Florida Building Contractor Business/Finance Practice Exam

In construction contracts, how are extensions of time formalized?

1. Letter of Intent

2. Change order

3. Notice of Delay

4. Project Update

The correct answer is: Change order

Extensions of time in construction contracts are formalized through a change order. A change order is a document that alters the original contract terms, including modifications to the scope of work, cost adjustments, and important timelines such as extension of time for project completion. This formalization is critical as it provides a clear and mutually agreed-upon record of the changes being made, protecting both the contractor’s ability to receive compensation for disruptions or delays and the owner’s interest in project timelines. The use of a change order helps ensure that both parties are in agreement on the new terms, including the new completion date, which becomes essential for project scheduling and management. It legally bindingly modifies the contract, ensuring compliance with project regulations and preserving the rights of all involved parties. While other options, such as a letter of intent or notice of delay, are useful communication tools within the project management context, they do not provide the same level of formalization as a change order, which requires approval from both parties. A project update, on the other hand, is typically an informational tool that provides progress reports without altering the contract's terms or timelines.