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California Contractor License Law: Requirements, Penalties, and Procedures, Exams of Contract Law

Texas State Technical College-West TexasContract Law

A detailed overview of california's contractor's license law, covering essential aspects such as qualifying individuals, licensing requirements, penalties for violations, and contract regulations. It delves into specific topics like the listing law, bid shopping and peddling, change orders, and home solicitation contracts, offering valuable insights for individuals seeking to understand the legal framework governing contracting in california.

Typology: Exams

2023/2024

Available from 11/15/2024

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CSLB - Law and Business Exam
questions and answers
2 types of qualifying individuals for each type of license - answer Individual - Responsible
Managing Employee (RME) or Owner
Partnership - Qualifying Partner or RME
Corporation - Responsible managing officer (RMO) or RME
LLC - RME, RMO, Responsible Managing member/manager
What must be filed w/CSLB if RME/RMO leaves? Within how long? If not, what happens? -
answer "Notice of disassociation" and "application for replacing qualifying individual".
Within 20 days
Or license automatically suspended
Responsible Managing Employee (RME) - answer Full time employee works at least 32 hours or
80% of operating time of biz, whichever is less.
May be used to qualify for individual, partnership, or corp license.
Never more than 3 licensees at one time.
Can only act as qualifier for 1 license at a time unless either: 1) other licensee is subsidiary 2)
he/she owns at least 20% of licensee 3) majority of officers/partners of other one also are those
of 1st
Responsible Managing Officer (RMO) - answer Officer of Corp
Journeyman - answer A person who has completed an apprecnticeship program or is an
experienced worker, not a trainee, and is fully qualified to perform the trade without
supervision.
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CSLB - Law and Business Exam

questions and answers

2 types of qualifying individuals for each type of license - answer Individual - Responsible Managing Employee (RME) or Owner Partnership - Qualifying Partner or RME Corporation - Responsible managing officer (RMO) or RME LLC - RME, RMO, Responsible Managing member/manager What must be filed w/CSLB if RME/RMO leaves? Within how long? If not, what happens? - answer "Notice of disassociation" and "application for replacing qualifying individual". Within 20 days Or license automatically suspended Responsible Managing Employee (RME) - answer Full time employee works at least 32 hours or 80% of operating time of biz, whichever is less. May be used to qualify for individual, partnership, or corp license. Never more than 3 licensees at one time. Can only act as qualifier for 1 license at a time unless either: 1) other licensee is subsidiary 2) he/she owns at least 20% of licensee 3) majority of officers/partners of other one also are those of 1st Responsible Managing Officer (RMO) - answer Officer of Corp Journeyman - answer A person who has completed an apprecnticeship program or is an experienced worker, not a trainee, and is fully qualified to perform the trade without supervision.

Foreman/Supervisor - answer A person who has the knowledge/skill of a journeyman and directly supervises physical construction What are penalties for contracting w/out a license - answer - Misdemeanor offense

  • 1st offense may receive citation from registrar, potential sentence of up to 6 months in jail and/or $500 fine, which is accompanied by civil penalty of no less than $200 and no more than $15,000. May lessen or waive if contractor obtains license within prescribed period of time.
  • Felony charges for contracting w/out a license in emergency projects.
  • 2nd offense found guilty of criminal offense which is punishable by civil penalty of 20% contract price or $4,500, whichever is greater, and county jail min 90 days. Penalty for advertising for work outside of your license - answer fine of $700-$ Penalty for hiring unlicensed sub or allowing use of license - answer Citation from registrar and civil penalty up to $15, Penalty for deliberate fraudulent use of contractor's license - answer Up to $10,000 and/or one year jail Bond must be filed with _ within _ days of effective date of bond. - answer CSLB ; 90 Contractor's Bond amount - answer $15, Performance Bond - answer guarantees job will be completed according to building plans and specs. If work is unacceptable or project is abandoned, bonding company can hire another contractor to complete the work or settle for damages. Payment Bond - answer Guarantee to the owner that no liens for materials or labor will be filed against the property.

