MHIC NASCLA Contractors Practice Exam

What is considered fraud in the context of contracting?

1. Overestimating project costs

2. Failing to meet deadlines

3. Making false promises

4. Not having a written contract

The correct answer is: Making false promises

Fraud in the context of contracting primarily involves deceitful practices intended to secure an unfair or unlawful gain. Making false promises fits this definition because it typically entails misrepresenting intentions or capabilities to persuade another party into an agreement or to provide services. For example, if a contractor assures a client that a project will be completed by a certain date or that specific materials will be used, but knowingly intends to do otherwise, this constitutes a deceptive act. In contrast, overestimating project costs may stem from a lack of accurate information or miscalculation rather than intentional deceit. Failing to meet deadlines can often be attributed to unforeseen circumstances or legitimate challenges rather than fraudulent intent, while not having a written contract might be a legal oversight but does not imply fraud, as it does not involve deceit or misrepresentation. Understanding these distinctions is crucial in recognizing fraudulent behavior in contracting situations.