A homeowner disputes $12,000 in charges from a licensed Michigan contractor. The contractor's surety bond is $25,000. What is the maximum amount the homeowner can claim against the bond for this single project?
Correct Answer
B) $12,000
Bond claims are limited to actual damages. The homeowner can claim up to the disputed amount of $12,000, not exceeding actual damages incurred.
Why This Is the Correct Answer
Bond claims are limited to actual, documented damages. The homeowner's actual dispute is $12,000, so that is the maximum claimable amount. The bond's $25,000 face value represents the maximum total capacity of the bond — not an entitlement for every claimant. A claimant cannot claim more than their actual damages, regardless of the bond amount.
Why the Other Options Are Wrong
Option A: $15,000
$15,000 exceeds the homeowner's actual dispute of $12,000. There is no basis to claim $15,000 when actual damages are $12,000 — bond claims are capped at actual loss, not an arbitrary higher number.
Option C: $20,000
$20,000 has no relationship to either the actual damages ($12,000) or a recognized partial fraction of the bond ($25,000). This is a distractor with no legal basis.
Option D: $25,000
$25,000 is the total bond value, but one claimant on one project cannot automatically claim the full bond amount. The homeowner is limited to their actual damages of $12,000. The full bond value would only be relevant if actual damages equaled or exceeded $25,000.
Memory Technique
Think of a surety bond as a pool of money. You can only scoop out what you actually lost — not the whole pool. Actual damages = actual claim. Bond face value = pool size, not your share.
More Michigan Questions
A Michigan contractor forms an S-Corporation. What is the maximum number of shareholders allowed?
A contractor's employee is injured on a job site in Michigan. The contractor's workers' compensation insurance has a $500 deductible per claim. The total medical costs are $12,500 and lost wages are $3,200. What is the contractor's out-of-pocket cost for this claim?
What is the minimum general liability insurance coverage amount required for Michigan residential builders?
Under Michigan Act 299, what is the consequence for a contractor who performs work outside the scope of their license classification?
A contractor discovers that a subcontractor has filed a construction lien against their project. The general contractor believes the lien is invalid. What is the primary legal mechanism to challenge the lien in Michigan?
Under Michigan Act 299, what happens if a contractor continues to work without a valid license after it expires?
Which of the following best describes the 'pay when paid' clause limitation under Michigan law?
A project has total costs of $180,000 including $75,000 labor and $105,000 materials. With workers compensation at 7.8% of labor costs and general liability at 0.4% of total costs, what are the combined insurance costs?
A Michigan contractor is forming an LLC. What is the minimum general liability insurance coverage required for residential builders under Michigan law?
Under Michigan Act 299, a contractor's license must be renewed every:
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
A Michigan contractor operates as a sole proprietorship and wants to convert to an LLC. The business has $150,000 in assets and $75,000 in liabilities. What is the owner's equity that will transfer to the new LLC?
Next Question
Under Michigan law, within how many days must a contractor provide preliminary notice to preserve lien rights on a commercial project?