TN BUSINESS AND LAW STUDY GUIDE 2025/2026
QUESTIONS WITH SOLUTIONS RATED A+
✔✔What circumstances are best for renting equipment - ✔✔short term specialized
projects
replacement for equipment being repaired
equipment with high maintenance cost
jobs that require transportation and storage to distant locations
✔✔What are allowances - ✔✔items not specified in project plans ( fixtures, lighting,
carpet) should be added based on owners budget
✔✔why are contigencies added and what are they based off of - ✔✔unexpected
problems or conditions that arise during project
based off risk level of project
✔✔What are project overhead costs and provide examples - ✔✔items necessary to
complete the project but are not directly associated with labor and materials such as
bonds or temporary offices
✔✔What is company overhead - ✔✔the cost of doing business that keeps the operation
running
✔✔what are some examples of company overhead - ✔✔office rent
accounting fees
taxes
phones
legal fees
administrative labor
✔✔Why is adding company overhead to your bid important - ✔✔to cover costs
✔✔If your direct costs of your bid is 100,000, your project overhead is 9% and your
company overhead is 11%, what should you markup your bid? Show math. -
✔✔100,% = 125,000
✔✔what is cost based pricing - ✔✔the cost of the project is determined through the cost
estimate and an overhead percentage, plus a markup percentage. The markup
percentage is divided into the direct costs of the project.
✔✔What is the standard industry markup - ✔✔15%
✔✔What happens if your mark up is too low - ✔✔you may not cover your costs to
complete the contract, causing you to break even or lose money
,✔✔What are the other methods of estimating - ✔✔conceptual estimating
square foot method
unit price method
✔✔what is a conceptual estimate - ✔✔estimate prepared by architects using previous
cost models from previous projects
✔✔what is the square foot method - ✔✔square footage x unit cost
✔✔what is the unit price method - ✔✔bundles all cost factors such as labor, materials,
subcontractors, equipment, etc to determine unit per foot multiplied by the square
footage of project
✔✔What are common errors that lead to inaccurate estimates - ✔✔mathmatical errors
omissions in labor or materials
nonstandard abbreviations
units of measure
✔✔What does a job cost recording system help witjh - ✔✔helps with future estimates by
creating more accurate unit costs
✔✔What is a contract - ✔✔legally binding agreements between 2 or more parties
✔✔if you have an agreement with a customer, does that mean you have a contract -
✔✔no
✔✔what are the 4 requirements of a contract to make it binding - ✔✔offer and
acceptance
consideration
competent parties
legal purpose
✔✔what is an offer in a contract - ✔✔specifically outlines the obligations of a contract
including the work to be done and the compensation
✔✔When are you legally bound to what you agreed to - ✔✔once the offer is made and
agreed to
✔✔When does an offer expire - ✔✔in a reasonable time that is determined by court
interpretation and is considered on an individual case basis
✔✔What is negotiation - ✔✔the process where the owner and contractor have made an
agreement on price and terms of cntract
, ✔✔what are the legal requierments of a contract - ✔✔must be possible to perform
not intended to harm anyone
and must not require illegal activities
✔✔What should the contract provisions be and what are the key provisions - ✔✔clear
and concise
Payment and price terms
obligations of parties
supplemental conditions
breach of contract
✔✔What are progress payments - ✔✔Partial payments made after specified phase is
completed
✔✔How are progress payments calculated - ✔✔Taking difference between completed
work, materials delivered, and a predetermined schedule of unit costs
✔✔Who certifies the progress payments - ✔✔Architect by confirming the information in
the progress payment estimate
✔✔What is retainage - ✔✔Used by owner to ensure the completion of the construction
and provide protection against liens, claims, and defaults.
