Browse all questions

The contractor must furnish the buyer a fully completed and signed copy of the home improvement contract before any work begins, so the buyer can review terms and exercise cancellation rights.

Civil Code §1689.6(a)(2) gives the buyer of a home improvement contract until midnight of the third BUSINESS day after receiving a signed and dated copy of it. The clock runs from receipt, not from the stroke of the pen, and business days exclude Sundays and holidays - so counting three calendar days is the common error, and the next business day is no one's deadline. Seven business days is a real period, but §1689.6(c) attaches it to repairs after a declared disaster; five business days is the period for a buyer aged 65 or older.

B&P §7159.5(a)(5) forbids front-loading: the contractor may neither request nor accept payment that exceeds the value of the work performed or material delivered. The 10 percent figure belongs to the down payment in §7159.5(a)(3), which is $1,000 or 10 percent of the contract amount, whichever is less, and is not a ceiling on later payments. Billing for materials still sitting at the supplier is exactly what the section prohibits. Nothing in §7159.5 sends home improvement payments to escrow; what the contract must carry is a schedule of payments in dollars and cents under §7159.5(a)(4).

B&P §7191 requires the arbitration provision in a contract for residential work to be clearly titled ARBITRATION OF DISPUTES and set in at least 10-point roman boldface — or, in contrasting red print, at least 8-point roman boldface — with the prescribed notice immediately above the space where the parties initial their assent. Eight-point bold in ordinary black does not qualify: the smaller size is allowed only in contrasting red. The contract's standard type never qualifies. And typography alone is not enough — without the separate initials nothing records the parties' assent to arbitrate.

B&P §7159(c)(5) makes a change-order form part of a home improvement contract only if it is in writing AND signed by the parties before any work covered by it begins, and §7159(d) repeats that requirement for any change to the contract. An email confirmation is a writing but not a signed change order, which is where this goes wrong most often in the field. No provision requires a change order to be filed with CSLB, on a five-day clock or any other. And a lender's approval may govern the draw, but it is not what makes the change binding between owner and contractor.

B&P §7164(a) applies to 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. Remodel or repair of an existing dwelling is a home improvement contract under §7159. A service and repair contract of $750 or less is governed by §7159.10, and §7159.10(b) applies §7159 anyway if any conforming requirement fails. And $500 is the price at which work becomes home improvement, not the trigger for §7164.

The law requires the contract to bear a clear heading identifying it as a "Home Improvement" contract so the consumer knows which set of protective rules applies to the agreement.

B&P §7153 requires a current and valid home improvement salesperson registration from the registrar before a person works as a salesperson for one or more home improvement contractors, and §7152 defines that role; officers, members and managers of the licensed entity and the qualifying person under §7025 are outside the definition, as are retail salespeople at a fixed location whose dealings the customer initiates. No contractor licence is needed - registration is the alternative to one. The $100,000 bond is the LLC employee wage and benefit bond of §7071.6.5. And the qualifying individual under §7068 is the person whose experience qualifies the licence, a different role entirely.

B&P §7030 requires a home improvement contract to carry a notice about the Contractors State License Board: the agency that licenses and regulates contractors, discloses complaints, disciplinary actions and civil judgments, and takes consumer complaints, with CSLB's website, telephone number and address. The Department of Industrial Relations and the Labor Commissioner handle wage claims and labor standards, not license verification, and unlicensed activity is also reported to CSLB. The bond number and the surety's address are not part of the §7030 notice.

Civil Code §1689.7 requires the seller to give the buyer the contract accompanied by a completed Notice of Cancellation form in duplicate, in type of at least 10 point, attached to the agreement and easily detachable so the buyer can tear it off and mail it. One copy in 8-point type is not that form: 8-point is the allowance B&P §7191(a) makes for service and repair contracts, and only in contrasting red. Nor is the right paperwork-free - delivering the form is part of the seller's duty - and the license and bond figures belong elsewhere in the contract, not in place of the notice.

