CSLB Law & Business ExamContract Requirements and ExecutionHard
A contractor collects the maximum allowable down payment of $900 on a $9,000 home improvement contract (10% of the price). During construction, the parties sign a written change order adding $3,000 of unforeseen work, raising the total contract price to $12,000. May the contractor collect an additional down payment based on the increased price?
- ANo, because change orders may never involve any additional payment
- BYes, but only up to 10% of the $3,000 change order amount
- CYes, because the down payment limit is recalculated whenever the contract price changes
- DNo, the down payment limit is fixed at contract signing and cannot be increased through a later change order
Show answer & explanationAnswer & explanation
Correct answer: D. No, the down payment limit is fixed at contract signing and cannot be increased through a later change order
The down payment limit applies at the time the original contract is signed and is based on the original contract price; it is not recalculated when a change order later increases the total price. Additional funds for change order work must come through progress or final payments, not an additional down payment.
Why the other options are wrong
- A. Change orders can involve additional payment obligations, just not as a new down payment.
- B. There is no proportional down payment rule tied to change order amounts.
- C. The down payment cap is not recalculated based on later price increases.
Down Payment Limit and Change Orders
The statutory down payment cap is based on the original contract price at signing and is not increased by later change orders.
- Down payment cap set at signing
- Change orders increase total price but not the down payment cap
- Additional work is funded via progress/final payments
Memory trick: Once the deposit is capped, change orders can't reopen the vault.