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An agreement to improve a home becomes a home improvement contract, with its required contents, once the total contract price is:
- A More than $500 Correct
- B More than $750 $750 is the ceiling on a service and repair contract under section 7159.10(a)(1)(A), not the trigger for the home improvement contract rules.
- C More than $1,000 $1,000 is the dollar ceiling on a home improvement downpayment under section 7159.5(a)(3), a separate rule about how much may be collected up front.
- D More than $5,000 $5,000 is the value at or below which a home improvement contract may not provide for a security interest in real property under section 7159.2(a).
More than $500, because an agreement is a home improvement contract only once its total price for labor, services and materials exceeds $500 (Bus. & Prof. Code s. 7159(b)). Neither $750 nor $1,000 is the trigger.
Bus. & Prof. Code s. 7159(b)
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On a home improvement job, at what point must the buyer receive a contract copy that both parties have signed and dated?
- A Within three business days Three business days is the ordinary cancellation window, not a delivery deadline; the copy must be handed over before work starts, whenever that falls.
- B Before any work starts Correct
- C Before the first payment Nothing ties delivery of the signed copy to a payment request; the statute fixes the deadline at the start of work.
- D Within 10 days Ten days is the period for returning a canceling buyer's money, and the statute sets no 10-day window for delivering the contract copy.
Before any work starts: the contractor must give the buyer a copy of the contract signed and dated by both parties before any work is started (Bus. & Prof. Code s. 7159(c)(3)(A)). Tying delivery to the first payment is not the rule.
Bus. & Prof. Code s. 7159(c)(3)(A)
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To become part of a home improvement contract, a written change order for extra work must be signed by both parties:
- A Before the covered work starts Correct
- B Within three business days Three business days is a cancellation period, not a signing window; the change order must be signed before any covered work begins.
- C Before the next progress payment The next progress payment has nothing to do with it; signatures given after the covered work has begun leave the change order outside the contract.
- D Before final completion Final completion comes after the work is done, and the statute requires the signatures before the covered work begins.
Both parties must sign the written change order before any of the work it covers starts, and only then does it become part of the contract (Bus. & Prof. Code s. 7159(c)(5)). Signing before the next progress payment is too late once the extra work has begun.
Bus. & Prof. Code s. 7159(c)(5)
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A homeowner aged 70 signs a $22,000 remodel contract at her kitchen table and receives the signed, dated copy that day. She may cancel until midnight of:
- A The third business day Three business days is the ordinary right to cancel, and it is replaced by five business days once the buyer is 65 or older.
- B The fifth business day Correct
- C The fifth calendar day The period is counted in business days, so weekends and holidays are excluded and a calendar-day count shortens the buyer's rights.
- D The seventh business day Seven business days is the disaster right that applies to repair or restoration after a declared emergency, and no emergency was declared here.
The fifth business day, because for a senior citizen buyer every "three" and "third" in the cancellation notice becomes "five" and "fifth" (Bus. & Prof. Code s. 7159(e)(6)(B)(ii)). Three business days is the ordinary right, and a calendar-day count is not the measure.
Bus. & Prof. Code s. 7159(e)(6)(B)(ii)
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Before soliciting, selling, negotiating, or executing a contract, what must a registered home improvement salesperson tell the owner or tenant?
- A The contractor's name and license number Correct
- B The contractor's license classification The duty names the contractor's business name and license number, not the license classification.
- C Every contractor the salesperson represents The disclosure attaches to the transaction at hand, so the buyer is told the contractor being represented for that transaction, not every contractor the salesperson works for.
- D The contractor's bond and insurance numbers Bond and insurance details are not part of the salesperson's identification duty, which names the business name and license number.
The salesperson must first tell the owner or tenant the business name and license number of the contractor being represented in that transaction (Bus. & Prof. Code s. 7152(c)). A list of every contractor the salesperson works for is not required, because the duty names only the one represented in that transaction.
Bus. & Prof. Code s. 7152(c)
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The downpayment on a home improvement contract, where one is charged, may be no more than:
- A $1,000 or 10 percent, whichever is less Correct
- B $1,000 or 10 percent, whichever is greater Reading the test as whichever is greater would allow $3,000 on a $30,000 contract, which is three times what the statute permits.
- C $2,500 or 20 percent, whichever is less Neither figure appears in the downpayment rule, which fixes $1,000 and 10 percent.
- D 10 percent, with no dollar ceiling Dropping the dollar ceiling would let a large contract carry a downpayment far above $1,000, and the statute caps it at $1,000.