The seven business days come from the disaster-repair rule, not from the buyer's age. Under Civil Code §1689.6(c), a home solicitation contract to repair or restore residential premises damaged by a disaster may be cancelled until midnight of the seventh business day after the buyer signs and dates it, whatever the buyer's age. The ordinary home solicitation window is three business days, and a senior citizen (65 or older) gets five business days, not seven (Civil Code §1689.6(a); B&P §7159(e)(6)(B)(ii) changes 'three' and 'third' to 'five' and 'fifth' in the required notice). One trap goes with it: under Civil Code §1689.14(a) a disaster-repair contract signed within seven business days of the disaster is void outright unless the buyer solicited it at the seller's place of business.

Civil Code §1689.10 gives the seller 10 days after a home solicitation contract is cancelled to tender back every payment the buyer made and any note or other evidence of indebtedness. Thirty days is not a deadline anywhere in the home solicitation statutes. A restocking or contract-preparation fee is exactly what a properly cancelled contract forbids the contractor to keep. And the refund does not wait on the goods: until the seller tenders the money, the buyer may keep possession of what was delivered and holds a lien on it for the amount owed.

B&P §7159(a) requires a home improvement contract, and any change to it, to be in writing and signed by the parties before the work it covers begins, once the aggregate price exceeds $500. A $15,000 remodel on a handshake is unenforceable by the contractor and is cause for discipline, so the size of the job is no reason to start. Taking the deposit first fails twice over: the contract must come first, and §7159.5 caps the down payment at $1,000 or 10% of the price, whichever is less - here $1,000, not the $1,500 that 10% would give. And papering the contract later, whether at the first billing or at the end, does not cure work that began without one.

B&P §7159.5(a)(5) is explicit: on a home improvement contract the contractor shall neither request nor accept payment that exceeds the value of the work performed or material delivered. Front-loading the money is the violation. Progress payments tied to completed phases are exactly how the statute expects payment to be staged; the license number and the CSLB notice are required contract contents; and a written warranty is a protection a contractor may always offer. Keep this apart from §7159.5(a)(3), which caps the down payment itself at $1,000 or 10% of the contract price, whichever is less.

Willfully departing from or disregarding plans or stopping work without legal excuse and without the owner's consent is abandonment, a cause for license discipline under B&P §7107.

One total price for the whole scope, whatever the work actually costs, is the fixed-price or lump sum contract: the contractor keeps the saving if costs come in low and absorbs the loss if they run high. Cost-plus-a-fixed-fee is the opposite arrangement - the owner reimburses actual costs and pays a set fee, so the overrun is the owner's. Time and materials is also open-ended: hours and materials are billed as they are incurred. A unit price contract fixes the rate for each unit installed but not how many units the job will need, so the quantity risk stays with the owner.

In a cost-plus-percentage contract the contractor is reimbursed actual costs and earns a fee equal to an agreed percentage of them, so the fee rises as costs rise and the owner carries most of the cost risk. A fixed dollar amount settled in advance is the cost-plus-fixed-fee variant, which is how an owner caps that exposure. An hourly rate for the owner's representative is a reimbursable cost, not the contractor's fee. A per-day deduction for finishing late is liquidated damages and has nothing to do with how the fee is computed.

A unit-price contract sets a price per unit of work (per cubic yard, per linear foot, etc.). The total contract value depends on the actual measured quantities completed.

A guaranteed maximum price reimburses cost up to a negotiated ceiling and the contractor absorbs anything above it, which is exactly what caps the owner's exposure. A lump sum paid regardless of what the costs run is a stipulated-sum contract, a different form with a different split of risk. Cost plus a fee with no ceiling is the open cost-plus arrangement a GMP exists to cap. And an underrun below the ceiling belongs to the owner unless a shared-savings clause says otherwise, so treating the savings as the contractor's reverses the deal.

Margin is gross profit divided by the selling price. Profit is $100,000 - $80,000 = $20,000; $20,000 / $100,000 = 20% margin. (Markup, by contrast, divides profit by cost: $20,000 / $80,000 = 25%.)

Markup is added to cost: selling price = cost x (1 + markup) = $50,000 x 1.30 = $65,000. The $15,000 difference is the gross profit on the job.

To find the price for a desired margin, divide cost by (1 - margin): $30,000 / (1 - 0.25) = $30,000 / 0.75 = $40,000. The $10,000 profit is 25% of the $40,000 price.