Public emergency or necessity (only after written finding) If contractor requests substitution of sub on public job, public entity is required to___? - answer Give written notice to sub of request and reason for it by certified mail. Sub has 5 working days to submit appeal. Then a hearing will be held. Public entity must give written notice to sub at least 5 working days before hearing. If contractor requests substitution of sub on public job due to clerical error, what must he/she do? - answer Give written notice to public entity, listed sub, and intended sub, within 2 working days after bid opening. Listed sub has 6 working days from bid opening to submit to public entity written objections. Contractor, listed sub, and intended sub then have 8 working days from bid opening to submit affidavits to public entity. Then a hearing is held. For a contract to be formed: - answer Offer Acceptance Consideration Legality Contractors License Law - answer Must give owner a notice (on property with 4 or fewer units) informing them of contractor's license requirements and give info on how to check with board to determine status of license. Notice must be in capital letters in 10pt Roman bold font or in contrasting red in at least 8pt Roman bold font. If license has be suspended or revoked 2 or more times w/in 8 year period, any disciplinary license suspension or revocation must be disclosed. Same font requirements. Contract Notice must be included in at least 10pt letting owner know of requirements to become licensed by the board and address if further questions. Swimming pool and home improvement contracts must include a Mechanic's Lien Warning. Informs owner of his/her and contractor's rights and responsibilities with respect to Mechanic's Lien Warning.

Must include general liability disclosure. Heading must be 14pt type with questions in at least 12pt, with comments in italics of at least 11pt. 20-day Preliminary Notice - answer Not a lien. Preserves right of subs/materials provider to record a lien on your property if not paid. Can be sent up to 20 days after the sub starts work or supplier provides materials. Not used by prime contractor as already obvious they are working on owner's property. Requirements for written contract - answer - Must be signed by all parties involved.

  • Estimated start and finish of work.
  • Name, address, license number, description of license classification of contractor.
  • Name and registration number of home improvement sales person if applicable.
  • Description of materials to be used, work to be done, equipment to be installed, and contract price.
  • Statement of what constitutes substantial commencement of work to be performed.
  • Whether you charge down payment. Must be $1000 or 10% of contract amount, whichever is less.
  • In addition to down payment, if other payments made prior to completion of work, must provide schedule of payments to be made in dollars and cents. Contractor cannot accept payments that exceed the value of work or materials delivered up to that point.
  • Notice to Owner that describes Mechanic's Lien Law and how it applies to owner/contractor.
  • Statement that when payments are made for any portion of the work performed, contractor shall furnish a full and unconditional release from any claim or mechanic's lien for that portion of the work.
  • General Liability disclosure statement.
  • Workers Comp Insurance Notice
  • Statement that owner may require contractor to post a performance and payment bond.

Home Solicitation Contract/Offer - answer Any contract/offer subject to approval for sale, lease, or rental of goods or services or both made OUTSIDE of the contractor's normal place of business in the amount of $25 or more. Buyer may cancel home solicitation contract w/in how many days? - answer 3 (any time prior to midnight of 3rd business day) Notice of Cancellation - answer Must be included in Home Solicitation Contract with statement that is super long, but includes the fact that they can cancel w/in 3 business days and that the contractor then has 10 days to return any amount paid. Contractor has 20 days to pick up any materials delivered after which point owner can keep it. When does Notice of Cancellation's 3-day window not apply? - answer Emergency repair work situations in which owner provides written and dates statements both waiving their right to cancel w/in 3 days AND describing the emergency situation. In state of emergency declared by gov't, how many days does customer have to cancel contract?

  • answer 7 In state of emergency declared by gov't, how much can contractor increase prices without it being considered price gouging? What is the penalty for price gouging? - answer 10% (for a period of 180 days following declaration). Misdemeanor punishable by county jail time NTE 1 year, or a fine of not more than $10k or both. Service and Repair Contract - answer Must include all 4 following criteria: $750 or less; buyer initiated contract; Contractor doesn't sell buyer goods/services beyond those necessary to take care of the particular problem; no payment due until work is completed. Once signed, owner has no right to cancel

What are 3 requirements of Service and Repair Contract? - answer 1) Contractor must offer owner any parts that were replaced unless they check a box saying "ok for contractor to take replaced parts."

