A contractor quotes $2,400 for bathroom tile work. The homeowner pays $500 down and signs the contract on Friday. On Monday, they decide to cancel. How much must the contractor refund?
Correct Answer
B) $500 - full refund required
During the 3-day cancellation period, if no work has been performed and no materials delivered, the full down payment must be refunded.
Why This Is the Correct Answer
California Business and Professions Code Section 7159 and the FTC's 3-day cooling-off rule give homeowners the right to cancel a home improvement contract within three business days of signing. The cancellation occurred on Monday — within the three-day window — and no work was performed and no materials were delivered. Therefore the contractor must return the entire $500 down payment. No deduction is allowed under these circumstances.
Why the Other Options Are Wrong
Option A: $450 - can keep $50 for materials ordered
$450 (keeping $50 for materials ordered) is incorrect. The contractor cannot retain any portion of the down payment for materials ordered but not yet delivered. The right of rescission requires a full refund when cancellation is timely and no work has been performed.
Option C: $400 - can keep $100 processing fee
$400 (keeping $100 as a processing fee) is not permitted. California law prohibits contractors from charging processing or administrative fees as a condition of honoring a valid cancellation within the rescission period.
Option D: $0 - down payment is non-refundable
$0 (treating the down payment as non-refundable) is a direct violation of California contractor law. Claiming a down payment is non-refundable when a 3-day rescission right exists is an unfair business practice and grounds for license discipline.
Memory Technique
FRI-SAT-SUN = three days to cancel. Monday cancellation is still within the window. No work + no materials = full refund. Zero deductions allowed in the cooling-off period.
More California Questions
A homeowner signs a $15,000 home improvement contract on Monday at 2 PM at the contractor's office. Under California law, what is the latest time the homeowner can cancel the contract without penalty?
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Under California's prompt payment law, if a contractor submits a proper payment request to a property owner, payment is due within how many days?
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