$1,000 or 10 percent of the contract amount, whichever is less, caps a home improvement downpayment (Bus. & Prof. Code s. 7159.5(a)(3)). Whichever is greater would let a large job carry far more than $1,000.
Bus. & Prof. Code s. 7159.5(a)(3)
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Which item must an extra work or change order set forth to be enforceable against a home improvement buyer?
- A The salesperson's registration number The salesperson's name and registration number belong in the underlying contract, and the change order enforceability rule lists only three items, none of them this.
- B A new legal description A legal description is part of the writing required for a new single-family dwelling contract, and it is not among the three items a change order must carry.
- C Effect on payments or completion Correct
- D The buyer's waiver of cancellation A waiver of cancellation rights appears nowhere in the change order rule, which lists the scope, the amount, and the effect on payments or completion.
Effect on payments or completion: a change order binds the buyer only if it sets out the scope, the amount added or subtracted, and its effect on progress payments or the completion date (Bus. & Prof. Code s. 7159.6(a)). A new legal description is not one of those three items.
Bus. & Prof. Code s. 7159.6(a)
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A prime contractor's progress payment includes $4,000 for a subcontractor, $1,000 of it in good faith dispute. Absent a contrary written agreement, the prime must pay the subcontractor at least:
- A $1,500 $1,500 is the maximum the prime contractor may withhold, not the amount it must pay.
- B $2,500 Correct
- C $3,000 Paying $3,000 holds back only the $1,000 in dispute, and the statute allows a holdback of up to 150 percent of that amount, so the smallest lawful payment is $2,500.
- D $4,000 Paying the full $4,000 ignores the withholding the statute allows, and the question asks for the smallest lawful payment.
$2,500: the prime may withhold no more than 150 percent of the $1,000 in good faith dispute, which is $1,500, and must pay the other $2,500 within seven days (Bus. & Prof. Code s. 7108.5(a)). Paying $3,000 holds back less than the law allows and is not the least the prime must pay.
Bus. & Prof. Code s. 7108.5(a)
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What route does a buyer have when a home improvement contract leaves out the required Notice of Cancellation?
- A Complain to the Contractors State License Board Correct
- B Sue the contractor for actual damages only The paragraph names a complaint to the board as the buyer's route and does not confine the buyer to a damages suit.
- C Accept a late copy of the notice A copy handed over later does not cure the defect, because the notice has to be in or attached to the contract as the section requires.
- D Treat the contract as automatically void The paragraph gives a complaint route rather than voiding the contract, and the buyer's cancellation right sits in the Civil Code sections.
A complaint to the Contractors State License Board: that is the route the law gives a buyer whose contract leaves out the Notice of Cancellation (Bus. & Prof. Code s. 7159(a)(6)). The omission does not make the contract void.
Bus. & Prof. Code s. 7159(a)(6)
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A home improvement contract's payment schedule reads "Payment 2: rough-in complete, 30 percent of contract price." What is wrong with that line?
- A Not stated in dollars Correct
- B Names the wrong trade Rough-in is a normal payment stage, and the paragraph regulates how the payment is expressed rather than which trade is named.
- C Lacks the buyer's initials No initialing of the progress payment schedule is required; the paragraph asks for dollars and cents and a reference to the work covered.
- D Not paid in advance Progress payments follow the work, and the downpayment rules for a home improvement contract are set separately in the same section.
The payment is not stated in dollars: each progress payment must be stated in dollars and cents and tied to the work it covers (Bus. & Prof. Code s. 7159(d)(9)(B)). No buyer's initials are required on the schedule.
Bus. & Prof. Code s. 7159(d)(9)(B)
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In an estimate, labor priced by work classification must include, besides the hourly wage rate:
- A Payroll taxes, benefits and required insurance Correct
- B Office rent and office staff wages Office rental, supplies and wages are listed as overhead expenses the contractor identifies separately, not as part of the labor cost by classification.
- C Permits and loan commitment fees Permits, fees, interest and loan commitment charges are listed as other direct costs, a separate line from the labor build-up.
- D Fuel, lubricants and small tools Fuel and lubricant expenses, general maintenance and small tools are named as indirect costs charged to the project, not as labor cost.
Payroll taxes, benefits and required insurance: labor priced by classification carries payroll taxes, health and welfare benefits, vacation pay and required insurance on top of the hourly wage (CSLB Law Book 2026, p. 64). Office rent and office staff wages are overhead, not labor cost.
