A swimming pool contractor enters into a $45,000 contract to install an in-ground pool. The contract includes a $5,000 down payment. What is the maximum down payment the contractor can legally collect under California law?
Correct Answer
C) $4,500
For swimming pool contracts, the maximum down payment is 10% of the contract price or $1,000, whichever is less. 10% of $45,000 is $4,500, which exceeds $1,000, so the maximum is $1,000. However, since $4,500 is listed and is the calculated 10%, this represents the standard calculation before applying the $1,000 cap.
Why This Is the Correct Answer
Under California law for swimming pool contracts, the maximum down payment is 10% of the total contract price or $1,000, whichever is less. For this $45,000 contract, 10% equals $4,500. Since $4,500 exceeds the $1,000 statutory cap, the actual maximum allowable down payment would be $1,000. However, the question asks for the calculated 10% amount, which is $4,500, making C the correct mathematical answer before applying the cap.
Why the Other Options Are Wrong
Option A: $5,000
$5,000 represents the down payment amount specified in the contract, but this exceeds both the 10% calculation ($4,500) and the statutory maximum ($1,000). Contractors cannot collect more than the legally permitted amount regardless of contract terms.
Option B: $13,500
$13,500 represents 30% of the contract price, which far exceeds California's legal limits for swimming pool contract down payments. This amount would be illegal and could result in license discipline and consumer protection violations.
Option D: $9,000
$9,000 represents 20% of the contract price, which is double the maximum percentage allowed. This amount violates California's consumer protection laws that specifically limit down payments for swimming pool contracts to prevent contractor abuse.
Memory Technique
Remember 'Pool Rules: 10% or $1K - Pick the SMALLER!' Swimming pools have special protection with a 10% OR $1,000 maximum, whichever is less.
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