MHIC Contracts and Estimating 2 — Questions and Answers
Question 1: Under Maryland Home Improvement Law, which of the following MUST be included in every home improvement contract?
- The contractor's MHIC license number (Correct answer)
- The homeowner's credit score
- A list of all subcontractors to be used
- A breakdown of the contractor's profit margin
Correct answer: The contractor's MHIC license number
Every Maryland home improvement contract must include the contractor's MHIC license number. This is a mandatory disclosure requirement under Maryland law.
Maryland Home Improvement Law requires that every home improvement contract prominently display the contractor's MHIC license number. This allows homeowners to verify the contractor's licensure status and is a basic consumer protection measure. Contracts missing the license number may be voidable by the homeowner, and the contractor may face disciplinary action.
Question 2: A contractor provides a written estimate and the homeowner signs it. Under Maryland law, this signed estimate generally functions as:
- A binding contract if it contains all required contract elements (Correct answer)
- A non-binding proposal only
- Binding only after work begins
- Binding only if notarized
Correct answer: A binding contract if it contains all required contract elements
If a signed estimate includes all elements required by Maryland Home Improvement Law (parties, description of work, price, start/completion dates, license number, etc.), it can function as a valid binding contract.
Maryland courts and the MHIC have recognized that a signed estimate containing all mandatory contract elements can constitute a legally binding home improvement contract. Contractors should ensure that any document signed by a homeowner includes all required disclosures to avoid disputes. Conversely, a simple estimate lacking key elements like completion dates or the right-to-cancel notice may not be enforceable as a contract.
Question 3: Maryland law requires that a home improvement contract include a notice of the homeowner's right to cancel. When must this notice be provided?
- At the time of signing, as part of the contract (Correct answer)
- Within 72 hours after work begins
- Only if the contract exceeds $25,000
- Only for contracts solicited at the homeowner's door
Correct answer: At the time of signing, as part of the contract
Maryland Home Improvement Law requires the right-to-cancel notice to be included in the contract at the time of signing, not after work begins.
The right-to-cancel notice must be a conspicuous part of every home improvement contract at the time it is signed. Maryland law requires a 3-business-day cancellation period, and homeowners must be informed of this right in writing. The notice must include the cancellation deadline date and instructions for how to cancel. Failure to provide this notice gives the homeowner an extended right to cancel.
Question 4: A contractor gives an oral estimate of $8,000, then submits a written contract for $9,500. The homeowner signed the written contract. Which amount governs?
- $9,500 — the signed written contract governs (Correct answer)
- $8,000 — the oral estimate is binding
- The average of both amounts
- Neither amount; the contract is void due to discrepancy
Correct answer: $9,500 — the signed written contract governs
Under contract law and Maryland Home Improvement Law, the signed written contract governs over any prior oral discussions. The homeowner agreed to $9,500 by signing the contract.
The parol evidence rule generally prevents oral negotiations from overriding a written signed contract. Once a homeowner signs a home improvement contract, they are bound by its written terms. This underscores the importance of homeowners carefully reviewing written contracts before signing. Maryland law does give homeowners a 3-business-day right to cancel, during which they can back out if the written terms differ from expectations.
Question 5: Under Maryland Home Improvement Law, what is the maximum deposit a contractor can require before beginning work?
- One-third (1/3) of the contract price (Correct answer)
- One-half (1/2) of the contract price
- 10% of the contract price
- There is no legal limit on deposits
Correct answer: One-third (1/3) of the contract price
Maryland Home Improvement Law limits advance deposits to one-third (1/3) of the total contract price before work begins.
To protect homeowners from contractors who take large deposits and fail to perform, Maryland law caps the initial deposit at one-third of the contract amount. This rule applies to contracts for home improvement work on residential property. Contractors who demand more than one-third upfront violate MHIC regulations and may face disciplinary action, including suspension or revocation of their license.
Question 6: Which of the following contract provisions is PROHIBITED under Maryland Home Improvement Law?
- A waiver of the homeowner's right to cancel (Correct answer)
- A payment schedule tied to completion milestones
- A clause allowing price adjustments for material cost increases
- A dispute resolution clause requiring mediation
Correct answer: A waiver of the homeowner's right to cancel
Maryland Home Improvement Law explicitly prohibits contract clauses that waive the homeowner's right to cancel. Such provisions are void as against public policy.
The 3-business-day right to cancel is a non-waivable consumer protection right under Maryland Home Improvement Law. Any contract provision that attempts to waive this right is automatically void and unenforceable. Payment milestones, price escalation clauses for materials, and mediation requirements are all generally permissible as long as they comply with other requirements of the law.
MHIC Contracts and Estimating 2
Under Maryland Home Improvement Law, which of the following MUST be included in every home improvement contract?