Alabama Home Builder Business and Law Exam

Project overhead covers job-specific support costs (bonds, temporary storage, temporary office, security guard, utilities, dumpsters, portable toilets) and typically runs 5–10 percent of the total bid, while company overhead covers business-wide costs such as office rent, accounting fees, and legal fees.

Direct costs are tied to a specific project (materials, labor, permit fees, subcontractor fees, and equipment needed for the job such as a crane to set an air handling unit), while indirect costs such as small tools and pickup trucks are figured into project overhead instead of being listed as project equipment.

Addenda are changes made before the contract award (and become part of the bid documents and ultimately the contract when awarded), while modifications are changes made after the contract is signed and executed.

In arbitration a third-party arbitrator acts as a judge and renders an arbitral award that legally binds all parties, while in mediation an independent third-party mediator only facilitates dialogue and the parties themselves set the terms of any agreement.

Mediation and arbitration involve a neutral third party, while collaborative law has no neutral mediator or arbitrator — the parties negotiate through their own advocates (usually lawyers) toward a mutually beneficial result.

All-risk covers direct loss by any peril not specifically excluded by the policy (covering almost all risks), while named peril is narrower and covers only the perils it specifies, such as fire and lightning.

Bid shopping is the general contractor approaching subcontractors other than those who submitted bids to seek a lower offer, while bid peddling is a subcontractor approaching the general contractor after the award intending to undercut the price submitted on bid day.

Bid rigging is collusion in which contractors coordinate their bids to fix the award outcome of a project, while bid shopping is a general contractor seeking lower subcontractor prices than those originally quoted.

The quantity take-off method individually estimates units of materials and labor for each task (generally the most accurate), while the unit price method bundles all cost factors — labor, materials, equipment, and subcontractors — into a single price for the entire task.

The square-foot method is a quick estimate but does not account for project-specific factors that affect cost, while the quantity take-off method estimates each component individually and is generally the most accurate.

Leasing requires no down payment, spreads lower payments over a longer period, allows lease payments to be deducted as operating expenses, and returns obsolete equipment to the owner, while purchasing usually costs less in the long run and provides ownership/salvage value.

They are mutually exclusive remedies — an owner who sues for the contract's liquidated damages (e.g., $500/day × 20 days = $10,000) cannot also sue for actual damages.

An immaterial or partial breach is a less serious violation that usually does not terminate the contract, and the injured party may only sue for the value of the damages suffered.

A home builder's license is required when residential construction cost exceeds $10,000, but a residential roofer is included in the definition when the cost of the undertaking exceeds only $2,500.

The Home Builders Licensure Board may levy administrative fines not exceeding $5,000 for each violation, while the criminal fine of up to $6,000 for unlicensed activity is a separate penalty imposed by the courts.