Contracts & ExecutionQuestion 209 of 1632

A homeowner exercises the three-day right to cancel a home improvement contract. The contractor had already delivered some materials. The contractor:

a.Must refund the buyer's payments and may reclaim the materials
b.May keep up to $1,000 of the down payment as a cancellation fee
c.May bill the buyer for the materials delivered before the notice
d.May hold the refund until the buyer returns the delivered materials

Explanation

A timely cancellation must be honored. The Notice of Cancellation required by B&P §7159, and Civil Code §1689.10, give the contractor 10 days from receipt of the notice to return every payment; the buyer need only make delivered goods available at their own residence, and if the contractor does not pick them up within 20 days the buyer may keep them without further obligation. No cancellation fee is authorized - the $1,000 figure is the §7159.5 down-payment cap, not money the contractor may retain. Materials delivered before the notice cannot be billed, and the refund cannot be held hostage to their return: the 10-day refund duty does not wait on the 20-day pickup window.

Law Reference: Bus. & Prof. Code §7159 (Notice of Cancellation); Civil Code §1689.10, §1689.11

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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)
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