A homeowner cancels a $35,000 home improvement contract within the 3-day right of rescission period. What amount can the contractor legally retain?
Correct Answer
C) $0 (full refund required)
Tennessee law requires contractors to provide full refunds when homeowners exercise their 3-day right of rescission, with no cancellation fees allowed.
Why This Is the Correct Answer
Option C ($0) is correct. Tennessee law grants homeowners a 3-day right of rescission on home improvement contracts. When this right is exercised, the contractor must refund all payments in full. No cancellation fees, down payment retention, or administrative charges are permitted.
Why the Other Options Are Wrong
Option A: $1,000 (maximum down payment)
Option A ($1,000 maximum down payment) is incorrect. While some states regulate down payment limits for home improvement contracts, Tennessee's rescission law does not allow the contractor to retain any amount when the homeowner cancels within the 3-day window.
Option B: $3,500 (10% cancellation fee)
Option B ($3,500 — 10% cancellation fee) is incorrect. Tennessee does not permit a cancellation fee when the homeowner exercises their statutory right of rescission within the 3-day period. Any contractual provision attempting to impose such a fee would be unenforceable.
Option D: $500 (administrative costs)
Option D ($500 administrative costs) is incorrect. Administrative cost recovery is not authorized under Tennessee's rescission statute. Contractors cannot offset any costs against a homeowner who timely exercises rescission rights.
Memory Technique
Think of the 3-day rescission right as a 'reset button' — everything goes back to zero. No work done, no money kept. Zero retained = zero liability.
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