The bid price equals direct costs plus overhead plus profit: $60,000 + $12,000 + $8,000 = $80,000. Overhead and profit must both be added on top of direct job costs.

The overhead rate is total overhead divided by total direct costs: $120,000 / $600,000 = 0.20, or 20%. Each job is marked up 20% of its direct costs to recover overhead.

Break-even sales = fixed overhead divided by gross margin: $90,000 / 0.30 = $300,000. At $300,000 in sales, the 30% margin produces exactly $90,000 to cover overhead.

A contingency is a percentage of estimated cost set aside for unforeseen conditions: 5% x $200,000 = $10,000. It cushions the budget against surprises without inflating the base estimate.

Retention accrues on the work billed to date, not on the contract total: 5% x $150,000 = $7,500 (c). Civil Code §8811 caps private-works retention at 5% for contracts entered into on or after January 1, 2026, and Public Contract Code §7201 has capped most public works at the same figure for years. (b) $12,500 applies the correct 5% to the wrong base, the full $250,000 contract, which is what will have been withheld only once everything is billed. (d) $15,000 is 10% of the billed amount — the superseded private-works custom. (a) $750 slips a decimal.

Under California prompt payment law, a direct contractor on a private project must pay each subcontractor its portion within 7 days of receiving a progress payment from the owner.

Civil Code §8800(a) makes the owner pay a progress payment as to which there is no good faith dispute within 30 days after notice demanding payment; §8800(b) lets the owner withhold up to 150 percent of a disputed amount; and §8800(c) sets the sanction at 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due, with costs and a reasonable attorney's fee to the prevailing party. 1.5 percent a month is not the statutory rate, and the 10 percent annual legal rate is what applies to ordinary contract judgments, which is precisely what §8800(c) displaces. The idea that only the principal is recoverable is the rule §8800(c) was enacted to change.

On private works, an owner must release retention proceeds withheld from a direct contractor within 45 days after completion of the work of improvement.

Once the general contractor receives retention from the owner, it must release each subcontractor's share of that retention within 10 days on a private works project.

A schedule of values divides the contract sum among the parts of the work — earthwork, framing, roofing, finishes — so each progress billing can be tested against the percentage of each line item actually in place. It is what a lender's draw process and a standard payment application run on. (b) describes certified payroll, the wage record Labor Code §1776 requires on public works. (c) describes an internal overhead allocation, an accounting exercise that never appears in a payment application. (d) reads 'schedule' as a calendar; in this term it means an itemized list, and the calendar is the project schedule, a different document.

Framing's total value is 18% x $500,000 = $90,000. At 50% complete the contractor may bill 50% x $90,000 = $45,000 for that line item this period.

Retention = 5% x $80,000 = $4,000, so the current payment is $80,000 - $4,000 = $76,000 (d); the $4,000 is paid later when retention is released. Civil Code §8811 caps private-works retention at 5% for contracts entered into on or after January 1, 2026. (a) $80,000 forgets the retention entirely. (b) $4,000 reports the amount withheld rather than the amount paid. (c) $84,000 adds the retention instead of subtracting it.

Job costing posts actual labor, material, subcontract and equipment costs against the estimate line by line while the job is still running, so an overrun surfaces in time to be corrected. Taxable income is computed from the year's books, not from one job's cost report. Wage rates come from the market or the applicable wage determination, not from the last job's costs. And no cost report substitutes for the written change order that documents extra work.

Actual labor above the estimate is a cost overrun, also called an unfavorable variance; job costing surfaces it so the contractor can find the cause. A contingency allowance is money carried in the bid before the work starts, not a difference discovered after it. Retention is a percentage the owner holds back from progress payments until the work is accepted. Liquidated damages are a per-day sum the contract fixes for late completion.

When a general reasonably and foreseeably relies on a sub's bid in submitting its own, Drennan v. Star Paving holds the sub to that bid under promissory estoppel, even with nothing signed. Free withdrawal after award is exactly what the doctrine prevents, because the general is already committed at its own bid price. A signed subcontract is not the trigger — reliance is, which is the whole point of the doctrine. And no fixed ten-day acceptance window exists at common law; what matters is whether the general relied within a reasonable time.

