Study guide · Law & Business · Contract Requirements and Execution
Contracts: The Paper That Runs the Job
About 38 minutes · 6 sections
What this guide covers
You've worked under contracts for years — someone else's. The moment you're the owner, the contract is yours to write, and the same paper that protects your customer is what makes extra work collectible, protects your schedule, and keeps a dispute from eating the job. The exam tests these rules hard because California writes them directly into the home improvement laws. (The money side — downpayments, progress payments, retention — has its own Brief: Payments.)
Key terms
- Home improvement
- Repairing, remodeling, altering, converting, modernizing, or adding to residential property — homes and dwelling units, not commercial buildings; a tenant's unit in a large apartment building still counts.
- Home improvement contract
- An agreement between a contractor and a homeowner or tenant for home improvement work. The definition covers oral and written deals — but the law requires the real thing to be in writing.
- Change order
- A written, signed change to the contract — different work, a different price, or a different payment schedule.
- Business day
- For cancellation deadlines: every calendar day except Sunday and certain listed holidays. Saturday usually counts. The listed holidays: New Year's Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and Christmas.
The rules the exam tests
29 rules · 13 minHome improvement contract contents
Home improvement means repairing, remodeling, altering, converting, modernizing, or adding to residential property.
The term also covers installing home improvement goods or furnishing home improvement services. The statute's own list runs from driveways, pools, and patios to awnings, storm windows, solar, landscaping, fences, and garages. Commercial buildings are not residential property.
On the job
These contract rules protect people where they live — commercial work runs under different rules.
Exact wording
Home improvement means repairing, remodeling, altering, converting, modernizing, or adding to residential property. "Home improvement" also means installing home improvement goods or furnishing home improvement services — the statute's own list runs from driveways, pools, and patios to awnings, storm windows, solar, landscaping, fences, and garages.
A home improvement contract is any agreement for home improvement work priced over $500.
A home improvement contract is an agreement between a contractor and a homeowner or tenant for home improvement work under section 7151, priced at more than $500 for all labor, services, and materials — counted across every contract or document for the job. A tenant's agreement counts no matter how many units the building has, if the work is in, to, or upon the tenant's own residence or dwelling unit.
On the job
Splitting one job into smaller papers to stay under $500 is exactly what the across-all-documents measurement is written to stop.
Exact wording
An agreement between a contractor and a homeowner or tenant — a tenant contract counting regardless of the number of residence or dwelling units in the building, if the work is to be performed in, to, or upon the tenant's own residence or dwelling unit — counts as a home improvement contract when the work is a HOME IMPROVEMENT as defined in section 7151 and the total price of all labor, services, and materials is more than $500. The $500 threshold is measured across the job's one or more contracts or documents — splitting the paperwork does not duck it.
The home improvement contract rules do not cover a fire alarm sold with an alarm system.
All three conditions must hold: the fire alarm is sold in conjunction with an alarm system as the Alarm Company Act defines it; all costs to make the fire alarm system operable, including sale and installation, do not exceed $500; and the licensee complies with Section 7159.9. Sale, installation, and servicing then fall outside Section 7159. Costs for monitoring a burglar or fire alarm system are also outside Section 7159.
On the job
The home improvement contract rules stop at the alarm panel: a small fire-alarm add-on and the monitoring contract run under the Alarm Company Act's own rules, not section 7159.
Exact wording
Section 7159 does not apply to the sale, installation, and servicing of a fire alarm sold in conjunction with an alarm system, as the Alarm Company Act defines it, if all costs attributable to making the fire alarm system operable — including sale and installation costs — do not exceed $500 and the licensee complies with section 7159.9; nor does it apply to any costs associated with monitoring a burglar or fire alarm system.
You and the customer both sign the home improvement contract before work starts.
The home improvement contract must be in writing; an oral deal does not count. Both signatures have to be on it before any of the work that contract covers begins.
On the job
A handshake start is already a violation — the signed writing has to exist before any of the work it covers does.
Exact wording
A home improvement contract must be in writing and signed by both parties before the work it covers begins.
Hand the buyer the signed copy before you start work. The cancellation clock starts on delivery.
Both parties must sign and date the contract copy, and you must deliver it to the buyer before any work starts. The buyer's cancellation rights do not begin running until the buyer receives that copy.
On the job
Hand it over late and you have done two things wrong: work cannot lawfully start yet, and you have pushed back the start of the buyer's cancellation window.
Exact wording
Before any work starts, the contractor must give the buyer a copy of the contract signed and dated by both parties — and the buyer's receipt of that copy is what starts their cancellation rights running.
Put the signing date, your cancellation-notice contact, and a help number on the first page.
The type can be no smaller than the body text. The three items: the date the buyer signed; a line telling the buyer they may send the Notice of Cancellation to you, followed right after by your name, address, and email; and a phone number for help filling out the notice.
On the job
The buyer's route to canceling — where to send the notice, and whom to call for help with it — sits on page one with the signing date, not buried in the body.
Exact wording
Three things must appear on the first page, in type no smaller than the body text. The date the buyer signed. The contractor's name, address, and email for sending a Notice of Cancellation, right after a line telling the buyer they may send it there. And a phone number for help filling the notice out.
If you leave out a required notice or disclosure, you can be disciplined for that alone.
Leaving out any required information, notice, or disclosure — or violating the home improvement contract rules any other way — is by itself cause for discipline. If the Notice of Cancellation is missing, the buyer may file a complaint with CSLB.
On the job
Every formatting rule in this section has an enforcement tail; they are not drafting suggestions.
Exact wording
Omitting required information, notices, or disclosures — or otherwise violating this section — is itself cause for discipline, and if the Notice of Cancellation is missing the buyer may file a complaint with CSLB.
Set your printed contract forms in at least 10-point type. Make headings 10-point boldface.
The form as a whole must be readable: headings in at least 10-point boldface, and all other text in at least 10-point type. Where this article specifies a larger typeface, use that larger size instead of the 10-point minimum.
On the job
Fine print is not allowed to be fine here — 10-point is the floor for the whole printed form, and some notices are required to be larger.
Exact wording
Printed contract forms must be readable, with text in at least 10-point type and headings in at least 10-point boldface, unless a larger typeface is specified in this article.
You must write the job, the price, and the completion date into every home improvement contract.
The home improvement contract must show your name, your business address, and your license number. Describe the project and the significant materials and equipment. State the price in dollars and cents, and give the approximate completion date.
On the job
Missing descriptions and missing dates are on CSLB's list of common contract problems.
Exact wording
A home improvement contract must include the contractor's name, business address, and license number; a description of the project and the significant materials and equipment; the contract price in dollars and cents; and the approximate completion date.
If you check yes for subcontractors, you must offer the customer a list of them.
Your contract must have a yes/no checkbox saying whether you'll use subcontractors. If yes, it must tell the customer they can request a list of subs with names, contact information, license numbers, and classifications. Repeat that disclaimer on change orders.
