A contractor receives a progress payment of $18,000 from a property owner on Monday. The contractor owes subcontractors $12,000 of this amount. By what day must the contractor pay the subcontractors?
Correct Answer
B) The following Monday
Under California prompt payment laws, contractors must pay subcontractors within 7 days of receiving payment. Monday + 7 days = the following Monday.
Why This Is the Correct Answer
Under California prompt payment laws (Business and Professions Code Section 7108.5), contractors must pay subcontractors within 7 days of receiving progress payments from property owners. When the contractor receives $18,000 on Monday, the 7-day payment period begins immediately. Counting 7 days from Monday (including weekends) leads to the following Monday as the deadline for paying the $12,000 owed to subcontractors.
Why the Other Options Are Wrong
Option A: Friday
Friday would only be 4 days after receiving payment on Monday. This falls short of the required 7-day payment period mandated by California law, making it an insufficient timeframe for compliance with prompt payment requirements.
Option C: The following Tuesday
The following Tuesday would be 8 days after receiving payment on Monday. This exceeds the 7-day maximum payment period required by law, potentially subjecting the contractor to penalties and legal consequences for late payment to subcontractors.
Option D: Thursday
Thursday would only be 3 days after receiving payment on Monday. This is significantly less than the required 7-day payment period, making it an inadequate timeframe that would violate California's prompt payment laws.
Memory Technique
Remember 'Lucky 7 Days' - contractors have exactly 7 days to pay subs after receiving payment. Count every day including weekends: Monday to Monday is exactly 7 days.
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A public works contractor submits a final payment application for $85,000. The public entity disputes $12,000 of the amount. Under prompt payment law, what amount must be paid within 30 days?
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A service and repair contract for $950 must include all of the following EXCEPT: