CSLB Contract and Lien Laws 2

Question 1

Which California code section governs the required elements of a valid home improvement contract?

Accepted Answer

Business and Professions Code 7159

Answer

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?

Accepted Answer

A clause making the subcontractor's payment contingent on the general contractor actually receiving payment from the owner

Answer

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?

Accepted Answer

The contractor may be subject to discipline and the homeowner may have grounds to rescind

Answer

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?

Accepted Answer

A preliminary title report

Answer

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?

Accepted Answer

A payment arrangement making checks payable jointly to the GC and subcontractor or supplier to ensure funds reach the lower-tier party

Answer

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.

CSLB - Contractors State License Board Practice Test

CSLB - Contractors State License Board Practice Test

CSLB Contract and Lien Laws 2