On the job
New rule for 2026 — fresh law is exactly what exams like to test.
Exact wording
The contract must state, with a yes/no checkbox, whether subcontractors will be used — and if yes, it must tell the customer they can request a list of the subs with names, contact information, license numbers, and classifications. The same disclaimer repeats on change orders.
Put the home improvement contract in writing and state the price in dollars and cents.
The contract amount is the entire cost of the job: profit, labor, and materials together. Finance charges are excluded from that amount.
On the job
The customer agrees to one exact, all-in figure — profit, labor, and materials together, stated to the penny — with finance charges kept out of that number.
Exact wording
A home improvement contract must be in writing and state the agreed contract amount in dollars and cents — the entire cost including profit, labor and materials, but excluding finance charges.
You must state a separate finance charge apart from the contract amount.
This applies only when you and the person contracting for the home improvement agree to a separate finance charge — a charge for carrying the payments over time. The contract sets that charge out separately from the contract amount.
On the job
Separating the finance charge is a disclosure duty — its violation is discipline, not a misdemeanor. That sets it apart from the three rules that carry criminal exposure: the written contract stating the amount in dollars and cents, the downpayment cap, and the ban on collecting beyond the value of work performed or materials delivered (downpayment aside).
Exact wording
If there is a separate finance charge between the contractor and the person contracting for the home improvement, that finance charge must be set out separately from the contract amount.
Get the change order signed by both parties before you start the extra work.
A written change order signed by both parties is the only way extra work becomes part of a home improvement contract. Sign it first, then do the work — signing afterward does not bring the work into the contract.
On the job
The signed change order is what brings extra work inside the contract — signature first, then the work.
Exact wording
Extra work becomes part of a home improvement contract only through a written change order signed by both parties before that work starts.
Describe the materials in a home improvement contract specifically.
Give the quality, quantity, weight, color, size, or brand name, as they apply. "Install oak kitchen cabinets, manufactured by Company XYZ, model 01381A, per the plan" is a good description. "Install kitchen cabinets" is not.
On the job
Vague scope is where disputes start.
Exact wording
Describe the materials in a home improvement contract specifically — quality, quantity, weight, color, size, or brand name, as they apply. "Install oak kitchen cabinets, manufactured by Company XYZ, model 01381A, per the plan" is a good description; "install kitchen cabinets" is not.
CSLB contractor guides (Contracting for Success) — description-of-work
Write the cleanup and the firewood you promised into the contract too.
A home improvement contract should cover everything you agreed to, including complete cleanup and removal of debris and materials. Cover special requests too — saving lumber for firewood, saving certain materials or appliances. Note any work the homeowner is doing themselves.
On the job
If it was agreed to, it belongs in the contract — including the small items, like cleanup and saved materials, that are easiest to leave to memory.
Exact wording
A home improvement contract should cover everything that was agreed to — including complete cleanup and removal of debris and materials, and special requests like saving lumber for firewood or saving certain materials or appliances — and should note any work the homeowner is doing themselves.
CSLB contractor guides (Contracting for Success) — description-of-work
Put your two dates under the headings Approximate Start Date and Approximate Completion Date.
CSLB's guidance also calls for the contract to state what start of work consists of. The sample groups both dates under the section title Start and Completion of Work. There the start date depends on required permits being received and any agreed funds being paid to the contractor, and completion is subject to permissible delays as defined in this contract — so the sample leans on a definition your contract is expected to supply.
On the job
This is CSLB guidance on how to lay out the schedule, not a separate statutory heading rule.
Exact wording
CSLB's guidance is that the contract state what "start of work" consists of and give the dates under the headings APPROXIMATE START DATE and APPROXIMATE COMPLETION DATE — the sample groups both under a "START AND COMPLETION OF WORK" section title. The sample's start-date sentence makes that date contingent on required permits being received and any agreed funds being paid to the contractor, and its completion sentence is "subject to permissible delays as defined in this contract" — so the sample leans on a definition the contract itself is expected to supply.
CSLB contractor guides (Contracting for Success) — progress-payment-schedule
Your contract must carry a notice about extra work and change orders.
The notice in a home improvement contract must be headed "Note About Extra Work and Change Orders." A change order must describe three things: the scope of the extra work or change, the cost added to or subtracted from the contract, and the effect on the schedule of progress payments.
On the job
The incorporation rule is one thing; the contract also has to carry the note telling the buyer about it, with those three contents.
Exact wording
The contract must carry a note headed "Note About Extra Work and Change Orders," and a change order must describe three things: the scope of the extra work or change, the cost to be added to or subtracted from the contract, and the effect the order will have on the schedule of progress payments.
You can be disciplined for willfully disregarding state or local building law.
Section 7110 applies only when the disregard and violation are willful or deliberate — both, not one. Eight listed areas of law carry the same discipline: structural pest control; home-solicitation and right-to-cancel rules; safety, labor, workers' compensation and unemployment insurance law; the Subletting and Subcontracting Fair Practices Act; water-well drilling law; underground-facility location law; illegal dumping; and state or local building-permit law.
On the job
Skipping permits is not a jobsite shortcut — permits are one of the eight, and the whole list puts the license itself at risk.
Exact wording
Section 7110 makes willful or deliberate disregard and violation of the state or local building laws cause for discipline, along with eight listed areas of law: structural pest control, home-solicitation and right-to-cancel rules, safety and labor and workers' compensation and unemployment insurance law, the Subletting and Subcontracting Fair Practices Act, water-well drilling law, underground-facility location law, illegal dumping, and state or local building-permit law.
CSLB sees six common contract problems, from a missing cancel notice to a careless bid.
CSLB's list names a missing Right to Cancel notice; an excessive down payment requested or received; materials and equipment not described specifically enough; missing start and finish dates; no payment schedule; and a bid not worked out carefully or completely.
On the job
The list is not in job order. In practice: contract contents before signing, permits before the work that needs them, signed change orders before changed work.
Exact wording
CSLB's list of common problems with home improvement contracts includes a missing Right to Cancel notice, an excessive down payment requested or received, materials and equipment not described specifically enough, missing start and finish dates, no payment schedule, and a bid not figured carefully or completely.
CSLB contractor guides (Contracting for Success) — common-problems
Your home improvement contract must carry the Mechanics Lien Warning notice.
Headed "Mechanics Lien Warning," it tells the owner that anyone who helps improve the property and is not paid — subcontractors, suppliers, laborers — may record a mechanics lien, that the owner could be forced to pay twice or have the home sold, and what the owner can do to protect the property. The notice is required unless the bond or joint-control exemption applies.
On the job
The risk the warning explains comes from other people's unpaid bills — unpaid subs and suppliers can reach the owner's property, which is how an owner ends up paying twice.
Exact wording
A home improvement contract must include a notice headed "Mechanics Lien Warning" telling the owner that anyone who helps improve the property and is not paid — subcontractors, suppliers, laborers — may record a mechanics lien, that the owner could be forced to pay twice or have the home sold, and what the owner can do to protect the property — unless the bond/joint-control exemption applies.
