A homeowner contracts for a $28,000 kitchen renovation. The contractor demands full payment upfront. What does Tennessee law allow for down payments on residential projects?
Correct Answer
D) Maximum $1,000 or 10% of contract price, whichever is greater
Tennessee residential contractor law limits down payments to $1,000 or 10% of the contract price, whichever is greater.
Why This Is the Correct Answer
Tennessee residential contractor law limits upfront down payments to $1,000 or 10% of the contract price, whichever is GREATER. For a $28,000 contract, 10% = $2,800, which is greater than $1,000, so the maximum allowed down payment is $2,800. Demanding full payment upfront ($28,000) clearly violates this rule.
Why the Other Options Are Wrong
Option A: Maximum 25% down payment
A 25% down payment cap is not part of Tennessee law. There is no 25% rule for residential contractor down payments in TN statutes.
Option B: Maximum 10% or $1,000, whichever is less
'$1,000 or 10%, whichever is LESS' is the inverse of the actual rule and would be far more restrictive. Tennessee uses 'whichever is GREATER' — a common exam trap that swaps 'less' for 'greater.'
Option C: 100% payment upfront is permitted
100% upfront payment is never permitted under Tennessee residential contractor law. Demanding full payment before work begins is a violation that can result in disciplinary action.
Memory Technique
Think 'Greater Protection for the Contractor': Tennessee favors the contractor getting at least something meaningful upfront. 'Greater' = contractor gets more. $1,000 or 10% — pick the bigger number to protect both parties.
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A Tennessee residential contractor completes a $45,000 home addition project. If the contractor charges 6% sales tax, what is the total amount the customer will pay?
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