A homeowner contracts for a $28,000 kitchen renovation. The contractor requests $14,000 upfront payment. What does Tennessee law allow for upfront payments on residential contracts?
Correct Answer
D) No more than 25% of contract value or $1,000, whichever is less
Tennessee residential contractor law limits upfront payments to no more than 25% of contract value or $1,000, whichever is less. $14,000 exceeds both limits.
Why This Is the Correct Answer
Tennessee law limits upfront payments to the lesser of 25% of the contract value or $1,000. On a $28,000 contract, 25% = $7,000, but $1,000 is less, so the maximum is $1,000. The $14,000 request vastly exceeds this limit.
Why the Other Options Are Wrong
Option A: No more than 50% of contract value
50% is not an allowable cap under Tennessee residential contractor law. This is a significant overstatement of what the law permits.
Option B: No more than 10% of contract value
10% is not the correct threshold. While 10% of $28,000 ($2,800) is closer to reasonable, Tennessee's actual rule uses the 'lesser of 25% or $1,000' formula.
Option C: No more than 33% of contract value
33% is not a recognized limit under Tennessee residential contractor law and is a fabricated distractor.
Memory Technique
Think of it as the 'smaller wins' rule: Tennessee protects homeowners by always picking the smaller of two numbers — 25% of the contract OR $1,000. On virtually all residential projects, $1,000 will be smaller.
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