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Section 6 of 7

CSLB Bonding Requirements Practice Questions

10 free practice questions on bonding requirements, part of the Public Works section (about 5% of the exam). Try each one, then open the answer: every choice is explained and the law is quoted.

Questions and answers

  1. Public Works

    1. A city awards a public works contract to a direct contractor (the contractor that signs the contract with the city). Under Civil Code section 9550, the contractor must give a payment bond when the contract is MORE than what amount?

    • A. $5,000
    • B. $15,000
    • C. $25,000
    • D. $50,000
    Show answer

    Correct answer: C

    • A. $5,000

      $5,000 is too low. Section 9550 requires a payment bond only when the public works contract involves an expenditure of more than $25,000.

    • B. $15,000

      $15,000 is too low. Section 9550 sets the limit at contracts involving an expenditure of more than $25,000.

    • C. $25,000

      Correct answer

      Section 9550 says a direct contractor awarded a public works contract involving an expenditure of more than $25,000 must give a payment bond.

    • D. $50,000

      $50,000 is too high. Section 9550 requires the payment bond once the contract is more than $25,000.

    Explanation

    Civil Code section 9550 says a direct contractor must give a payment bond on a public works contract involving an expenditure of more than $25,000. The bond must be given to, and approved by, the public entity that awarded the contract. The lower amounts and $50,000 are not the limit in section 9550. The public entity must also say in its call for bids that a payment bond is required.

    Source

  2. Public Works

    2. A contractor wins a city public works contract that requires a payment bond. The contractor offers to deposit cash with the city instead of giving a bond. Under Civil Code section 9554, is this allowed?

    • A. Yes, if the cash equals the full contract amount
    • B. No, it must be a bond from an admitted surety insurer
    • C. Yes, if the city agrees in writing to hold the cash
    • D. No, it must be a letter of credit from a bank
    Show answer

    Correct answer: B

    • A. Yes, if the cash equals the full contract amount

      Section 9554 says the payment bond must be in the form of a bond, not a deposit in lieu of a bond, so cash is not allowed even for the full contract amount.

    • B. No, it must be a bond from an admitted surety insurer

      Correct answer

      Section 9554 says the payment bond must be in the form of a bond, not a deposit in lieu of a bond, and must be executed by an admitted surety insurer.

    • C. Yes, if the city agrees in writing to hold the cash

      The city's written agreement does not change the rule. Section 9554 does not allow a deposit in lieu of a bond.

    • D. No, it must be a letter of credit from a bank

      A bank letter of credit is not a bond from an admitted surety insurer, which is what section 9554 requires.

    Explanation

    Civil Code section 9554 says the payment bond must be in the form of a bond, not a deposit in lieu of (instead of) a bond. It also says the bond must be executed (issued) by an admitted surety insurer. So a cash deposit is not allowed, even for the full contract amount or with the city's written agreement. A bank letter of credit is also not a bond from an admitted surety insurer.

    Source

  3. Public Works

    3. A contractor bids on a city public works project. Under Public Contract Code section 20171, the bid must come with bidder's security, such as a bid bond. What is the smallest amount of this security?

    • A. 5 percent of the amount bid
    • B. 10 percent of the amount bid
    • C. 20 percent of the amount bid
    • D. 100 percent of the amount bid
    Show answer

    Correct answer: B

    • A. 5 percent of the amount bid

      5 percent is too low. Section 20171 requires bidder's security of at least 10 percent of the amount bid.

    • B. 10 percent of the amount bid

      Correct answer

      Section 20171 says the bidder's security must be at least 10 percent of the amount bid, and a bid will not be considered unless the security is enclosed with it.

    • C. 20 percent of the amount bid

      20 percent is more than the minimum. Section 20171 sets the floor at 10 percent of the amount bid.

    • D. 100 percent of the amount bid

      100 percent is the minimum for a payment bond, not for bid security. Section 20171 requires at least 10 percent of the amount bid.

    Explanation

    Public Contract Code section 20171 says the bidder's security must be at least 10 percent of the amount bid. It also says a bid will not be considered unless the security is enclosed with it. Section 20170 lists the allowed forms: cash, a cashier's check or certified check made payable to the city, or a bidder's bond from an admitted surety insurer. 100 percent is the minimum for a payment bond, not for bid security. 5 percent and 20 percent are not the rule in section 20171.

    Sources

  4. Public Works

    4. A direct contractor starts work on a $500,000 city public works contract. It never gives the payment bond required by Civil Code section 9550. Under Civil Code section 9552, what happens when the contractor asks the city to pay its claim under the contract?

    • A. The city must pay it but may keep a 10 percent penalty
    • B. The city must pay it once the work is fully completed
    • C. The city must pay it and then report the contractor to CSLB
    • D. The city may not review, approve, or pay the claim
    Show answer

    Correct answer: D

    • A. The city must pay it but may keep a 10 percent penalty

      Wrong. The law does not let the city pay the claim and keep a penalty; the city may not pay the claim at all.