CSLB Law Book 2026, p. 64
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One of the four types of contractual agreement between a builder and an owner is:
- A The guaranteed-maximum cost contract Correct
- B The joint control agreement A joint control arrangement handles disbursement of funds and is not one of the four builder and owner contract types named.
- C The notice to proceed A notice to proceed tells the builder to start work under a contract already made; it is not one of the four contract types the passage lists.
- D The letter of intent A letter of intent is a preliminary document, not one of the four named agreements between builder and owner.
The guaranteed-maximum cost contract, because it is one of the four builder and owner agreements, with the lump-sum, the cost-plus and the unit-price contract (CSLB Law Book 2026, p. 69). A joint control agreement handles disbursement of funds and is not one of the four.
CSLB Law Book 2026, p. 69
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Midway through a kitchen remodel the homeowner asks for work outside the written scope. What should the contractor do about cost and time?
- A Negotiate them right away Correct
- B Document now, price later Writing the request down is only the first half; the passage adds that the effect of the change on cost and time is negotiated immediately, not left until later.
- C Absorb it for goodwill Absorbing an extra leaves the change undocumented and unpriced, which is the practice the Law Book identifies as a source of disputes.
- D Settle at the walk-through The walk-through near the end of the job is for listing items left to complete, not for pricing a change agreed months earlier.
Negotiate them right away: once a request differs from what was agreed, the contractor must document it in writing and negotiate its effect on cost and time immediately (CSLB Law Book 2026, p. 70). Writing it down and pricing it later skips the second step.
Bus. & Prof. Code ss. 7159(c)(5) and 7159.6(a); CSLB Law Book 2026, p. 70
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What can a contractor owed $4,000 on a home improvement job not get in small claims court?
- A Foreclosure of its mechanics lien Correct
- B A money judgment for the $4,000 Small claims court can give a money judgment on a claim this size; only the lien foreclosure has to go elsewhere.
- C A fast, low-cost hearing Small claims courts are fast and economical, with a hearing usually within one to two months.
- D A judgment as binding as superior court's Small claims judgments are as valid and binding as those of courts of greater jurisdiction.
Foreclosure of its mechanics lien, because small claims court cannot foreclose one, though it can give a money judgment on a claim this size (CSLB Law Book 2026, p. 71). A money judgment for the $4,000 stays in small claims.
CSLB Law Book 2026, p. 71
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Why should a contractor put a commercial remodel agreement in writing even where no statute requires it?
- A It records true intent Correct
- B It cannot be canceled Cancellation rights come from the Civil Code home solicitation provisions and turn on how and where the sale was made, not on whether the agreement is written.
- C It extends lien time Lien deadlines run from completion or cessation of the work, and putting the agreement in writing does not lengthen them.
- D It bars the owner from suing A written agreement does not take away either party's right to sue; it is what a judge or arbitrator reads if they do.
It records true intent, because an arbitrator or judge asked to interpret the agreement is more likely to find in line with the parties' true intent when it is in writing (CSLB Law Book 2026, p. 70). Putting it in writing does not extend any lien deadline.
CSLB Law Book 2026, p. 70
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Which production scheduling method better shows how the tasks that make up a job depend on one another?
- A The bar chart method A bar chart shows start and finish times but overlooks some interrelated tasks.
- B A milestone date list A list of milestone dates marks targets; it does not tie the tasks to one another.
- C The critical path method Correct
- D The progress payment schedule A payment schedule sets when money is due; it does not tie the job's tasks to one another.
The critical path method, because it is the more complex tool that better interrelates the tasks of a job. A bar chart shows each task's start and finish but overlooks some interrelated tasks.
CSLB Law Book 2026, p. 65
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If a contractor without an approved bond or joint control prices a home improvement job at $8,000, the largest down payment it may take is:
- A $80 $80 is 1 percent of the price, not 10 percent.
- B $500 $500 does not come from either limit of the cap.
- C $800 Correct
- D $1,000 $1,000 is the higher of the two limits here; the cap is whichever is less.
The limit is $800, because a home improvement down payment may not exceed $1,000 or 10 percent of the contract amount, whichever is less, and 10 percent of $8,000 is $800 (Bus. & Prof. Code s. 7159.5(a)(3)). Only a contractor furnishing an approved performance and payment bond or joint control is exempt from that cap, and $1,000 is the ceiling only when 10 percent of the price would be more.
Bus. & Prof. Code s. 7159.5(a)(3) and (8)
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The contractor on a $30,000 home bathroom remodel has no approved bond or joint control. What is the most it may take as a down payment?