Use the 12-point license board notice in home improvement contracts. Never use the Registrar statement.
Section 7030 requires a CSLB notice in written contracts, and which one depends on the contract: written prime contracts use the 10-point statement naming the Registrar and the complaint deadlines — four years for a patent (observable) act or omission, ten years for a latent act or omission pertaining to structural defects. Home improvement and service-and-repair contracts instead use the longer 12-point "Information about the Contractors State License Board" notice.
On the job
Putting the wrong one in is the actual trap — the short Registrar notice is expressly excluded from both home improvement and service-and-repair contracts.
Exact wording
Section 7030 requires a CSLB notice in written contracts, and which one depends on the contract: a 10-point statement naming the Registrar and the complaint deadlines — four years for a patent (observable) act or omission, ten years for a latent act or omission pertaining to structural defects goes in written prime contracts, while home improvement and service-and-repair contracts instead carry a longer 12-point "Information about the Contractors State License Board" notice.
If a salesperson sold the job, put their name and registration number in your contract.
A home improvement salesperson holds a registration number of their own, and the contract must state that registration number beside the name. Soliciting the job counts, and so does negotiating it — either one alone triggers the requirement.
On the job
The person who sold the job is identified on the face of the contract itself — name and registration number.
Exact wording
If a home improvement salesperson solicited or negotiated the contract, the contract must state that salesperson's name and registration number.
Skip the 3-day and 5-day notices when you negotiated the contract at your place of business.
A — a deal made away from your place of business — is what triggers the 3-day and 5-day cancellation notices. Two other exceptions also remove them: the contract is subject to the Seven-Day Right to Cancel, so a disaster-repair contract carries the Seven-Day notice instead, not both; or the contract is subject to licensure under the Alarm Company Act and the licensee complies with the Civil Code cancellation sections.
On the job
NEGOTIATED is the word the exception turns on — a deal negotiated at your place of business does not take these notices.
Exact wording
The 3-day and 5-day cancellation notices are not required when the contract was negotiated at the contractor's place of business, when the contract is subject to the Seven-Day Right to Cancel — a disaster-repair contract carries the Seven-Day notice instead, not both — or when the contract is subject to licensure under the Alarm Company Act and the licensee complies with the Civil Code's cancellation sections.
Disaster repair contracts carry a Seven-Day Right to Cancel. Damage alone is not enough.
The Seven-Day Right to Cancel applies only when the President or the Governor declares a state of emergency, or a city or county declares a local emergency. Covered work: repairing or restoring homes damaged by a sudden or catastrophic event.
On the job
Disaster repair work carries a longer cancellation window — and what turns it on is a declared federal, state, or local emergency, not the damage alone.
Exact wording
Contracts to repair or restore homes damaged by a sudden or catastrophic event carry a Seven-Day Right to Cancel when a state of emergency has been declared by the President or the Governor, or a local emergency has been declared by a city or county.
You can be disciplined just for leaving the CSLB notice out of your contract.
The CSLB notice is the "Information about the Contractors State License Board" statement a written home improvement contract must carry. Nothing else has to go wrong on the job. The missing notice alone is cause for disciplinary action against the contractor.
On the job
The CSLB notice is not optional boilerplate — leaving it out is a violation on its own, before anything else goes wrong on the job.
Exact wording
Failing to include the required CSLB notice is itself cause for disciplinary action.
Say in the change-order notice that you can still be paid for work already done.
The separate notice covers extra or change-order work. It must tell the buyer that failing to meet the change-order requirements does not preclude you from recovering compensation for work actually performed, under legal or equitable remedies that prevent unjust enrichment.
On the job
Without a signed change order you cannot enforce the extra price under your contract. You can still go after the fair value of the work you actually did — the law does not let the owner keep free improvements — but you have lost your contract protection, and getting paid is much harder from there.
Exact wording
A separate notice about extra or change-order work must also tell the buyer that the contractor's failure to comply with those change-order requirements does not preclude recovering compensation for work actually performed, under legal or equitable remedies designed to prevent unjust enrichment.
Put both insurance notices in your home improvement contract. Having no coverage is a permitted answer.
The two are commercial general liability and workers' compensation. For liability, state that you do not carry it, that you carry it and name the insurer, that you are self-insured, or that you are a limited liability company carrying liability insurance or maintaining other security as required by law. For workers' compensation, state either that you have no employees and are exempt, or that you carry coverage for all employees. Either notice may be attached if the contract says so.
On the job
Both notices are required whether or not you carry the coverage — 'I don't have it' is a permitted answer, leaving it out is not.
Exact wording
A home improvement contract must also carry a notice about commercial general liability insurance — stating that the contractor does not carry it, carries it and naming the insurer, is self-insured, or is a limited liability company carrying liability insurance or maintaining other security as required by law — and a notice about workers' compensation insurance, stating either that the contractor has no employees and is exempt or that the contractor carries coverage for all employees. Either may be attached if the contract says so.
Your contract must say the owner or tenant can require a performance and payment bond.
Your contract must state that right in a notice placed in close proximity to the owner's and contractor's signatures. A performance and payment bond guarantees the job is finished and the subs and suppliers are paid.
On the job
The same bond that lifts the payment limits is something the customer can require of you — and the contract has to tell them so.
Exact wording
The contract must contain, in close proximity to the owner's and contractor's signatures, a notice stating that the owner or tenant has the right to require the contractor to have a performance and payment bond.
Your contract must define substantial commencement and give an approximate start date.
Write the description in the contract's own words: what counts as substantially commencing this job. Right after that description, print the heading "Approximate Start Date" and, under it, the approximate date work will begin.
On the job
"Start date" and "substantial commencement" are not the same thing — the contract must spell out, in its own words, what actually counts as starting, so both sides measure the start of work by the contract instead of by assumption.
Exact wording
The contract must address the commencement of work: a statement describing what constitutes substantial commencement of work under the contract, then the heading "Approximate Start Date" followed by the approximate date work will begin.
Take away
10 rules · 5 minThree-day right to cancel
A $25-or-more deal made away from normal business premises is a home solicitation contract.
A contract for goods or services of $25 or more counts as a home solicitation contract when it is made anywhere other than where the owner or the seller normally does business or normally offers these goods. That is what carries the cancellation rights. Contracts rescindable under section 125 of the federal Consumer Credit Protection Act are excluded.
On the job
WHERE the deal was made is what triggers these cancellation rights — the kitchen-table sale is the classic case.
Exact wording
A contract for goods or services of $25 or more, made away from appropriate trade premises — anywhere other than where the owner or the seller normally does business or normally offers these goods — is a "home solicitation" contract, which is what carries the cancellation rights below. Contracts rescindable under federal Consumer Credit Protection Act section 125 are excluded.