    • B. The city must pay it once the work is fully completed

      Wrong. Finishing the work does not change the rule; without the required bond, the city may not pay the contractor's claim.

    • C. The city must pay it and then report the contractor to CSLB

      Wrong. Section 9552 does not provide for paying the claim and reporting the contractor to the CSLB; it bars paying the claim.

    • D. The city may not review, approve, or pay the claim

      Correct answer

      Correct. Under section 9552, if the payment bond is not given and approved as section 9550 requires, the public entity and its officers may not audit, allow, or pay the direct contractor's claim.

    Explanation

    Civil Code section 9552 says that if a payment bond is not given and approved as section 9550 requires, neither the public entity nor any of its officers may audit, allow, or pay (review, approve, or pay) a claim of the direct contractor under the contract. So the city may not pay this contractor's claim. The law does not let the city pay and keep a penalty, and finishing the work does not change the rule. A report to the CSLB is not what this section provides.

    Sources

  5. Public Works

    5. A subcontractor finished its work on a public works project but was not paid. It plans to sue to enforce the payment bond. Under Civil Code section 9558, what is the latest time it may start (file) that lawsuit?

    • A. 30 days after the time to give a stop payment notice ends
    • B. 90 days after the time to give a stop payment notice ends
    • C. Six months after the time to give a stop payment notice ends
    • D. One year after the time to give a stop payment notice ends
    Show answer

    Correct answer: C

    • A. 30 days after the time to give a stop payment notice ends

      Wrong. Thirty days is shorter than the time the law allows; the deadline is six months after the stop payment notice period ends.

    • B. 90 days after the time to give a stop payment notice ends

      Wrong. Ninety days is shorter than the time the law allows; the deadline is six months after the stop payment notice period ends.

    • C. Six months after the time to give a stop payment notice ends

      Correct answer

      Correct. Section 9558 says a claimant must sue on the bond no later than six months after the period in which a stop payment notice may be given.

    • D. One year after the time to give a stop payment notice ends

      Wrong. One year is past the deadline; the lawsuit must be started within six months after the stop payment notice period ends.

    Explanation

    Civil Code section 9558 says a claimant may sue on the bond any time after it stops providing work, but not later than six months after the period in which a stop payment notice may be given. So the deadline is counted from the end of the stop payment notice period. Thirty days and 90 days are shorter than the time the law allows, and one year is past the deadline.

    Source

  6. Public Works

    6. A subcontractor gives a city a stop payment notice that claims $48,000. The city allows the direct contractor to give a release bond so the city will not hold back the money. Under Civil Code section 9364, what must the amount of the release bond be?

    • A. $12,000
    • B. $48,000
    • C. $60,000
    • D. $72,000
    Show answer

    Correct answer: C

    • A. $12,000

      Wrong. $12,000 is only the extra 25 percent ($48,000 x 0.25), not the whole bond, which must equal 125 percent of the claim.

    • B. $48,000

      Wrong. $48,000 is only 100 percent of the claim and leaves out the extra 25 percent the law requires.

    • C. $60,000

      Correct answer

      Correct. Section 9364 requires a release bond equal to 125 percent of the claim, and $48,000 x 1.25 = $60,000.

    • D. $72,000

      Wrong. $72,000 uses 150 percent ($48,000 x 1.5), but section 9364 sets the bond at 125 percent of the claim.

    Explanation

    Step 1: Civil Code section 9364 says the release bond must be in an amount equal to 125 percent of the claim stated in the stop payment notice. Step 2: 125 percent written as a decimal is 1.25. Step 3: $48,000 x 1.25 = $60,000. The answer $48,000 uses only 100 percent of the claim and leaves out the extra 25 percent. The answer $12,000 is only the extra 25 percent ($48,000 x 0.25 = $12,000), not the whole bond. The answer $72,000 uses 150 percent ($48,000 x 1.5 = $72,000), which is not the rate in this section.

    Source

  7. Public Works

    7. A contractor is the successful (winning) bidder on a city public works contract. It enclosed a bidder's bond with its bid. It then fails to sign (execute) the contract. No exception applies. Under Public Contract Code section 20172, what happens to its bidder's security?

    • A. The city must return it within 60 days after the award
    • B. The amount of the security is forfeited (lost) to the city
    • C. The city must pay it to the second lowest bidder
    • D. The city holds it until the project is complete
    Show answer

    Correct answer: B

    • A. The city must return it within 60 days after the award

      Section 20172 does not require the city to return the security. When the successful bidder fails to execute the contract, the amount of the security is forfeited to the city.

    • B. The amount of the security is forfeited (lost) to the city

      Correct answer

      Section 20172 says that if the successful bidder fails to execute the contract, the amount of its security is forfeited to the city. No exception applies here, so the city keeps it.

