According to Business and Professions Code Section 7071.17, what alternative security may a contractor provide instead of a surety bond?
Correct Answer
C) Cash deposit, certificate of deposit, or savings account assignment
Business and Professions Code Section 7071.17 allows contractors to substitute a cash deposit, certificate of deposit, or assignment of savings account in lieu of a surety bond. The security must be in the same amount as the required bond and deposited with the Registrar. Real property or stock certificates are not acceptable alternatives under this section.
Why This Is the Correct Answer
B&P Code Section 7071.17 explicitly enumerates three acceptable alternatives to a surety bond: a cash deposit, a certificate of deposit, or an assignment of a savings account. All three are liquid, government-regulated instruments that the Registrar can hold and liquidate quickly to satisfy a valid claim — the same consumer-protection purpose as the surety bond. The amount must equal the required bond amount and must be deposited directly with the Registrar of Contractors.
Why the Other Options Are Wrong
Option A: Corporate stock certificates or municipal bonds
Corporate stock certificates and municipal bonds are not listed as acceptable alternatives under Section 7071.17. Stocks fluctuate in value and are not guaranteed instruments, while municipal bonds have variable liquidity. The statute requires instruments that provide stable, readily accessible security — equities and debt securities do not meet that standard.
Option D: Certificate of deposit or savings account assignment only
Option D is a partial answer — it includes two of the three acceptable alternatives (certificate of deposit and savings account assignment) but omits cash deposit. Because a cash deposit is explicitly listed in Section 7071.17, option D is incomplete and therefore incorrect. The exam tests the full, exact list from the statute.
Memory Technique
Remember the three C's: Cash, CD (Certificate of Deposit), and Credit (Savings Account Assignment). All start with 'C' and all are cash-equivalent instruments the Registrar can hold.
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