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Contractors State License Board (CSLB) – LAW AND
BUSINESS EXAM QUESTIONS AND CORRECT ANSWERS
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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.
Bid Shopping - answer When prime contractor discloses sub's bid to other subs to get them to lower their price. Bid Peddling - answer When a sub whose bid wasn't chosen lowers bid in attempt to induce contractor to pick them instead. The Listing Law - answer Applies to state and local public works projects. Requires contractor to include in their bid name, place of business, and license # of each sub whose bid is .5% or more of total bid or $10,000 or more, whichever is greater, and the portion of work performed by each sub. If contractor violates, public entity may cancel contract or assess penalty of not more than 10% of amount of subcontract involved. May also be subjected to discipline by CSLB. If material change is made by public entity to its invitation to bid w/in 72 hours of bid closing, what has to happen? - answer Must extend deadline by no less than 72 hours. Reasons public entity can give consent for contractor to substitute a sub. - answer Failure to execute contract Insolvency Failure to perform subcontract
Failure to furnish bonds Clerical error Unlicensed Failure to perform work Failure to pay prevailing wages Not qualified 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
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.
- Notice that it's a violation of Contractors License Law if work doesn't start within 20 days from approx start date of contract. Salesperson must be registered as a home improvement specialist if ______________________? - answer Solicitation is done outside contractor's normal place of biz. Salesperson registration exemptions: - answer - Individual licensed contractor
- Qualifying individuals
- Partners
- Officers of the Corp
- RME
- Salesperson who sells goods or negotiates contracts at fixed business establishment. Penalty for acting as home improvement salesperson - answer Misdemeanor.
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." 2 ) 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" 3 ) 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.
- Contractor has additional 90 days to file mechanic's lien following this period. When can Notice of Cessation be filed? - answer After 30 days of stoppage. What must the contractor do in addition to filing a mechanic's lien in order to enforce payment on a contract? - answer File a lawsuit to enforce or "perfect" the lien within 90 days following the date mechanic's lien was filed. How can an owner free themselves from a mechanic's lien placed on them? - answer Posting a bond worth 1.25 times the amount of the lien. Since a mechanic's lien can't be filed on a public works project, what can a contractor do instead to collect money due him/her? - answer File a stop notice Preliminary 20-day Notice - answer - Designed to help prevent a situation in which the property owner is unaware of work being done on his/her property.
- Given by sub/supplier to owner, prime, and lender.
- To make sure it is known that sub/supplier has right to file mechanic's lien.
- If required, must be given to prime, owner, lender before starting a job, or 20 days after sub starts work or supplier provides material.
- Must be mailed certified or registered mail w/return receipt or hand delivered and signed with a dated receipt.
- 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.
- 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
