Contract requirements & execution: CSLB Law & Business Practice Questions

Above what total price does a home improvement job require a home improvement contract that meets §7159?

Section 7159(b) applies the home improvement contract rules when the aggregate contract price for labor, services and materials exceeds $500. The $1,000 figure is the separate minor-work exemption.

A tenant in a 40-unit apartment building hires a contractor to remodel her own unit for $6,000. Is this a home improvement contract?

Section 7159(b) covers contracts with a tenant for work on the tenant's own dwelling unit, regardless of how many units the building has.

What is the maximum down payment on a home improvement contract?

Section 7159.5(a)(3) caps the down payment at $1,000 or 10 percent of the contract amount, whichever is less.

A home improvement contract is for $7,500. What is the largest down payment the contractor may take?

10 percent of $7,500 is $750, which is less than $1,000, so $750 is the maximum.

A kitchen remodel contract is for $48,000. What is the largest down payment allowed?

10 percent would be $4,800, but the cap is $1,000 or 10 percent, whichever is less, so the maximum is $1,000.

After the down payment, how much may a home improvement contractor collect before work is done?

Section 7159.5(a)(5) bars requesting or accepting payment, other than the down payment, that exceeds the value of work performed or materials delivered, including advance payments from a lender.

A licensee takes a $3,000 down payment on a $20,000 home improvement job. What criminal penalty can apply?

Section 7159.5(b)(1) makes an excessive down payment (or payment ahead of work, or no written contract) a misdemeanor; in a declared disaster area the court must impose the maximum fine.

Which contractor is exempt from the down payment and progress payment limits on home improvement contracts?

Section 7159.5(a)(8) exempts contractors covering full performance and payment with a bond, bond equivalent or registrar-approved joint control; a blanket bond requires at least two years of active licensure.

When must the buyer receive a copy of the home improvement contract signed by both parties?

Section 7159(c)(3) requires a signed and dated copy before work begins; the buyer's receipt of it starts the cancellation period.

When does a change order become part of a home improvement contract?

Sections 7159(c)(5) and (d) require change orders to be written and signed by the parties before work under them begins.

Under §7159, what three things must a change order identify in writing to be enforceable against the buyer?

Section 7159(e)(3) says extra work is not enforceable against the buyer unless the order states the scope, the amount added or subtracted, and the effect on progress payments or completion date, before the work begins.

A contractor did extra work without a written change order. Can it recover anything?

Section 7159(e)(3)(C) states that failing the change-order rules does not bar recovery for work performed under remedies designed to prevent unjust enrichment, though it can be cause for discipline.

What notice must appear near the signatures on a home improvement contract?

Section 7159(c)(6) requires a notice, close to the owner's and contractor's signatures, that the owner or tenant has the right to require the contractor to have a performance and payment bond.

What must a home improvement contract say about subcontractors?

Section 7159(c)(7) requires a yes/no statement on subcontractor use; if yes, a disclaimer that a list with names, contact information, license numbers and classes is available on request.

After a payment is made, what must the contractor furnish before receiving the next payment, under the home improvement contract statement?

Section 7159(c)(4) requires a contract statement that, after satisfactory payment for a portion of work, the contractor will furnish a full and unconditional release from lien claims for that portion before further payment.