Contract Requirements and Execution practice

All 29 free contract requirements and execution questions

1. Section 7159 imposes its contract rules on a residential job once the aggregate price for labor, services and materials passes what figure?

   • A More than $500 Correct
   • B More than $750
   • C More than $1,000
   • D More than $5,000

   Section 7159 of the Business and Professions Code treats an agreement as a home improvement contract for that section only where the aggregate price for all labor, services, and materials exceeds $500, so the contract content rules start above that figure and splitting one job across two smaller papers does not avoid them.

   Bus. & Prof. Code s. 7159(b)

2. The home improvement article defines a senior citizen, for its cancellation rules, as an individual of what age or older?

   • A 60 years of age
   • B 62 years of age
   • C 65 years of age Correct
   • D 70 years of age

   The home improvement article defines a senior citizen as an individual 65 years of age or older, and that definition is what converts the ordinary three business day cancellation right into a five business day right.

   Bus. & Prof. Code s. 7150(b)

3. What is the ceiling on a downpayment charged under a home improvement contract?

   • A $1,000 or 10 percent, whichever is less Correct
   • B $1,000 or 10 percent, whichever is greater
   • C $2,500 or 20 percent, whichever is less
   • D 10 percent, with no dollar ceiling

   Where a downpayment is charged on a home improvement contract it may not exceed $1,000 or 10 percent of the contract amount, whichever is less, so the cap is $1,000 on a $30,000 job and $600 on a $6,000 job.

   Bus. & Prof. Code s. 7159.5(a)(3)

4. A contractor makes a substantial misrepresentation to procure a home improvement contract. Under the Contractors State License Law, what does that act amount to?

   • A A civil wrong the buyer alone pursues
   • B A misdemeanor and cause for discipline Correct
   • C Grounds for suspension after a fraud judgment
   • D An infraction carrying a $1,000 penalty

   The statute lists substantial misrepresentation in the procurement of a home improvement contract among the acts that are a misdemeanor and whose commission is cause for disciplinary action, so the same conduct draws both a criminal charge and a license action.

   Bus. & Prof. Code s. 7161(b)

5. Section 7164 requires a contract and any changes to it to be in writing signed by both parties. Which project does that cover?

   • A A bathroom remodel on an existing house
   • B A new four-unit apartment building
   • C A new house for resale in six months
   • D A new house the owner keeps a year Correct

   Every contract and any change to a contract between an owner and a contractor for the construction of a single-family dwelling to be retained by the owner for at least one year must be in writing signed by both parties, so the one-year retention test is what brings a project under the section.

   Bus. & Prof. Code s. 7164(a)

6. Under the Contractors State License Law, abandoning a construction project is cause for disciplinary action in which circumstance?

   • A Only after a notice of completion
   • B Only where the owner loses money
   • C Only where the contractor was paid fully
   • D Where it is without legal excuse Correct

   Abandonment of a construction project or operation is cause for disciplinary action where it is without legal excuse, so a contractor who stops for a reason the law recognizes, such as following the stop work notice procedure for non-payment, has not committed this violation.

   Bus. & Prof. Code s. 7107

7. Unless the owner and direct contractor have agreed otherwise in writing, an undisputed progress payment is due within how long after notice demanding payment?

   • A Within 10 days of notice
   • B Within 20 days of notice
   • C Within 30 days of notice Correct
   • D Within 45 days of notice

   The owner must pay the direct contractor any progress payment as to which there is no good faith dispute within 30 days after notice demanding payment is given, and may withhold no more than 150 percent of a genuinely disputed amount.

   Civ. Code s. 8800(a)

8. An owner who has withheld retention from the direct contractor must pay it out by what deadline once the work is complete?

   • A Within 10 days of completion
   • B Within 30 days of completion
   • C Within 45 days of completion Correct
   • D Within 60 days of completion

   Where an owner withholds retention from a direct contractor, the owner must pay it within 45 days after completion of the work of improvement, and the clock runs from completion rather than from an invoice or a demand.

   Civ. Code s. 8812(a)

9. Which of the following jobs falls within the definition of home improvement in the Contractors State License Law?

   • A Replacing the roof of an office building
   • B Grading a vacant lot with no dwelling
   • C Installing a swimming pool at a house Correct
   • D Repairing a shopping center parking structure

   The definition of home improvement reaches improvements of the land adjacent to a dwelling as well as the dwelling itself, and it expressly names swimming pools, including spas and hot tubs, so pool work at a residence is home improvement even though nothing inside the house is touched.

   Bus. & Prof. Code s. 7151(a)

10. Diverting funds received for a specific construction project is cause for disciplinary action. What else does that same section cover?

