C27 License Business Practices and Contract Law 1 — Questions and Answers
Question 1: Under California law, what is the maximum deposit a contractor may collect from a homeowner at the start of a home improvement project?
- 10% of the contract price or $1,000, whichever is less (Correct answer)
- 15% of the contract price or $1,500, whichever is less
- 25% of the total contract price
- 50% of the total contract price
Correct answer: 10% of the contract price or $1,000, whichever is less
California Business and Professions Code Section 7159.5 limits contractor deposits to 10% of the contract price or $1,000, whichever is less, to protect consumers.
Question 2: Which document must a California contractor provide to a homeowner before starting a home improvement project?
- A materials list only
- A written contract that includes a three-day right to cancel notice (Correct answer)
- A verbal agreement confirmed by email or text
- A building permit application only
Correct answer: A written contract that includes a three-day right to cancel notice
California law requires contractors to provide a written contract including a Notice of the Three-Day Right to Cancel before beginning any home improvement work.
Question 3: What is the 'right to cure' provision in California contractor law?
- The contractor's right to substitute plant species without owner approval
- The contractor's right to fix alleged defective work before the homeowner can pursue legal action (Correct answer)
- The homeowner's right to cancel a contract within three business days
- The contractor's right to adjust the contract price due to unforeseen material costs
Correct answer: The contractor's right to fix alleged defective work before the homeowner can pursue legal action
The right to cure allows a contractor to repair or remedy alleged construction defects before the homeowner can pursue a lawsuit or arbitration.
Question 4: When must a California contractor include a Mechanics Lien Warning in a home improvement contract?
- Only for jobs exceeding $50,000 in value
- For all home improvement contracts regardless of the contract amount (Correct answer)
- Only when the contractor uses licensed subcontractors
- Only for new construction projects on vacant land
Correct answer: For all home improvement contracts regardless of the contract amount
California law requires a Mechanics Lien Warning in every home improvement contract to inform homeowners that their property may be subject to liens if subcontractors or suppliers are not paid.
Question 5: What must a C-27 contractor do if a project requires work outside the scope of the landscaping license?
- Self-perform the out-of-scope work if the value is minor
- Hire a licensed contractor holding the appropriate classification for that work (Correct answer)
- Apply to CSLB for a temporary expansion of license scope
- Subcontract the work to unlicensed workers under direct supervision
Correct answer: Hire a licensed contractor holding the appropriate classification for that work
Contractors must subcontract work outside their licensed classification to a contractor holding the appropriate license — performing out-of-scope work is a license violation.
Question 6: What is the minimum information required in a California contractor's written home improvement contract?
- Just the total price and estimated start date
- Contractor's license number, description of work, start and completion dates, and payment schedule (Correct answer)
- Only a materials list and hourly labor rate
- The contractor's name and contact information only
Correct answer: Contractor's license number, description of work, start and completion dates, and payment schedule
California law specifies that written contracts must include the contractor's license number, scope of work, project timeline, payment schedule, and multiple required disclosures.
C27 License Business Practices and Contract Law 1
Under California law, what is the maximum deposit a contractor may collect from a homeowner at the start of a home improvement project?