Contracts

California Home Improvement Contract Rules

Updated September 2026

Contract Requirements and Execution is the biggest area on the Law and Business exam. CSLB lists bidding, cost control, project organization, contracts and payments under it, and the home improvement contract rules in Business and Professions Code section 7159 are a core part. Here is what that law requires, in plain words.

When you need a written contract

Any home improvement job over $500 in combined labor and materials needs a written contract. Before any work starts, the buyer must get a copy signed and dated by both the contractor and the buyer.

Down payments and progress payments

• The down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less. On a $6,500 job that is $650. On a $42,000 job it is $1,000. The two limits meet at a $10,000 contract.
• After the down payment, you can only collect for work that is completed or materials that are delivered. Payments can never get ahead of the value of the work performed.
• The contract needs a schedule of progress payments that describes each phase of work and the amount of each payment.

Change orders

Extra work becomes part of the contract only when a change order is written up and signed by both parties before that work starts. The change order must describe the scope of the change, the cost added or subtracted, and how it changes the payment schedule.

The buyer's right to cancel

• Generally, the buyer can cancel until midnight of the third business day after receiving a signed copy that includes the cancellation notice.
• Buyers 65 or older get five business days.
• Repairs after a declared disaster get seven business days.
• No three-day notice is needed if the contract was negotiated at the contractor's place of business.

Required notices

The contract has to carry several required statements, including the Mechanics Lien Warning, the notice about extra work and change orders, and a paragraph describing CSLB as the state consumer protection agency that licenses and regulates contractors. Printed forms must use at least 10-point type.

Small jobs of $750 or less can use a shorter service and repair contract, but only when the buyer called the contractor for the work and a few other conditions are met.

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