    • A Abandoning the project without legal excuse
    • B Failing to complete for the contract price
    • C Willfully failing to pay a supplier
    • D Failing substantially to account for those funds Correct

    The diversion rule reaches two separate acts, moving project money to another purpose and failing substantially to account for how funds received for the project were applied, so a contractor who cannot show where the money went faces discipline without any proof that it was spent on a different job.

    Bus. & Prof. Code s. 7108

11. Failing in a material respect to complete a construction project is cause for discipline. Which price is the licensee held to?

    • A The original bid, whatever changes followed
    • B The contract price, as modified Correct
    • C The lowest price quoted in negotiations
    • D The contractor's pre-bid cost estimate

    The licensee is held to the price stated in the contract or in any modification of it, so a signed change order resets the figure that counts, and discipline follows a material failure to finish for that agreed price rather than an overrun the contractor absorbs.

    Bus. & Prof. Code s. 7113

12. A home improvement salesperson violates the license law on a sale the employing contractor knew nothing about. What follows for the contractor?

    • A No exposure without knowledge or participation
    • B Cause for disciplinary action against the contractor Correct
    • C Exposure only if the contractor profited
    • D Only the salesperson's registration is at risk

    A home improvement salesperson's violation is cause for disciplinary action against the employing contractor whether or not the contractor knew of or took part in the act, so knowledge is expressly irrelevant and a sale made behind the contractor's back is no answer.

    Bus. & Prof. Code s. 7155.5

13. A private construction contract states that the Civil Code retention payment rules do not apply. What force does that clause carry?

    • A It binds both parties as written
    • B It binds the direct contractor only
    • C It works if both parties initial it
    • D None, waiver is against public policy Correct

    The retention payment article states that waiving its provisions by contract is against public policy, so a clause switching those rules off does not bind the party entitled to the retention and the statutory deadlines and penalty still run.

    Civ. Code s. 8820

14. What is a stop work notice under the Civil Code rules on works of improvement?

    • A Subcontractor to owner, 10 days to pay
    • B Contractor to owner, 10 days to pay Correct
    • C Owner to contractor, halting disputed work
    • D Contractor to owner, 35 days to pay

    A stop work notice is given by a direct contractor to an owner and warns that the contractor will stop work if the amount owed is not paid within 10 days after the notice is given, so the 10 days are the owner's chance to cure after the notice goes out.

    Civ. Code s. 8830

15. Under the Civil Code home solicitation rules, what amount makes a sale away from trade premises a home solicitation contract?

    • A More than $500, excluding service charges
    • B $25 or more, including service charges Correct
    • C $750 or more, including service charges
    • D More than $1,000, excluding service charges

    A home solicitation contract is a sale, lease or rental of goods or services made somewhere other than appropriate trade premises for $25 or more including any interest or service charges, so the threshold sits far below the figure that turns a residential job into a home improvement contract.

    Civ. Code s. 1689.5(a)

16. A program administrator may enroll a Property Assessed Clean Energy (PACE) solicitor only on one of three criteria. Which is one of them?

    • A A contractor's license from any state
    • B A $25,000 bond to the administrator
    • C A Contractors State License Board license Correct
    • D A training course the administrator approved

    The California Financing Law bars a program administrator from enrolling a PACE solicitor or agent unless that person satisfies at least one of three criteria, and holding a Contractors State License Board license in good standing is the first of them, alongside a home improvement salesperson registration in good standing and exemption from the license law.

    Fin. Code s. 22680(d)

17. What does a service and repair contract have to say about parts replaced during the service call?

    • A They belong to the contractor, buyable back
    • B They are offered back above $750
    • C They are offered back to the buyer Correct
    • D They are disposed of and noted

    The default sits with the buyer, because the statute requires the contract to state that the contractor must offer back any parts replaced during the call, and the contractor keeps them only where the buyer initials the checkbox allowing it.

    Bus. & Prof. Code s. 7159.10(e)(9)

18. In an action between an owner and a swimming pool contractor over the pool contract, how are attorney's fees handled?

    • A Each side bears its own fees
    • B Only a prevailing owner may recover
    • C Only where the contract says so
    • D The prevailing party must be awarded fees Correct

    The statute directs the court to award reasonable attorney's fees to whichever side prevails, so the award does not depend on the contract carrying a fee clause and it runs to a winning contractor as readily as to a winning owner.

    Bus. & Prof. Code s. 7168

19. An owner receives a stop work notice from the direct contractor. What must the owner do, and by when?

    • A Copy the construction lender within 10 days
    • B Copy the construction lender within five days Correct
    • C Post it at the site within five days
    • D Copy every subcontractor within 20 days

    The duty to pass the notice on to the construction lender sits on the owner and runs for five days from receipt, so the party funding the job learns quickly that the direct contractor has stopped for nonpayment.

