CSLB Law & Business ExamContract Requirements and ExecutionMedium
A homeowner signs a home improvement contract for $8,500 to remodel a kitchen. What is the maximum down payment the contractor may legally collect?
- A$425
- B$1,700
- C$1,000
- D$850
Show answer & explanationAnswer & explanation
Correct answer: D. $850
10% of $8,500 is $850, and $850 is less than the $1,000 flat cap, so the maximum legal down payment is $850 (the lesser of the two figures).
Why the other options are wrong
- A. This is half of the correct 10% calculation, an arithmetic error.
- B. This is 20% of the contract price, which is too high.
- C. $1,000 is the flat cap but is greater than 10% here, so it does not apply.
Down Payment Calculation
To find the legal maximum down payment, compare $1,000 to 10% of the contract price and select the smaller value.
- 10% of $8,500 = $850
- $850 < $1,000, so $850 governs
- Always calculate both figures before answering
Memory trick: Ten percent or a grand — pick the smaller hand.