CSLB Contract Law and Dispute Resolution 1 — Questions and Answers
Question 1: Under California law, a written home improvement contract is required for projects exceeding what dollar amount?
- $200
- $500
- $750 (Correct answer)
- $1,000
Correct answer: $750
California Business and Professions Code §7159 requires a written contract for home improvement projects where the total price exceeds $750.
Question 2: What is the maximum down payment a contractor may legally collect from a homeowner at the start of a home improvement project in California?
- 5% of the contract price or $200, whichever is less
- 10% of the contract price or $1,000, whichever is less (Correct answer)
- 20% of the contract price
- 25% of the contract price
Correct answer: 10% of the contract price or $1,000, whichever is less
California law caps initial down payments at 10% of the contract price or $1,000, whichever is less, to protect consumers from contractor fraud.
Question 3: A California mechanic's lien must be filed within how many days after project completion for a direct contractor?
- 30 days
- 60 days
- 90 days (Correct answer)
- 120 days
Correct answer: 90 days
Under California Civil Code §8412, a direct (prime) contractor must record a mechanic's lien within 90 days after the work of improvement is completed.
Question 4: Before recording a mechanic's lien, a subcontractor or supplier must first serve a:
- Notice of Intent to Lien
- Preliminary Notice (20-day notice) (Correct answer)
- Stop Payment Notice
- Notice of Nonresponsibility
Correct answer: Preliminary Notice (20-day notice)
California Civil Code requires subcontractors and material suppliers to serve a Preliminary Notice (formerly called a 20-day notice) before they can record a valid mechanic's lien.
Question 5: Which clause in a construction contract allows the owner to direct the contractor to perform additional work beyond the original scope?
- Indemnification clause
- Changes clause (Correct answer)
- Termination for convenience clause
- Liquidated damages clause
Correct answer: Changes clause
The Changes clause (or change order clause) gives the owner the right to order changes in the work and requires the contractor to proceed while price and time adjustments are negotiated.
Question 6: In California, a homeowner has the right to cancel a home improvement contract (3-day right of rescission) if:
- The contract was solicited at the contractor's place of business
- The contract was signed at the owner's home (Correct answer)
- The project exceeds $10,000
- The contractor does not provide a bond certificate
Correct answer: The contract was signed at the owner's home
California consumers have a 3-business-day right of rescission for home improvement contracts solicited and signed at their home, under the Home Solicitation Sales Act.
CSLB Contract Law and Dispute Resolution 1
Under California law, a written home improvement contract is required for projects exceeding what dollar amount?