Business FinancesQuestion 1153 of 1605
On a home improvement contract, the down payment a contractor may collect is limited by law to whichever is less:
a.25% of the contract or $5,000
b.20% of the contract or $10,000
c.50% of the contract or $2,500
d.10% of the contract price or $1,000
Explanation
Under B&P Code §7159, for home improvement contracts the down payment cannot exceed 10% of the contract price or $1,000, whichever is LESS. This protects consumers from large upfront payments; the balance is collected through progress payments as work proceeds.
Law Reference: Business & Professions Code §7159Practice all 1605 questions free — no signup required.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)