Calculate the total amount a contractor can collect before starting work on an $18,000 roofing contract that requires a building permit.
Correct Answer
C) $2,000
Down payment is limited to $1,000 or 10% ($1,800), whichever is less = $1,000. Plus permit fees can be collected in advance, typically around $1,000 for roofing, totaling approximately $2,000.
Why This Is the Correct Answer
California Business & Professions Code §7159(d) limits the down payment (deposit before work begins) to $1,000 or 10% of the contract price, whichever is less. For an $18,000 contract, 10% = $1,800, which exceeds $1,000, so the maximum down payment is $1,000. Additionally, actual permit fees can be collected separately and in advance of starting work — these are pass-through costs, not part of the contract price cap. A typical roofing permit on an $18,000 project approximates $1,000, making the total collectible approximately $2,000 ($1,000 deposit + ~$1,000 permit fees).
Why the Other Options Are Wrong
Option A: $1,000
$1,000 alone represents only the down payment cap, excluding the separately collectable permit fees. While $1,000 is correctly identified as the maximum deposit, the question asks for the TOTAL collectible before work starts, which includes permit fees in addition to the deposit.
Option B: $1,800
$1,800 represents 10% of $18,000, which would be the 10% threshold — but since $1,800 exceeds $1,000, the cap is $1,000, not $1,800. This is the most common trap: students calculate 10% correctly but fail to apply the 'whichever is less' rule that caps the deposit at $1,000.
Option D: $2,800
$2,800 would represent $1,800 (10%) plus $1,000 in permit fees — but since the deposit cap is $1,000 (not $1,800), the correct total is $2,000, not $2,800. This answer reflects the error of using 10% instead of $1,000 for the deposit portion.
Memory Technique
The Down Payment Rule: '$1,000 or 10%, pick the SMALLER one.' For any contract over $10,000, 10% will always exceed $1,000, so the cap is always $1,000 for contracts $10,000 and above. Below $10,000, use 10%. Then ADD actual permit fees on top — they are always a separate, pre-collectible item.
More California Questions
A homeowner signs a $15,000 home improvement contract on Monday at 2 PM at the contractor's office. Under California law, what is the latest time the homeowner can cancel the contract without penalty?
A swimming pool contract for $28,000 is signed on Wednesday at the customer's home. The contract includes proper cancellation notices. If the customer wants to cancel, they must do so by when?
Under California's prompt payment law, if a contractor submits a proper payment request to a property owner, payment is due within how many days?
A general contractor hires a subcontractor for $22,000. The general contractor receives payment from the owner but fails to pay the subcontractor within how many days, subjecting themselves to penalty interest?
Under California Civil Code Section 8180, when must a subcontractor serve a preliminary notice on a private work project?
Which of the following contracts is NOT subject to the 3-day right to cancel under California law?
A subcontractor completes roofing work on Tuesday, March 15th. The general contractor is paid by the owner on Friday, March 25th. Under California prompt payment laws, what is the latest date the general contractor must pay the subcontractor?
A contractor receives a progress payment of $18,000 from a property owner on Monday. The contractor owes subcontractors $12,000 of this amount. By what day must the contractor pay the subcontractors?
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?
A contractor completes $15,000 worth of electrical work on a commercial building. The property owner disputes $3,000 of the charges. Under California prompt payment law, what amount must the owner pay within the required timeframe to avoid penalties?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass