CSLB Law & Business ExamContract Requirements and ExecutionHard
An investigator discovers that a contractor routinely collects down payments exceeding the legal limit on home improvement contracts. What is the most likely consequence under the Contractors State License Law?
- ANo consequence exists as long as the homeowner voluntarily agreed to pay more
- BThe practice constitutes cause for disciplinary action against the contractor's license
- CThe homeowner alone must pay a penalty fee to the state
- DThe contract is automatically terminated with no further legal effect
Show answer & explanationAnswer & explanation
Correct answer: B. The practice constitutes cause for disciplinary action against the contractor's license
Collecting a down payment in excess of the legal limit (the lesser of $1,000 or 10% of the contract price) is a violation of the Contractors State License Law and constitutes cause for disciplinary action, including citation, fines, or license suspension/revocation, regardless of homeowner consent.
Why the other options are wrong
- A. Homeowner agreement does not excuse a statutory violation.
- C. Penalties apply to the contractor, not the homeowner.
- D. The contract is not automatically terminated; the contractor faces separate licensing consequences.
Down Payment Violation Consequences
Collecting a down payment above the legal limit violates the Contractors State License Law and can result in disciplinary action.
- Homeowner consent does not excuse violation
- Discipline may include citations or license suspension
- Limit is lesser of $1,000 or 10% of contract price
Memory trick: Overcharge the deposit, undercut your license