    • C. The city must pay it to the second lowest bidder

      The forfeited amount goes to the city, not to the second lowest bidder.

    • D. The city holds it until the project is complete

      The section does not have the city hold the security until the project is done. The amount is forfeited to the city once the winning bidder fails to execute the contract.

    Explanation

    Public Contract Code section 20172 says that if the successful bidder fails to execute (sign) the contract, the amount of the bidder's security is forfeited to the city, unless an exception applies. No exception applies here, so the city keeps the amount of the security. The section does not require the city to return the security, pay it to another bidder, or hold it until the project is complete.

    Source

  8. Public Works

    8. A contractor is bidding on a city public works project. Under Public Contract Code section 20170, which of these may it enclose with its bid as bidder's security?

    • A. A personal check drawn on the company's bank account
    • B. A written promise to pay signed by the owner
    • C. A letter of credit issued by the company's bank
    • D. A certified check made payable to the city
    Show answer

    Correct answer: D

    • A. A personal check drawn on the company's bank account

      A personal check is not one of the four forms of bidder's security in section 20170. The list is cash, a cashier's check or certified check payable to the city, or a bidder's bond from an admitted surety insurer.

    • B. A written promise to pay signed by the owner

      A written promise to pay is not on section 20170's list of bidder's security, so it does not qualify.

    • C. A letter of credit issued by the company's bank

      A letter of credit is not on section 20170's list of bidder's security, so it does not qualify.

    • D. A certified check made payable to the city

      Correct answer

      Section 20170 lists a certified check made payable to the city as one of the four allowed forms of bidder's security.

    Explanation

    Public Contract Code section 20170 says every city bid must come with one of four forms of bidder's security: cash, a cashier's check made payable to the city, a certified check made payable to the city, or a bidder's bond from an admitted surety insurer. A certified check made payable to the city is on this list. A personal check, a written promise to pay, and a letter of credit are not on the list, so they do not qualify.

    Sources

  9. Public Works

    9. A county awards a $400,000 public works contract to a direct contractor. Under Civil Code section 9550, when must the contractor give the payment bond?

    • A. Before the contractor starts work on the contract
    • B. Before the public entity opens the bids
    • C. Within 10 days after the work is completed
    • D. Before the contractor receives the final payment
    Show answer

    Correct answer: A

    • A. Before the contractor starts work on the contract

      Correct answer

      Section 9550 says the direct contractor must give the payment bond before commencement of work, meaning before it starts work on the contract.

    • B. Before the public entity opens the bids

      Section 9550 does not tie the payment bond to the bid opening. It requires the bond before the contractor starts work.

    • C. Within 10 days after the work is completed

      After the work is completed is too late. Section 9550 requires the payment bond before work begins.

    • D. Before the contractor receives the final payment

      Final payment is too late. Section 9550 requires the payment bond before commencement of work.

    Explanation

    Civil Code section 9550 says the direct contractor must give the payment bond before commencement (start) of work. The public entity that awarded the contract must approve the bond. The bond protects people who are not paid for their work, so it must be in place before the work begins. Section 9550 does not tie the payment bond to the bid opening, and giving it after the work is completed or at final payment is too late.

    Source

  10. Public Works

    10. On a public works project, a payment bond is in place. Under Civil Code section 9100, which of these may NOT make a claim against the payment bond?

    • A. A laborer who was not paid for work on the project
    • B. A subcontractor hired by the direct contractor for the job
    • C. A second-tier subcontractor hired by a subcontractor on the job
    • D. The direct contractor that signed the contract with the public entity
    Show answer

    Correct answer: D

    • A. A laborer who was not paid for work on the project

      A laborer who was not paid for work on the project may make a claim against the payment bond under section 9100.

    • B. A subcontractor hired by the direct contractor for the job

      A subcontractor provides work authorized by the direct contractor, so under section 9100 it may claim against the payment bond if not paid.

    • C. A second-tier subcontractor hired by a subcontractor on the job

      A second-tier subcontractor provides work authorized by a subcontractor, so under section 9100 it may claim against the payment bond if not paid.

    • D. The direct contractor that signed the contract with the public entity

      Correct answer

      Section 9100 says a direct contractor may not assert a claim against a payment bond. The direct contractor gave the bond, so the bond does not protect it.

    Explanation

    Civil Code section 9100 lets unpaid persons make a claim against a payment bond. This includes a laborer and a person who provides work authorized by a direct contractor or a subcontractor. But section 9100 also says a direct contractor may not assert a claim against a payment bond. The direct contractor is the one that gave the bond, so the bond does not protect it. Laborers, subcontractors, and lower-tier subcontractors who are not paid can claim.

    Sources

Keep studying

Read the Section 6 study notes: Public Works

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