The cancellation period starts when the buyer receives a copy complying with the notice requirements.
On a home-solicitation home improvement contract, the customer can cancel until midnight of the 3rd business day after receiving a signed and dated copy that meets the notice requirements, including the required cancellation notice. For a senior citizen buyer the deadline is the 5th business day. The disaster seven-day right under this code instead runs from the day the buyer signs and dates the contract. That right applies only if the contract is not void under the disaster-solicitation ban (Civil Code 1689.14), and only if the buyer did not validly waive cancellation under the emergency-repair rules (Civil Code 1689.15).
On the job
This is the buyer's cooling-off window, and on the 3-day and 5-day tracks the clock does not start until the buyer holds a compliant signed copy — late or defective paperwork keeps the window open.
Exact wording
On a home-solicitation home improvement contract, the customer can cancel until midnight of the 3rd business day — or the 5th business day if the buyer is a senior citizen — after receiving a signed and dated copy of the contract that complies with the notice requirements, including the required cancellation notice. The disaster seven-day right under this code runs from the day the buyer signs and dates the contract — and only for a contract that is not void under the disaster-solicitation ban (Civil Code 1689.14), and unless the buyer validly waived cancellation under the emergency-repair waiver rules (Civil Code 1689.15).
A senior citizen is a person 65 years of age or older.
This definition applies wherever these cancellation rules use the term senior citizen. Age 65 is the line, counted on the person's birthday: someone one day short of 65 is not a senior citizen, and someone well past 65 still is.
On the job
Whether the buyer gets the 3-business-day window or the 5-business-day one turns on this definition.
Exact wording
In these cancellation rules, a senior citizen is a person 65 years of age or older.
Saturday usually counts as a business day. Sunday and the listed holidays never do.
For these deadlines, count every calendar day as a business day. Sunday is the exception, along with the listed holidays. Saturday usually counts.
On the job
Count the days wrong and you treat the window as closed while it is still open — Sunday is out, Saturday usually counts.
Exact wording
For these deadlines, every calendar day is a business day except Sunday and the listed holidays — Saturday usually counts.
Urgency does not waive the right to cancel. The buyer must sign a separate waiver.
A separate waiver is a dated statement, signed by the buyer apart from the contract, describing the situation and expressly waiving the three-, five-, or seven-business-day right to cancel, whichever applies. Civil Code 1689.5, 1689.6, 1689.7, 1689.10, 1689.12, and 1689.14 then do not apply — but only if all three of these are true: the buyer, the buyer's agent, or the buyer's insurance representative initiated the contract; the contract is for emergency or immediately necessary repairs needed for the immediate protection of persons or property; and the buyer gives that signed, dated statement.
On the job
Urgency alone does not waive a cancellation right. Without this separate signed waiver, whatever cancellation rules otherwise apply still apply.
Exact wording
Six of the cancellation sections — Civil Code 1689.5, 1689.6, 1689.7, 1689.10, 1689.12, and 1689.14 — do not apply to a contract that meets all three of these: the buyer, the buyer's agent, or the buyer's insurance representative initiated it; it is for emergency or immediately necessary repairs needed for the immediate protection of persons or property; and the buyer gives a separate dated, signed statement describing the situation and expressly waiving the three-, five-, or seven-business-day right to cancel, whichever applies.
The buyer signs and dates a home improvement contract twice.
The second signature and date go on the "Three-Day Right to Cancel" statement, which may sit in the contract itself or in an attachment. For a senior citizen buyer, change "three" to "five" throughout. On a home improvement contract for repair or restoration of residential premises damaged by a disaster, the buyer signs and dates the "Seven-Day Right to Cancel" statement instead, in the contract or in an attachment. Write the agreement in the same language principally used in the oral sales presentation — on a home improvement contract, and on a home solicitation contract that is neither a home improvement contract nor a service-and-repair contract. On that second kind, the buyer dates and signs the agreement.
On the job
On the home improvement track the buyer signs twice — once for the deal, once for the cancellation statement — and the paper speaks the language the sale was actually made in.
Exact wording
On a home solicitation contract that is neither a home improvement contract nor a service-and-repair contract, the buyer's agreement must be written in the same language principally used in the oral sales presentation, dated, and signed by the buyer. On a home improvement contract the same-language rule applies too, and the buyer signs and dates TWICE: once on the contract itself, and again on the "Three-Day Right to Cancel" statement, which may sit in the contract itself or in an attachment — with "three" changed to "five" throughout for a senior citizen buyer. On a disaster-repair home improvement contract it is the "Seven-Day Right to Cancel" statement, in the contract or in an attachment, that the buyer signs and dates.
Print the cancellation statement in boldface right where the buyer signs.
On a home solicitation contract that is neither a home improvement contract nor a service-and-repair contract, you print the statement — three business days to cancel, or five for a senior citizen buyer — in at least 10-point boldface in immediate proximity to the buyer's signature space. Two kinds of contract take a seven-business-day statement in that same position: a personal emergency response unit not installed as part of a licensed alarm system, and repair or restoration of residential premises damaged by a disaster. A home improvement contract instead carries the "Three-Day Right to Cancel" statement, or the "Seven-Day Right to Cancel" statement when the work is repair or restoration of residential premises damaged by a disaster, in at least 12-point boldface in that same position.
On the job
The cancellation statement sits where the buyer cannot miss it — in immediate proximity to the space where they sign, in boldface at the required size.
Exact wording
On a home solicitation contract that is neither a home improvement contract nor a service-and-repair contract, the cancellation statement — three business days, or five for a senior citizen buyer — must appear in at least 10-point boldface type in immediate proximity to the buyer's signature space. Two kinds of contract take a SEVEN-business-day statement in that same position instead: a personal emergency response unit not installed as part of a licensed alarm system, and the repair or restoration of residential premises damaged by a disaster. A home improvement contract instead carries the "Three-Day Right to Cancel" statement — the "Seven-Day" version on a disaster-repair contract —, in at least 12-point boldface, in that same position.
The buyer cancels a home solicitation contract only by written notice to the contractor.
Email, mail, fax, or delivery to the contractor's place of business all work. The notice is due by midnight of the third — or, as applicable, fifth or seventh — business day after the buyer received the signed, dated copy containing the cancellation notice. The required notice tells the buyer to include their name, their address, and the date the buyer received the signed copy and this notice.
On the job
Cancelling takes a written notice, but the methods are ordinary ones — email, mail, fax, or delivery — and the deadline runs to midnight, counted from the day the buyer received the signed copy.
Exact wording
Cancelling a home-improvement home solicitation contract takes a written notice — emailed, mailed, faxed, or delivered to the contractor at the contractor's place of business by midnight of the deadline — the third (or, as applicable, fifth or seventh) business day after the buyer received the signed, dated copy that includes the notice. The required notice tells the buyer to include their name, their address, and the date they received the signed copy of the contract and this notice.
A mailed cancellation takes effect when the customer deposits it in the mail.
