A general contractor hires a subcontractor for $22,000. The general contractor receives payment from the owner but fails to pay the subcontractor within how many days, subjecting themselves to penalty interest?
Correct Answer
B) 10 days
Under California prompt payment law, general contractors must pay subcontractors within 10 days of receiving payment from the owner or face penalty interest.
Why This Is the Correct Answer
Under California's prompt payment law (Civil Code Section 8814), general contractors must pay subcontractors within 10 days of receiving payment from the property owner. This 10-day requirement protects subcontractors from cash flow problems and ensures timely payment down the construction chain. Failure to pay within this timeframe subjects the general contractor to penalty interest charges, making prompt payment a legal obligation rather than just good business practice.
Why the Other Options Are Wrong
Option A: 7 days
Seven days is too short a timeframe under California law. While this might seem reasonable for quick payment, the statute specifically provides 10 days to allow contractors adequate time to process payments and handle administrative requirements after receiving funds from the owner.
Option C: 15 days
Fifteen days exceeds the statutory requirement and would expose the general contractor to penalty interest. California law specifically mandates payment within 10 days, not 15, to ensure subcontractors receive timely compensation and maintain proper cash flow throughout the project.
Option D: 21 days
Twenty-one days is far too long under California prompt payment law. This extended timeframe would subject the general contractor to significant penalty interest charges and violates the 10-day statutory requirement designed to protect subcontractors from delayed payments.
Memory Technique
Remember 'Perfect 10' - California gives contractors a perfect 10 days to pay subs after getting paid by the owner, or face penalty interest.
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Previous Question
A general contractor receives a $25,000 progress payment from the owner. The contractor has $8,000 in subcontractor invoices and $3,000 in material supplier invoices that are due. Under California prompt payment law, how long does the contractor have to pay the subcontractors?
Next Question
A contractor completes $15,000 worth of electrical work on a commercial building. The property owner disputes $3,000 of the charges. Under California prompt payment law, what amount must the owner pay within the required timeframe to avoid penalties?