  1. If there is a service charge, contractor must have "AMOUNT OF SERVICE CHARGE" followed by service charge and statement "You may be charge only one service charge, including any trip charge or inspection fee"
  2. Right to cancel - Must say in 12 pt bold - "YOUR RIGHT TO CANCEL BEFORE WORK BEGINS - You the buyer have the right to cancel this contract until: 1. you receive a copy of this contract signed and dated by you and the contractor; and 2. The Contractor starts work." to be dated and signed by buyer. Mechanic's Lien - answer - Used by contractor to enforce payment on a contract by placing a lien on property where work was done. (private only, not public)
  • Gives Contractor right to foreclose on owner's property
  • Must file document with county recorder's office including description of work, address of property, name of owner, and unpaid balance.
  • Can be filed by anyone (contractor, sub, supplier, employee) that dealt directly with owner or agent of the owner (like the contractor).
  • Owner must know work is being done.
  • May be filed within 90 days of completion of contract. Mechanic's lien must be filed within how many days of completion of contract? - answer 90 Notice of Completion - answer - May be filed by contractor, owner, agent in order to shorten the 90-day lien period
  • Filed with Country recorder
  • Serves as indication that the filer accepts the work performed by a particular contractor as complete.
  • Must be filed within 10 days following completion of contract.
  • Reduces lien period for sub to 30 days and 60 days for prime contractor.
  • Not required to be filed with country recorder. Who must give Preliminary 20-day Notice - answer - A sub who's working for $400 or more
  • Contractor who contracts with someone who is not the owner of the property (includes tenants and architects).
  • If a contractor is working on a job funded by construction loan.
  • A contractor that is performing work on public works project. Preliminary 20-day Notice must contain: - answer - Name and address of person furnishing labor, materials, equipment, or service.
  • General description and price estimate.
  • Name of person who contracted for purchase of labor, materials, equipment or service.
  • Description of jobsite sufficient for ID
  • Statement that claimant has right to file mechanic's lien.
  • If lender involved, total price of claimant's contract must be included. Notice of Nonresponsibility - answer - A contractor must send a preliminary 20-day notice to owner if contractor contracts with tenant or an agent.
  • Owner may choose to not be held responsible by filing this notice with county recorder within 10 days of prelim notice.
  • Renders contractor unable to file mechanic's lien.
  • Must be posted at job site in conspicuous place. Release of Mechanic's Lien - answer - Once contractor or suppliers have been paid in full, owner may ask contractor or supplier to sign this to prove the contractor/supplier is paid in full and thus can't file mechanic's lien. Construction Loan - answer - Money not dispersed at once, rather over life of project.
  • Balance of loan does not exceed value of property at particular point in time.
  • Lender can place lien on property until amount owed is paid in full. Stop Notice - answer - Similar to mechanic's lien in that it ensures contractor can collect funds due.
  • Different in that it's placed on funds as opposed to on property.
  • Given to lender or awarding authority in case of public works obligating them to withhold money on the loan to pay notice amount.
  • Doesn't have to be filed, just delivered to lender or awarding authority.
  • Hand delivered w/receipt or registered mail
  • Deadline to file same a mechanic's lien - 90 days from termination of contract unless notice of cessation or notice of completion is filed. Stop Notice Must Contain Following: - answer - Name, address, signature of filing contractor.
  • Name of individual for whom the labor/services were provided.
  • Description of work to be done or supplies to be furnished.
  • Value (close as possible) of work that has been done or materials provided along with total amount of contract. What must be done to "perfect" a stop notice and when can it be done? - answer File a lawsuit between 10-90 days following stop notice. In order to have a valid stop notice, what must be present? - answer Bond of 1.25 times the amount of the stop claim notice. An inactive license must be renewed every __ years? - answer 4