The envelope must be properly addressed with postage prepaid — those two conditions are what make the mailing effective. The date you receive the notice does not matter.
On the job
Once it is properly addressed and stamped and in the mail, it counts — so the customer is covered even if it lands on your desk late.
Exact wording
A mailed cancellation is effective when it is deposited in the mail, properly addressed with postage prepaid — not when the contractor receives it.
Count your 10 days to refund from the day the cancellation notice reaches you.
If the buyer cancels, you — the seller, and on a home improvement job that means the contractor — must return everything the buyer paid within 10 days of receiving the cancellation notice.
On the job
Cancellation unwinds the deal both ways — whatever the buyer paid comes back, and the clock on returning it is short.
Exact wording
If the buyer cancels, the seller — the contractor, on the home improvement track — must return anything the buyer paid within 10 days of receiving the cancellation notice.
Take away
11 rules · 5 minService and repair contracts
Write a service and repair contract only when the job runs $750 or less.
The $750 ceiling is only one of four conditions, and all four must hold: the buyer contacted you to request the work; you sell nothing beyond what is reasonably necessary to fix the problem that prompted the call; and no payment is due, or accepted by you, until the work is complete.
On the job
It is a narrow exception for small call-out jobs — qualify, and this section's requirements apply instead of the full home improvement contract rules.
Exact wording
A job may be written as a service and repair contract only when all four are true: the contract is $750 or less, the buyer initiated contact to request the work, the contractor sells nothing beyond what is reasonably necessary to fix the problem that prompted the call, and no payment is due — or accepted by the contractor — until the work is complete.
Hand the buyer the service and repair contract before any work starts.
You and the buyer must both sign and date the service and repair contract, and the buyer receives that signed, dated copy. No work starts until that copy is in the buyer's hands.
On the job
The small-job track keeps the same discipline about paper: the signed, dated contract is in the buyer's hands before any work starts.
Exact wording
A service and repair contract must be given to the buyer, signed and dated by both parties, BEFORE any work starts.
The buyer signs and dates the Notice to the Buyer on a service and repair contract.
The Notice to the Buyer appears in at least 12-point boldface and restates the four statutory requirements: the $750 ceiling, buyer-initiated contact, no upselling, and no payment due — or accepted by the contractor — until the work is complete.
On the job
The buyer signs the same four tests you had to meet — which is how a violation gets proved later.
Exact wording
A service and repair contract must carry a Notice to the Buyer, in at least 12-point boldface and signed and dated by the buyer, restating the four statutory requirements — the $750 ceiling, buyer-initiated contact, no upselling, and no payment due — or accepted by the contractor — until the work is complete.
You write the service and repair contract in the language you sold the job in.
A service and repair contract is the form for a qualifying repair call, not a home improvement contract. The contract must be in the language principally used in the oral sales presentation, so a Spanish negotiation needs a Spanish contract.
On the job
A buyer who negotiated the deal in one language should not be handed a contract in another — the paper follows the language of the sales presentation.
Exact wording
A service and repair contract must be written in the language principally used in the oral sales presentation — so a deal negotiated in Spanish needs a Spanish contract.
Print "Service and Repair" on the contract in at least 10-point boldface.
"Service and Repair" is the contract type, and naming it up front tells the buyer which track the job runs on. The contract also carries a Commercial General Liability Insurance notice and a Workers' Compensation Insurance notice, each with whichever alternative statement is true for you — one statement for carrying the coverage, one for not carrying it. All other text runs at least 10-point, and headings at least 10-point boldface, unless the law specifies larger for a particular notice.
On the job
The heading tells the buyer at a glance which track this contract runs on, and the insurance notices are required whichever answer is true for you — carrying the coverage and not carrying it each have a permitted statement.
Exact wording
A service and repair contract must state the contract type "Service and Repair" in at least 10-point boldface, and must carry both a Commercial General Liability Insurance notice and a Workers' Compensation Insurance notice with whichever alternative statement is true for that contractor. The rest of the contract rides the same floor: text in at least 10-point type and headings in at least 10-point boldface, unless the law specifies larger for a particular notice.
Offer the customer any parts you replaced during the service call.
The service and repair contract must carry a statement of that offer, plus a checkbox the customer initials if the customer does not want the parts. The initialed box documents the refusal.
On the job
Offer the old parts. If the customer doesn't want them, the contract gives them a box to initial so that choice is documented.
Exact wording
On a service and repair contract the law requires the contractor to OFFER the customer any parts replaced during the service call. The contract carries a statement saying so, plus a checkbox the customer initials if they don't want them.
If you miss one of the four service and repair conditions, the home improvement rules apply.
The four conditions are the dollar ceiling, buyer-initiated contact, no upselling, and no payment until the work is complete. Fail any one of them and B&P 7159 subdivisions (c), (d), and (e) apply, cancellation rights included, whatever the contract price.
On the job
Losing the exception is not about the dollar amount; it drops you into the full home improvement rules.
Exact wording
If a job misses any one of the four service-and-repair conditions, the exception is lost and the home improvement contract requirements of B&P 7159 subdivisions (c), (d), and (e) apply — including cancellation rights — regardless of the contract price.
A service and repair job is complete only when every condition behind the call is fixed.
A service and repair contract is the job a customer calls you out to fix. It is complete only when you have fully corrected every condition that prompted the service call, and — where it applies — the building department has accepted and approved the corrective work.
On the job
Finishing the physical work is not always the moment you can take payment.
Exact wording
For a service and repair contract, the work is not "completed" until every condition that prompted the service call is fully corrected and, where it applies, the building department has accepted and approved the corrective work.
The buyer keeps the right to cancel until the signed copy arrives and work starts.
On a service and repair contract, the buyer's copy must be signed and dated by both parties, and the ordinary right to cancel stays open until the buyer has that copy and you have started work. For the listed-reason cancellations, the buyer's written notice may be emailed, mailed, faxed, or delivered to your place of business. Return anything the buyer paid within 10 days of receiving that notice.
On the job
Starting work closes the ordinary window only on a contract that truly qualifies. Break one of the four conditions and the buyer can still cancel even after work has begun — the fallback claim carries what applies then.
Exact wording
On a service and repair contract the buyer's ordinary right to cancel runs until two things have both happened: the buyer has received a copy of the contract signed and dated by both parties, and the contractor has started work. For the listed-reason cancellations, the notice spells out the method — a written notice, emailed, mailed, faxed, or delivered to the contractor's place of business — and the contractor must return anything the buyer paid within 10 days of receiving it.
Get the buyer's written approval before you charge past your estimate on a time-and-materials job.
A service and repair contract priced by time and materials carries the heading "Estimated Contract Price," the estimate in dollars and cents, your set rate, the estimated materials cost, and how you compute time. It must also state that the amount cannot exceed that estimate without the buyer's written authorization.
On the job
Blowing past your own estimate without getting it in writing is the most common way a service call turns into a complaint.
