Under California B&P Code 7159, what is the maximum down payment a contractor may collect for a home improvement contract valued at $2,000?
Correct Answer
A) $200 (10% of contract value)
B&P Code 7159(d) limits down payments to $1,000 or 10% of the contract price, whichever is less. For a $2,000 contract, 10% equals $200, which is less than $1,000, so the maximum down payment is $200.
Why This Is the Correct Answer
Under California B&P Code 7159(d), contractors may collect a maximum down payment of $1,000 or 10% of the contract price, whichever is less. For a $2,000 home improvement contract, 10% equals $200. Since $200 is less than the $1,000 cap, the maximum allowable down payment is $200, making option A correct.
Why the Other Options Are Wrong
Option B: $200 or 10% of contract value, whichever is less
This option contains an error in the statutory language. B&P Code 7159(d) states the limit is $1,000 or 10%, whichever is less, not $200 or 10%. The $200 figure is the result of applying the 10% calculation to this specific $2,000 contract, not part of the general statutory rule.
Option D: $1,000 or 10% of contract value, whichever is less
This option incorrectly states the general rule without applying it to the specific contract value. While the rule is $1,000 or 10%, whichever is less, for a $2,000 contract, the calculation must be completed to determine that 10% ($200) is the applicable limit, not just stating the formula.
Memory Technique
Remember 'Ten or Thousand, Take the Lesser' - 10% or $1,000, whichever is less. For any contract, calculate 10% first, then compare to $1,000.
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