CSLB Contract and Lien Laws 2 — Questions and Answers
Question 1: Which California code section governs the required elements of a valid home improvement contract?
- Civil Code 1624
- Business and Professions Code 7159 (Correct answer)
- Civil Code 8000
- Labor Code 1720
Correct answer: Business and Professions Code 7159
Business and Professions Code Section 7159 specifies all mandatory provisions, disclosures, and format requirements for valid home improvement contracts.
Question 2: What is a 'pay-if-paid' clause in a construction subcontract?
- A clause requiring payment within 30 days regardless of owner payment
- A clause making the subcontractor's payment contingent on the general contractor actually receiving payment from the owner (Correct answer)
- A clause guaranteeing lien-free payment
- A clause requiring escrow of all project funds
Correct answer: A clause making the subcontractor's payment contingent on the general contractor actually receiving payment from the owner
A pay-if-paid clause shifts the risk of owner non-payment to the subcontractor, making sub payment contingent on the GC receiving owner payment.
Question 3: Under California law, what happens if a required written home improvement contract is missing key statutory elements?
- The contract is automatically voided
- The contractor may be subject to discipline and the homeowner may have grounds to rescind (Correct answer)
- The missing elements are implied by statute
- Only the contractor is penalized, not the homeowner
Correct answer: The contractor may be subject to discipline and the homeowner may have grounds to rescind
Contracts missing required statutory elements expose the contractor to CSLB disciplinary action, and homeowners may be entitled to rescind the contract.
Question 4: In California, what tool reveals recorded mechanics' liens and other encumbrances on a property to buyers and lenders?
- A preliminary title report (Correct answer)
- A CSLB clearance certificate
- A signed lien waiver from the contractor only
- A county assessor printout
Correct answer: A preliminary title report
A preliminary title report reveals all recorded encumbrances including mechanics' liens, enabling buyers and lenders to evaluate title risk.
Question 5: What is a 'joint check agreement' in construction and why is it used?
- An agreement where the owner pays the bank directly for materials
- A payment arrangement making checks payable jointly to the GC and subcontractor or supplier to ensure funds reach the lower-tier party (Correct answer)
- An agreement splitting payment between two general contractors
- A lien waiver combined with a payment check
Correct answer: A payment arrangement making checks payable jointly to the GC and subcontractor or supplier to ensure funds reach the lower-tier party
A joint check agreement ensures that a subcontractor or supplier is included as a co-payee on checks, preventing the GC from diverting funds owed to them.
Question 6: Under California's licensing law, can a contractor legally sue to collect payment if the license lapsed during the project?
- Yes, if the work was performed competently
- No — a contractor who was unlicensed at any time during the project generally cannot sue for compensation (Correct answer)
- Yes, if the contractor renews the license before filing suit
- Yes, for labor costs only
Correct answer: No — a contractor who was unlicensed at any time during the project generally cannot sue for compensation
Under BPC Section 7031, a contractor who was unlicensed at any point during the project generally cannot sue to recover compensation, regardless of work quality.
CSLB Contract and Lien Laws 2
Which California code section governs the required elements of a valid home improvement contract?