Arizona Contractors License Practice Exam

What constitutes a material breach in a contractor-owner agreement?

1. An increase in project cost

2. A refusal by the contractor to perform or complete the job, or by the owner to pay

3. A delay in project completion

4. A disagreement over scope of work

The correct answer is: A refusal by the contractor to perform or complete the job, or by the owner to pay

A material breach in a contractor-owner agreement primarily involves a significant failure in fulfilling contractual obligations that undermines the agreement's essence. In this context, a refusal by the contractor to perform or complete the job, or by the owner to pay, represents a clear violation of the agreed terms of the contract. Such refusals indicate that one party is not meeting their responsibilities, which disrupts the entire project and can lead to significant losses for the other party. An increase in project cost might be frustrating but does not necessarily signify a material breach unless it is linked to a failure to adhere to the terms set in the contract. Delays in project completion could potentially lead to a breach, yet they depend on whether the delays are considered excusable under the contract terms. Disagreements over the scope of work, while potentially problematic, do not inherently constitute a material breach unless they result in the refusal to perform or payment issues. Thus, the distinction lies in the direct refusal to fulfill obligations, which can disrupt the project to a degree that it warrants a classification as a material breach.