Exact wording
Where a service and repair contract is priced by time and materials, it must carry the heading "Estimated Contract Price" with the estimate in dollars and cents, disclose the set rate and the estimated cost of materials, disclose how time is computed, and state that the actual contract amount may not exceed the estimate without written authorization from the buyer.
Your service and repair contract must list the service charge under its own heading.
The heading applies only when you charge a service charge, and it reads "Amount of Service Charge" with the amount. The contract must state the buyer may be charged only one service charge, including any trip charge or inspection fee.
On the job
One service charge per call — you cannot stack a trip charge and an inspection fee on top of it.
Exact wording
If a service charge is charged, the service and repair contract must carry the heading "Amount of Service Charge" with the amount, and state that the buyer may be charged only one service charge, including any trip charge or inspection fee.
Take away
6 rules · 3 minOffer, acceptance, and contract principles
An accord settles an obligation by accepting something different or less.
The accepting party is the one already entitled to full performance. In an accord, that party agrees to take something different from, or less than, that entitlement, in extinction of the obligation.
On the job
The exam pairs accord with novation: an accord changes what is accepted in satisfaction of a debt, a novation replaces the obligation itself.
Exact wording
An accord is an agreement to accept, in extinction of an obligation, something different from or less than that to which the person agreeing to accept is entitled.
A novation substitutes a new obligation for an existing one.
In a novation the parties agree that a new obligation replaces the existing one, and the old obligation is released.
On the job
When a new contractor takes over a contract with everyone's consent and the old contractor is released, that is a novation, not an assignment; an assignment leaves the original obligor on the hook.
Exact wording
Novation is the substitution of a new obligation for an existing one.
A qualified acceptance is a new proposal.
An acceptance binds only if it is absolute and unqualified. It also binds when the proposer can separate an acceptance of that character from the rest and that separated part binds the person accepting. Anything less is a new proposal.
On the job
An owner who 'accepts' a bid at a lower price has made a counter-offer; no contract exists until the contractor accepts it.
Exact wording
An acceptance must be absolute and unqualified, or must include an acceptance of that character which the proposer can separate from the rest and which will bind the person accepting. A qualified acceptance is a new proposal.
You can revoke a proposal right up until the acceptance reaches you.
The cut-off is the moment the acceptance is communicated to you, not the moment the other party decides to accept. Before that, you can withdraw the proposal; after that, you cannot.
On the job
A private bid with no stated irrevocability can be withdrawn until the owner's acceptance reaches the bidder; the exam tests that the acceptance must be communicated.
Exact wording
A proposal may be revoked at any time before its acceptance is communicated to the proposer, but not afterwards.
You revoke your proposal by notifying the other party before acceptance is communicated.
Any one of four events revokes a proposal: the proposer's notice of revocation to the other party before acceptance is communicated; lapse of the time the proposal sets for acceptance, or a reasonable time if it sets none; the acceptor's failure to fulfill a condition precedent to acceptance; or the proposer's death or legal incapacity.
On the job
Four ways a bid dies before acceptance; the exam's usual ones are express withdrawal and lapse of time.
Exact wording
A proposal is revoked by communication of notice of revocation by the proposer to the other party before acceptance has been communicated; by lapse of the time the proposal prescribes for acceptance or, if none, a reasonable time without acceptance; by the acceptor's failure to fulfill a condition precedent to acceptance; or by the death or legal incapacity of the proposer.
A liquidated damages provision is valid unless the party attacking it proves it unreasonable.
A liquidated damages provision fixes the damages for breach in advance, like a per-day late-completion charge. The party seeking to invalidate it carries the burden, and the test is the circumstances existing when the contract was made. If another statute expressly applicable to the contract prescribes that standard, that statute governs instead. But where the damages are recovered from a party to a retail purchase or rental, by that party, of personal property or services primarily for personal, family, or household purposes, or from a tenant under a lease of real property used as a dwelling by that tenant or their dependents, the provision is void — except where damages would be impracticable or extremely difficult to fix and the parties agree on a presumed amount.
On the job
A per-day late-completion charge in a construction contract fixes the owner's damages in advance and stands unless shown unreasonable at signing; the stricter rule turns on who the damages are collected FROM — a consumer buyer or a residential tenant — not on the label of the contract.
Exact wording
Except where another statute expressly applicable to the contract prescribes the rules or standard for determining the validity of its liquidated damages provision — in which case that statute governs — a contract provision liquidating the damages for breach is valid unless the party seeking to invalidate it establishes that the provision was unreasonable under the circumstances existing when the contract was made. A different rule applies where the liquidated damages are sought to be recovered FROM a party to a contract for the retail purchase or rental, by that party, of personal property or services primarily for personal, family, or household purposes, or FROM a party to a lease of real property used as a dwelling by that party or their dependents: against those parties the provision is void except where damages would be impracticable or extremely difficult to fix and the parties agree on a presumed amount.
Take away
18 rules · 8 minBidding and contract vocabulary
Your bid is normally an offer. The owner's acceptance makes it a contract.
Acceptance made according to the bid's terms can form a binding contract, still subject to any required conditions and to the mistake and rescission rules. On public works you may seek relief from a bid with certain clerical mistakes under the Public Contract Code's relief-of-bidders rules.
On the job
The bid is the offer and the owner's acceptance makes the contract, so the number on the bid form is the number the contractor is bound to once it is accepted.
Exact wording
A contractor's bid is generally an offer: acceptance made according to the bid terms can form a binding contract, subject to any required conditions and the mistake and rescission rules; on public works a bidder may seek relief from a bid containing certain clerical mistakes under the Public Contract Code's relief-of-bidders rules.
Standard trade practice
An addendum changes the bid documents before bids are due.
An addendum is a written change to the plans, specifications, or other bid documents, issued to all bidders before bids are due. Because it becomes part of the bid documents, a responsive bid prices the work as changed.
On the job
Issued to everyone so the bids stay comparable — a bidder who ignores an addendum has priced a different job from the one being awarded.
Exact wording
An addendum is a written change to the plans, specifications, or other bid documents issued to all bidders before bids are due; it becomes part of the bid documents, so a responsive bid prices the work as changed.
Standard trade practice
Ask in writing before bids are due when the drawings and specs conflict.
Follow the bid instructions: a written prebid question or request for information goes to the designated contact before bids are due. Then price the binding written clarification or addendum. Never silently pick the cheaper reading or guess.
On the job
A silent assumption turns the conflict into a dispute after award, when the contractor has the least leverage; the written question before bid keeps every bidder on the same scope.
Exact wording
When bid documents conflict — the drawings show one thing and the specifications another — the bidder follows the bid instructions and submits a written prebid question or request for information to the designated contact before bids are due, then prices the binding written clarification or addendum; it does not silently pick the cheaper reading or guess.
Standard trade practice
Bid peddling comes from the subcontractor and bid shopping comes from the general contractor.
