Under California Business and Professions Code Section 7071.9, in lieu of a surety bond, what alternative security may a contractor provide to satisfy the contractor license bond requirement?
Correct Answer
C) A certificate of deposit in a California bank or savings and loan association
California B&P Code Section 7071.9 specifically allows contractors to substitute a certificate of deposit from a California bank or savings and loan association in lieu of a surety bond. The certificate must be in the same amount as the required bond and must be properly assigned to the CSLB. Personal guarantees and letters of credit are not acceptable alternatives under this code section.
Why This Is the Correct Answer
California Business and Professions Code Section 7071.9 specifically permits contractors to substitute a certificate of deposit from a California bank or savings and loan association in lieu of a surety bond. The certificate must be in the same amount as the required bond and properly assigned to the CSLB. This is the only alternative security explicitly authorized by statute for contractor license bond requirements.
Why the Other Options Are Wrong
Option A: An irrevocable letter of credit from any federally insured institution
While irrevocable letters of credit are financial instruments, California B&P Code Section 7071.9 does not recognize them as acceptable alternatives to surety bonds. The statute specifically limits alternatives to certificates of deposit from California banks or savings and loan associations only.
Option B: A personal guarantee from the qualifying individual
Personal guarantees from qualifying individuals are not acceptable alternatives under California B&P Code Section 7071.9. The law requires actual financial security instruments, not personal promises to pay, as substitutes for surety bonds in contractor licensing requirements.
Option D: Cash deposit equal to 150% of the required bond amount
California law does not require cash deposits at 150% of the bond amount as an alternative. Section 7071.9 only allows certificates of deposit in the same amount as the required bond, not cash deposits at inflated percentages.
Memory Technique
Remember 'California CD' - California contractors can use Certificates of Deposit from California banks as bond alternatives.
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