and cannot be charged to employee. Social Security - Correct Answer Social Sec Admin is responsible for paying retirement, disability and survivors benefits to workers and their families. The SSA issues SSN which are required for employees to legally work in US What is a bond? - Correct Answer A surety bond is a risk transfer mechanism between surety company, the contractor and the property owner. The agreement binds the contractor to comply with the terms and conditions of the contract. if the contractor cannot perform, the surety assumes responsibility. Bond language or requirements - Correct Answer 1) Total amount required for the bond (varies and can be up to 100% value of contract) 2) Length of the bond 3) Requirement for notice of defect or lack of maintenance (a period of completion of corrections is generally outlined after notice of defect, and it also establishes a time period of response) 4) Bond enforcement (if a contractor fails to successfully complete work or violates any requirement of the bond, enforcement measures are outlined here) Types of Bonds - Correct Answer - Bid bond (guarantees that the contractor, if awarded the job, will perform at submitted price) - Performance bond (guarantees that the contractor will complete the contract) - Payment bond (guarantees subcontractors and suppliers will be paid for work and material) - maintenance bond (guarantees that for a stated period, typically 1 year, no defective workmanship or material will appear in the completed project) - completion bond (provides assurance to the financial backers of a construction project that it will be completed on time) - fidelity bond (covers business owners for losses due to dishonest acts by their employees) - lien bond (guarantees that liens cannot be places against the owners property by contractors payment of services)