✔✔How is retainage calculated and withheld - ✔✔It usually calculated by a percentage
(most commonly 10%) and is withheld out of each progress payment
✔✔What are a contractor's obligations - ✔✔Having proper licensure
securing building permits
ordering all materials and supplies and arranging site delivery
furnishing all labor including obtaining required subcontractors to complete the job
completing all work in compliance with all applicable codes and scheduling inspections
on a timely basis
completing all work according to plans and specifications
keeping the construction site clean and removal of debris during and upon completion of
job
✔✔What are the owners obligations - ✔✔Ensuring prompt approval of all plans and
specifications
ensuring project meets zoning specifications
issuing payments according to the specified schedule of progress payments
paying for all required permits, assessments, and charges required by the public
agencies and utilities
furnishing all surveys and recording plats and a legal description of the property
providing access to the construction site in a timely manner
QUESTIONS WITH SOLUTIONS RATED A+
✔✔What circumstances are best for renting equipment - ✔✔short term specialized
projects
replacement for equipment being repaired
equipment with high maintenance cost
jobs that require transportation and storage to distant locations
✔✔What are allowances - ✔✔items not specified in project plans ( fixtures, lighting,
carpet) should be added based on owners budget
✔✔why are contigencies added and what are they based off of - ✔✔unexpected
problems or conditions that arise during project
based off risk level of project
✔✔What are project overhead costs and provide examples - ✔✔items necessary to
complete the project but are not directly associated with labor and materials such as
bonds or temporary offices
✔✔What is company overhead - ✔✔the cost of doing business that keeps the operation
running
✔✔what are some examples of company overhead - ✔✔office rent
accounting fees
taxes
phones
legal fees
administrative labor
✔✔Why is adding company overhead to your bid important - ✔✔to cover costs
✔✔If your direct costs of your bid is 100,000, your project overhead is 9% and your
company overhead is 11%, what should you markup your bid? Show math. -
✔✔100,% = 125,000
✔✔what is cost based pricing - ✔✔the cost of the project is determined through the cost
estimate and an overhead percentage, plus a markup percentage. The markup
percentage is divided into the direct costs of the project.
✔✔What is the standard industry markup - ✔✔15%
✔✔What happens if your mark up is too low - ✔✔you may not cover your costs to
complete the contract, causing you to break even or lose money
,✔✔What are the other methods of estimating - ✔✔conceptual estimating
square foot method
unit price method
✔✔what is a conceptual estimate - ✔✔estimate prepared by architects using previous
cost models from previous projects
✔✔what is the square foot method - ✔✔square footage x unit cost
✔✔what is the unit price method - ✔✔bundles all cost factors such as labor, materials,
subcontractors, equipment, etc to determine unit per foot multiplied by the square
footage of project
✔✔What are common errors that lead to inaccurate estimates - ✔✔mathmatical errors
omissions in labor or materials
nonstandard abbreviations
units of measure
✔✔What does a job cost recording system help witjh - ✔✔helps with future estimates by
creating more accurate unit costs
✔✔What is a contract - ✔✔legally binding agreements between 2 or more parties
✔✔if you have an agreement with a customer, does that mean you have a contract -
✔✔no
✔✔what are the 4 requirements of a contract to make it binding - ✔✔offer and
acceptance
consideration
competent parties
legal purpose
✔✔what is an offer in a contract - ✔✔specifically outlines the obligations of a contract
including the work to be done and the compensation
✔✔When are you legally bound to what you agreed to - ✔✔once the offer is made and
agreed to
✔✔When does an offer expire - ✔✔in a reasonable time that is determined by court
interpretation and is considered on an individual case basis
✔✔What is negotiation - ✔✔the process where the owner and contractor have made an
agreement on price and terms of cntract
, ✔✔what are the legal requierments of a contract - ✔✔must be possible to perform
not intended to harm anyone
and must not require illegal activities
✔✔What should the contract provisions be and what are the key provisions - ✔✔clear
and concise
Payment and price terms
obligations of parties
supplemental conditions
breach of contract
✔✔What are progress payments - ✔✔Partial payments made after specified phase is
completed
✔✔How are progress payments calculated - ✔✔Taking difference between completed
work, materials delivered, and a predetermined schedule of unit costs
✔✔Who certifies the progress payments - ✔✔Architect by confirming the information in
the progress payment estimate
✔✔What is retainage - ✔✔Used by owner to ensure the completion of the construction
and provide protection against liens, claims, and defaults.
✔✔How is retainage calculated and withheld - ✔✔It usually calculated by a percentage
(most commonly 10%) and is withheld out of each progress payment
✔✔What are a contractor's obligations - ✔✔Having proper licensure
securing building permits
ordering all materials and supplies and arranging site delivery
furnishing all labor including obtaining required subcontractors to complete the job
completing all work in compliance with all applicable codes and scheduling inspections
on a timely basis
completing all work according to plans and specifications
keeping the construction site clean and removal of debris during and upon completion of
job
✔✔What are the owners obligations - ✔✔Ensuring prompt approval of all plans and
specifications
ensuring project meets zoning specifications
issuing payments according to the specified schedule of progress payments
paying for all required permits, assessments, and charges required by the public
agencies and utilities
furnishing all surveys and recording plats and a legal description of the property
providing access to the construction site in a timely manner