Bid shopping is using one subcontractor's quoted price to push the others lower after bids are in. Value engineering is redesigning to cut cost without giving up function, and is legitimate. A scope review compares what work each bid actually covers, to find gaps and overlaps. Prequalification screens a bidder's capacity and finances before bidding opens. Only the first uses someone else's number as leverage; it is widely viewed as unethical and is restricted on public works to protect competitive bidding.

Civil Code §1586 lets a proposal be revoked at any time before its acceptance is communicated to the proposer. An hour after submission, with nothing signed, the bid is still an open offer — so prompt written notice of the arithmetic error and a request to withdraw or correct it is both available and the honest route. Signing and swallowing $20,000 is a business choice, not the best course, and it is the one the statute makes unnecessary. Substituting cheaper materials to claw the money back is a departure from the plans and specifications and grounds for discipline. And the claim that a submitted bid can never be withdrawn is simply not the rule before acceptance.

The scope of work spells out the specific work the contractor will perform. A clear scope prevents disputes over whether a task is included in the contract price or is extra work requiring a change order.

A punch list itemises the minor incomplete or corrective work the contractor must finish before the owner's final acceptance, which is what releases final payment and the retention. A materials list is a procurement or submittal log, not an acceptance document. Certified payroll records are the weekly public works reporting duty under Labor Code §1776. And outstanding change orders are priced and signed by both parties under B&P §7159(c)(5) before that work begins; they are not punch-list items.

Substantial completion is the point where the work is complete enough for the owner to occupy or use the project for its intended purpose, even with minor punch-list items still open. Clearing every punch-list item is final completion, which comes later. Recording a notice of completion is an owner's filing that starts the lien and stop-payment clocks; it does not measure how finished the work is. And no payment percentage defines the term - 90% paid usually just means retention is still being held.

Civil Code §1671(b) makes a liquidated damages provision valid unless the party challenging it proves the provision was unreasonable under the circumstances existing at the time the contract was made. A figure set to punish, unrelated to any harm the parties could foresee, is exactly that. The other three cut the other way: a reasonable forecast of the owner's loss is what the statute asks for, damages that were hard to quantify at signing are the classic reason to liquidate them in advance, and arm's-length bargaining with counsel makes the clause harder to attack, not easier.

Liquidated damages accrue per day of delay: $400 x 12 days = $4,800. An enforceable clause fixes this amount in advance so actual damages need not be separately proven.

SB 800 establishes tiered standards: most function/finish items 1 year, plumbing and electrical systems generally 4 years, and structural/major defects up to 10 years from close of escrow.

The structural standards carry the longest reach: Civil Code §941(a) allows an action up to 10 years after substantial completion for a violation of those standards. Paint finishes, interior trim and cabinets are fit-and-finish items, and Civil Code §900 gives them a one-year express written warranty instead, so none of the finish categories can be the longest period.

Civil Code §910 opens a prelitigation process: the claimant serves written notice - certified mail, overnight mail or personal delivery - describing the claimed violation in reasonable detail, and the builder may then inspect and offer to repair before suit. A CSLB complaint is licence discipline and does not satisfy §910. No engineer's report is a precondition; §910 asks for notice of the claim, not proof of it. The ten years in Civil Code §941 is the outside deadline for filing, not a period to wait out.

B&P §7159(d)(5) requires the home improvement contract to carry the heading 'Contract Price' followed by the amount of the contract in dollars and cents, so a price left 'to be determined' fails a required term on the face of the contract. A homeowner's signature cannot supply a disclosure the statute requires. There is no emergency-repair exception to the price term. And the licence bond answers for damages; it does not fill in a missing contract price.

Under cost-plus, the contractor is reimbursed for actual costs plus a fee, so cost increases are passed through to the owner. The owner therefore bears the bulk of the cost-overrun risk.

B&P §7159 requires a written home improvement contract whenever the aggregate price of labor, services and materials exceeds $500, so a $700 repair must be in writing. The $1,000 figure belongs to the §7159.5(a)(3) downpayment cap ($1,000 or 10 percent, whichever is less), not to the writing threshold. Above $500 the parties cannot agree their way into a verbal deal, and the requirement turns on the price — not on the owner's age and not on whether a home improvement salesperson was involved.