    Civ. Code s. 8836

20. A direct contractor cancels its stop work notice after the claim is resolved. What must the contractor then do?

    • A Notify the owner and lender only
    • B Notify every preliminary notice claimant
    • C Post and give notice to its subcontractors Correct
    • D Nothing, the notice lapses on payment

    The contractor has to close the loop it opened, so the statute requires notice of the resolution or cancellation to be posted and given to the subcontractors in direct contractual relationship with the contractor, with an extra posting at the main office of the site where there is one.

    Civ. Code s. 8840

21. Goods delivered under a cancelled home solicitation contract are still at the buyer's home. Who bears the risk during the 20-day period?

    • A The buyer, who holds the goods
    • B The seller, subject to reasonable care Correct
    • C Both parties equally until collection
    • D Whoever insured the goods

    Cancellation moves the risk of loss back to the seller, because the Civil Code puts the goods at the seller's risk during the 20-day period and leaves the buyer with nothing beyond a duty of reasonable care over goods in the buyer's possession.

    Civ. Code s. 1689.11(b)

22. How long must a licensee have held an active California license before applying for blanket bond approval?

    • A Not less than one year
    • B Not less than five years
    • C No minimum period is set
    • D Not less than two years Correct

    The rule requires two years of active licensure in California before the application goes in, and the same two-year condition is written into the home improvement contract statute, so a newly licensed business cannot buy its way past the downpayment and progress payment limits.

    16 CCR s. 858.2(b)

23. How many subcontractors may a prime contractor list for each portion of the work defined in its bid?

    • A Only one per portion Correct
    • B One primary and one alternate
    • C As many as it wants
    • D Two, if their prices match

    Section 4104 states that the prime contractor lists only one subcontractor for each portion it has defined in its bid, so naming a backup or a second firm for the same portion breaks the listing rule.

    Pub. Contract Code s. 4104(b)

24. An awarding authority chooses to assess a penalty against a prime contractor that broke the subcontractor listing rules. What is the maximum penalty?

    • A 10 percent of the subcontract Correct
    • B 10 percent of the prime contract
    • C Five percent of the subcontract
    • D Twice the subcontract price

    Section 4110 caps the penalty at 10 percent of the amount of the subcontract involved, so the measure is that subcontract and not the prime contract, and the authority may cancel the contract instead of assessing anything.

    Pub. Contract Code s. 4110

25. A licensed prime contractor breaks the subcontractor listing rules. What may follow in addition to the awarding authority's penalty?

    • A Discipline by the Contractors State License Board Correct
    • B Nothing beyond the contract penalty
    • C A criminal fraud charge
    • D Automatic debarment from public work

    Section 4111 provides that a licensee's violation of the subcontracting chapter is grounds for disciplinary action by the Contractors State License Board in addition to the penalties in section 4110, so the two routes run alongside each other.

    Pub. Contract Code s. 4111

26. Bidder's security accompanying a bid on a state contract must equal at least what share of the amount bid?

    • A 10 percent of the amount bid Correct
    • B Five percent of the amount bid
    • C 20 percent of the amount bid
    • D 100 percent of the amount bid

    Section 10167 requires bidder's security equal to at least 10 percent of the amount bid, and a bid that arrives without one of the listed forms of security is not considered at all.

    Pub. Contract Code s. 10167(b)

27. For how long must a licensee keep the records of its contracting business open to the registrar's inspection?

    • A Five years after project completion Correct
    • B Three years after project completion
    • C Seven years after project completion
    • D Five years after the contract date

    Section 7111 makes it cause for discipline to fail to keep records available to the registrar for not less than five years after completion of the project they refer to, so the clock runs from completion rather than from signing.

    Bus. & Prof. Code s. 7111(a)

28. A licensee commits a wilful or fraudulent act as a contractor. What else is needed before that act is cause for discipline?

    • A Another person was substantially injured Correct
    • B The act was reported promptly
    • C A criminal conviction has followed
    • D The contract price exceeded $500

    Section 7116 sets two elements, a wilful or fraudulent act done as a contractor and substantial injury to another person as a consequence, so injury is not presumed from the act on its own.

    Bus. & Prof. Code s. 7116

29. An owner accepts disputed work on a private project. Within what time must the retention relating to that work be paid?

    • A Within 10 days of acceptance Correct
    • B Within 30 days of acceptance
    • C Within 45 days of completion
    • D Within 10 days of the notice

    Section 8816 requires the owner or direct contractor to pay the portion of the retention relating to disputed work within 10 days after accepting that work, which is a separate clock from the 10 days it has to accept or reject.

    Civ. Code s. 8816(b)