A losing subcontractor who returns after award and offers to undercut the winning subcontractor's price is peddling. A general contractor who takes the low subcontractor bid around to squeeze out a lower price is shopping.
On the job
Two names for the same squeeze from opposite directions, and the exam asks which is which; on public works the Subletting and Subcontracting Fair Practices Act restricts the post-award substitution both practices lead to.
Exact wording
Bid peddling is a losing subcontractor going back to the general contractor after award and offering to undercut the winning subcontractor's price; bid shopping is the mirror image — the general contractor shopping the low subcontractor bid around to squeeze a lower one. Peddling is pushed by the subcontractor; shopping is pulled by the general.
Standard trade practice
Alternates can't be picked after bids open to choose the winner.
The base bid prices the basic scope shown in the plans and specifications. Alternates are separately priced additions or deductions the owner may accept or reject under the bidding rules. On California local public works, the solicitation must state how alternates determine the low bidder. The agency may add or deduct alternates only after the low bidder is determined.
On the job
Alternates let the owner fit the job to the budget, but on public work the rules for using them in the ranking are set before bids open — the agency does not get to pick its winner by choosing alternates afterward.
Exact wording
The base bid prices the basic scope of work shown in the plans and specifications; alternates are separately priced additions or deductions that the owner may accept or reject under the bidding rules. On California local public works the solicitation must state how alternates will be used to determine the low bidder, and only after the low bidder is determined may the agency add or deduct alternates.
Standard trade practice
On a lump-sum job you eat the overrun and keep savings.
A lump-sum (fixed-price) contract sets one total price for a defined scope. With scope unchanged, you generally carry cost overruns and keep any savings. The price changes only through an adjustment the contract or law allows, usually a change order.
On the job
The three pricing forms are told apart by who carries the risk of cost: lump sum puts it on the contractor, cost-plus on the owner, and unit price splits it — rate fixed, quantity open.
Exact wording
A fixed-price, or lump-sum, contract sets one total price for a defined scope of work: with the scope unchanged, the contractor generally carries the cost-overrun risk and keeps the savings if the work costs less than estimated, and the price changes only through an adjustment the contract or the law allows — most commonly a change order.
Standard trade practice
If you write cost-plus with no agreed total, your home improvement contract fails.
Cost-plus pays the contractor actual cost — as the contract defines reimbursable cost — plus an agreed fee or markup. Spell out which costs count and how the fee is calculated. A California home improvement contract must state the amount in dollars and cents, so open-ended cost-plus with no agreed total does not meet those rules. A qualifying service-and-repair contract of $750 or less has its own estimated time-and-materials pricing rules.
On the job
Cost-plus moves the cost risk to the owner; the home-improvement overlay is the exam's twist, because the statute demands a stated price even where the pricing form would leave it open.
Exact wording
A cost-plus contract pays the contractor the actual cost of the work — as the contract defines reimbursable cost — plus an agreed fee or markup, and the contract should spell out which costs count and how the fee is figured. A California home improvement contract must state the agreed contract amount in dollars and cents, so an open-ended cost-plus arrangement with no agreed total does not meet those rules on home improvement work; a qualifying service-and-repair contract of $750 or less has its own estimated time-and-materials pricing rules.
Standard trade practice
A unit-price contract sets a price per unit of work. The total is unknown at signing.
The parties agree on a rate per cubic yard, square yard, or linear foot. You are paid that rate times the quantity actually measured and accepted under the contract, so the total is not known when you sign.
On the job
The rate is fixed and the quantity floats, which is why paving and earthwork are bid this way: nobody knows the exact quantity until it is measured.
Exact wording
In a unit-price contract the parties agree on a price per unit of work — per cubic yard, square yard, or linear foot — and the contractor is paid that rate times the quantity actually measured and accepted under the contract; the final contract total is not known when the contract is signed.
Standard trade practice
Convert the slab thickness from inches to feet before you multiply.
Concrete is priced by the cubic yard, and one cubic yard is 27 cubic feet: for a slab, multiply length by width by thickness in feet to get cubic feet, divide by 27, then multiply by the unit price. That is the theoretical volume; any waste allowance is a separate estimating judgment.
On the job
The exam's takeoff question is a unit-conversion question: inches to feet first, then cubic feet to cubic yards — a 45 by 36 foot slab four inches thick is 20 cubic yards.
Exact wording
Concrete is priced by the cubic yard, and one cubic yard is 27 cubic feet: to take off a slab, convert the thickness to feet, multiply length by width by thickness for cubic feet, divide by 27 for cubic yards, then multiply by the unit price. This gives the theoretical volume; any waste allowance is a separate estimating judgment.
Standard trade practice
On each progress payment, deduct retention before subtracting what the owner already paid.
Retention is the percentage of each payment the contract lets the owner hold back. The payment due is the value of all work completed to date, less the retention percentage on that value, less what has already been paid. On California private works entered into on or after January 1, 2026, statute caps retention at 5 percent of each payment and of the contract price, with exceptions.
On the job
Three numbers in a fixed order — earned to date, minus retention, minus prior payments — and skipping the retention step is the common error; the rate itself comes from the contract within the statutory cap.
Exact wording
Where a contract lets the owner hold a retention percentage on each progress payment, the payment due is the value of all work completed to date, less the retention percentage on that value, less what has already been paid. The percentage is whatever the contract lawfully sets: on California private works entered into on or after January 1, 2026, statute caps retention at 5 percent of each payment and of the contract price, with exceptions.
Standard trade practice
A signed change order changes the contract price up or down.
Once signed, the change order becomes part of the contract: the adjusted price is the original price plus additive change orders, minus deductive ones. The remaining contract balance is the adjusted price minus payments made — a balance on the contract, not necessarily an amount due now.
On the job
Deductive change orders are the trap: the adjusted price goes down as well as up, and the balance owed is figured from the adjusted price, not the original.
Exact wording
A signed change order becomes part of the contract and changes the contract price: the adjusted price is the original price plus additive change orders minus deductive ones, and the remaining contract balance is the adjusted price minus what has been paid — a balance still on the contract, not necessarily an amount currently due.
Standard trade practice
Compare what you spent against the budget for the work actually completed.
Earned value is that scope's budget multiplied by that same scope's percent complete — not the project's overall percent complete. Anything spent above that earned value is the cost overrun, even when the total budget still has room.
On the job
At 60 percent complete, a $60,000 labor budget has earned $36,000, so $42,000 spent is $6,000 over — even though it is still $18,000 under the total budget.
Exact wording
Cost control compares money spent against the budget for the work actually completed, not against the whole budget: the budget earned is the budget times the percent complete of that same scope — not overall project percent complete — and spending above the budget earned is the overrun.
Standard trade practice
Code the supplier invoice to its job in accounts payable. Month end is too late.
Under normal job-cost accounting practice, a supplier invoice is assigned to the right job and the right cost code while it is processed in accounts payable — before it posts to the job-cost reports. It is not sorted out at month end or job close.
