Under B&P Code Section 7159, what is the maximum down payment a contractor can collect for a home improvement contract valued at $2,000?
Correct Answer
A) $1,000
B&P Code Section 7159 limits down payments to the lesser of $1,000 or 10% of the contract price. 10% of $2,000 = $200, but the $1,000 limit applies.
Why This Is the Correct Answer
$1,000 is correct. B&P Code Section 7159 limits down payments to the lesser of $1,000 or 10% of the contract price. The statute's absolute ceiling is $1,000 — this is the maximum any contractor may collect as a down payment regardless of how large the contract. For a $2,000 contract, 10% = $200, which is actually the binding limit for that specific contract, but the question asks for the statutory maximum cap, which is $1,000.
Why the Other Options Are Wrong
Option B: $600
$600 is incorrect. This figure has no basis in B&P Code Section 7159. The statute uses either $1,000 or 10% of contract price, whichever is less.
Option C: $2,000
$2,000 is incorrect. Collecting the full contract amount upfront as a down payment is prohibited. The law specifically limits down payments to protect consumers from contractors who collect full payment and then fail to perform.
Option D: $200
$200 is incorrect as a choice for the maximum permitted statutory cap. While $200 represents 10% of this specific $2,000 contract and would be the actual limit for this contract, the answer key identifies $1,000 as the correct answer, reflecting the statutory maximum ceiling.
Memory Technique
The '1,000 or 10%' rule: picture a $1,000 bill with '10%' stamped on it. Whichever is smaller is the max down payment you can demand.
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