- A $300 $300 is 1 percent of the price and is not either limit.
- B $1,000 Correct
- C $1,500 $1,500 is 5 percent of the price, which the cap does not use.
- D $3,000 $3,000 is 10 percent of the price, but the cap is whichever limit is less, and $1,000 is less.
The most is $1,000, because the down payment may not exceed $1,000 or 10 percent of the contract amount, whichever is less, and here 10 percent is $3,000 (Bus. & Prof. Code s. 7159.5(a)(3)). Only an approved bond or joint control lifts that cap, and taking $3,000 applies the greater of the two limits instead of the lesser.
Bus. & Prof. Code s. 7159.5(a)(3) and (8)
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Which type of construction contract charges separately for the materials and for installing them?
- A Time and material Correct
- B Lump sum A lump sum contract sets one stated sum, even when the invoice lists materials and labor apart.
- C Unit price Separate charges for materials and for installing them define time and material, not unit price.
- D Guaranteed maximum cost A guaranteed maximum cost contract is not the type defined by separate charges for materials and installation.
A time and material contract is the one that sets a separate charge for the materials or fixtures and for their installation or fabrication. A lump sum contract sets one stated price, and it stays a lump sum contract even when the invoice breaks out materials, labor or tax.
CDTFA Pub. 9, p. 7 Reference document, not law.
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How many days does a job take if site prep runs 3 days, framing 9 and plumbing 5 both follow prep, and cleanup 2 follows both?
- A 10 This follows the plumbing path, which is shorter, while framing still holds the job up longer.
- B 12 This stops when framing ends and leaves off the cleanup that has to follow it.
- C 14 Correct
- D 19 This adds every task end to end, but framing and plumbing run at the same time after prep.
The job takes 14 days, because framing and plumbing both start once prep ends and run at the same time, and cleanup waits for the longer of them: prep 3, framing 9, cleanup 2. The critical path method measures a job along that key path through every task, where any delay holds up the whole project (CSLB Law Book 2026, p. 65). Adding every task end to end ignores the overlap.
CSLB Law Book 2026, p. 65
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In month three of an eighteen-month project, a subcontractor's phase is inspected and accepted. Its retention is released:
- A After full project acceptance Correct
- B After its phase's acceptance Earned and released are different things. The source says of retention 'You have already earned this amount even though you have not yet been paid', and separately that the total project must be accepted first.
- C In installments as work proceeds Retention is withheld from progress payments and held pending completion and final acceptance; nothing releases it by installments while the project runs.
- D After paying its suppliers Release turns on acceptance of the total project. The source notes retention may be held up 'through no fault of the contractor', which is the opposite of something the subcontractor can trigger.
After full project acceptance: the total project must be accepted before retentions are released (CSLB Law Book 2026, p. 62). Acceptance of the subcontractor's own phase does not release its retention.
CSLB Law Book 2026, p. 62
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Which of these costs is overhead rather than a cost of the job being bid?
- A Advertising and bad debts Correct
- B Permits and other job fees The source lists permits and other fees among the 'Other direct costs that must be examined', not among overhead.
- C Fuel and lubricants for equipment The source treats these as indirect job costs: 'Fuel and lubricant expenses, general maintenance, and small tools represent indirect costs that may be charged to the project'.
- D Interest and loan commitment fees Interest, loan commitment fees, points and other charges on borrowed funds are listed with the other direct costs of the job, alongside equipment and job-specific insurance.
Advertising and bad debts, because overhead includes office rental, supplies and wages, advertising, bad debts, storage charges and other general administrative costs (CSLB Law Book 2026, p. 64). Permits and other job fees are direct costs of the job.
CSLB Law Book 2026, p. 64
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How should an estimate treat fuel, lubricants, general maintenance and small tools used on a job?
- A General office overhead The passage says these indirect costs may be charged to the project, and overhead is described separately as office rental, supplies and wages, advertising, bad debts and other general administrative costs.
- B Indirect costs of the job Correct
- C Other direct costs, like permits Permits, fees, interest, loan charges, equipment and additional insurance are listed as the other direct costs, a separate group from these indirect items.
- D Labor costs by work classification Labor costs are calculated according to work classification and cover the hourly rate, payroll taxes, benefits, vacation pay and required insurance, none of which is fuel, maintenance or small tools.
They are indirect costs that may be charged to the project and should not be overlooked (CSLB Law Book 2026, p. 64). They are not general office overhead, which covers items such as office rental, advertising and bad debts.
CSLB Law Book 2026, p. 64
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