On the job
Job costing only works if each cost lands on the right job as soon as it is recorded; coded at receipt, an overrun shows on the report while there is still time to act.
Exact wording
Under normal job-cost accounting practice a supplier invoice is assigned to the correct job and cost code as part of accounts payable processing, before it is posted to the job-cost reports — not sorted out at month end or at job close.
Standard trade practice
A critical path delay moves the completion date by the same amount.
The critical path is the chain of activities with no spare time. In a basic schedule with no imposed date constraints, those activities have zero total float: a delay to one normally delays project completion by the same amount, unless time is recovered by resequencing, acceleration, or another schedule change.
On the job
Float is what a non-critical activity can lose without moving the finish date; critical activities have none, so their delays go straight to the completion date.
Exact wording
In a basic critical path schedule with no imposed date constraints, activities on the critical path have zero total float: a delay to a critical activity normally delays project completion by the same amount unless time is recovered by resequencing, acceleration, or another schedule change.
Standard trade practice
The subcontractor or supplier submits shop drawings and submittals through the prime contractor.
The prime contractor reviews and approves the submittal, then forwards it to the architect or design professional for the required review. If the contract requires a reviewed submittal, that work is not supposed to proceed until the review comes back.
On the job
The review is what ties the design intent to what gets built; who pays for a defect caught late depends on the contract, the deviation, and who approved what — which is why nobody wants to be the one who fabricated ahead of the review.
Exact wording
Required shop drawings and submittals flow up the contract chain: the subcontractor or supplier that prepares one submits it through the prime contractor, the prime reviews and approves it and forwards it to the architect or design professional for the required review, and where the contract requires a reviewed submittal that work is not supposed to proceed until the review comes back.
Standard trade practice
Send your questions about the contract documents to the general contractor.
The subcontractor does not go straight to the owner or the design professional, unless the contract or the project's communication protocol authorizes another route. The general contractor forwards the request for information to the design professional and returns the answer.
On the job
Questions travel along the contract chain because the subcontractor's contract is with the general, and one record of what was asked and answered keeps the prime, who carries the schedule, informed.
Exact wording
A subcontractor directs questions about the contract documents to the general contractor, not to the owner or the design professional, unless the contract or the project's communication protocol authorizes another route; the general contractor forwards the request for information to the design side and returns the answer.
Standard trade practice
The notice to proceed starts contract time. The day you signed does not.
A notice to proceed is the owner's written direction to start work. Contract time — the performance period — runs from the date the notice states, not the signing date, if the contract says performance begins when the owner directs the start.
On the job
Contract time and calendar time are different clocks, and the notice to proceed is what starts the one liquidated damages are measured against.
Exact wording
A notice to proceed is the owner's written direction telling the contractor to start work; where the contract provides that the period for performance begins when the owner directs the start, contract time runs from the date the notice states, not from the date the contract was signed.
Standard trade practice
A binds the subcontractor to the prime contract for the subcontractor's own scope.
The prime contract is the general contractor's contract with the owner. For the subcontractor's own scope, and only that far, the subcontractor owes the general contractor what the general contractor owes the owner: schedule, quality, insurance, and documentation.
On the job
The owner has no contract with the subcontractor, so the prime passes its own obligations down by agreement — and a subcontractor who has not read the prime contract has agreed to terms it has not seen.
Exact wording
A flow-down clause carries the prime contract's obligations into the subcontract so far as they bear on the subcontractor's own scope of work: the subcontractor owes the general contractor what the general contractor owes the owner for that scope, schedule, quality, insurance, and documentation requirements included.
Standard trade practice
Take away
2 rules · 1 minPublic bids and subcontractor listing
Public Contract Code section 4100 begins the Subletting and Subcontracting Fair Practices Act.
The Subletting and Subcontracting Fair Practices Act is the short title anyone may use when citing the Public Contract Code chapter that begins at section 4100. Those sections carry the public works rules for listing subcontractors and substituting them.
On the job
The Act is the source of the public-works subcontractor listing and substitution rules; the exam asks for it by name.
Exact wording
The chapter of the Public Contract Code beginning at section 4100 may be cited as the Subletting and Subcontracting Fair Practices Act.
Submit every state bid under sealed cover with bidder's security enclosed.
The security must be at least 10 percent of the amount bid, in one of three forms: an electronic bidder's bond by an admitted surety through an approved registry; a signed bidder's bond by an admitted surety; or cash, a cashier's check, or a certified check payable to the director of the advertising department. Enclose none of these and the bid is not considered.
On the job
Ten percent of the bid, in one of three forms, or the bid is not read; the bond promises the bidder will sign if awarded.
Exact wording
On state contracts, all bids are presented under sealed cover accompanied by bidder's security in one of three forms: an electronic bidder's bond by an admitted surety through an approved registry, a signed bidder's bond by an admitted surety, or cash, a cashier's check, or a certified check payable to the director of the advertising department. The security must be at least 10 percent of the amount bid, and a bid is not considered unless one of those forms is enclosed.
Take away
Important numbers to know
Where people go wrong
Sounds right: Saturday is not a business day for the cancellation clock.
Where’s the catch?
Easy to mix up: Oral home improvement deals vs. the written-contract requirement
Which is which?
Sounds right: Change-order paperwork is red tape that protects only the customer.
Where’s the catch?
Easy to mix up: Home improvement contract vs. service and repair contract
Which is which?
Sounds right: "It's an emergency, so the cancellation rules don't apply"
Where’s the catch?
Easy to mix up: The disaster seven-day window: from signing, or from receiving the copy?
Which is which?
Glossary
Every term this guide defines, in one place. Each is also defined where it first appears.
- Flow-down clause
- A subcontract clause that carries the prime contract's obligations down to the subcontractor, so far as they bear on the subcontractor's own scope of work.
- Home solicitation sale
- A deal made anywhere other than the seller's regular place of business — like the customer's kitchen table. This is what triggers the cancellation rights below.
Keep going
- Practice questions for Law & Business — Contract Requirements and Execution is 21% of the exam.
- Job scenario: The $38,000 Kitchen
- Also in Contract Requirements and Execution: Payments: When the Money Must Move
- Every number on one page — this guide’s figures alongside every other Law & Business guide’s.
Test yourself: 10 questions for this guide
A paid account adds more ways to practice and prepare: study questions after every chapter, practice questions for every topic, timed practice exams, and job scenarios drawn from real jobs. A free account gets you one timed practice exam and saves your progress across devices. Here is one of this guide's questions:
Your customer is 68 — a senior citizen under these rules — and you negotiate and sign a home improvement contract with them at their kitchen table. How long do they have to cancel?
AnswerUntil midnight of the 5th business day after they receive a signed and dated copy that complies with the notice requirements, including the required cancellation notice.
Finished reading?
When you miss a question on this topic, we'll suggest a job scenario where there is one, rather than text you've already read. Finishing every chapter counts too.