One question I get fairly often when drafting or reviewing construction contracts is what provisions, if any, are required in construction contracts in California. This is, of course, different than what should be included in a construction contract which is a post for another day. So, here you go:
Provisions Required in All Construction Contracts
There’s only one requirement applicable to all construction contracts in California. And, that is, that you must include your California contractor’s license number if you are performing or bidding on work requiring a license. California Business and Professions Code section 7030.5 requires that licensed contractors include their license number in “(a) all construction contracts; (b) subcontracts and calls for bid; and (c) all forms advertising, as prescribed by the register of contractors, used by such person.”
Provisions Required in Prime Contracts Other than Home Improvement Contracts
If you are performing work as a prime contractor on a project other than a home improvement project, Business and Professions Code section 7030(a) requires that you include the following statement in at least 10-point type:
Contractors are required by law to be licensed and regulated by the Contractors’ State License Board which has jurisdiction to investigate complaints against contractors if a complaint regarding a patent act or omission is filed within four years of the date of the alleged violation. A complaint regarding a latent act or omission pertaining to structural defects must be filed within 10 years of the date of the alleged violation. Any questions concerning a contractor may be referred to the Registrar, Contractors’ State License Board, P.O. Box 26000, Sacramento, CA 95826.
Provisions Required in Public Works Contracts
Labor Code section 1775 provides that for contracts “executed between [a] contractor and [a] subcontractor for the performance of work on [a] public works project shall include a copy of this section and Sections 1771, 1776, 1777.5, 1813 and 1815.”
Provisions Required in Home Improvement Contracts
As discussed above, if you’re a prime contractor on a project other than a home improvement project, there is certain statutory language you must include in your contracts. But if you’re a prime contractor working on a home improvement project, whether a single-family, condominium, or multi-family project, you must use a contract which complies with Business an Professions Code section 7159 which sets forth numerous detailed requirements from font size to headings to required language.
The requirements of Section 7159 are too extensive to discuss in detail here, so you should check out Section 7159 yourself, but in a rather large nutshell it requires that home improvement contracts:
- Be in writing and include in the title the words “Home Improvement” [Contract or Agreement] in at least 10-point boldface type.
- Be in a typeface of at least 10-point type with headings in at least 10-point boldface type except as provided otherwise.
- Include, on the first page of the contract, the date the date the project owner signed the contract and the name and address of the contractor, along with a statement advising the project owner that a Notice of Cancellation may be sent to the contractor at the address provided.
- Include the name, business address and contractor’s license number of the contractor and, if a home improvement salesperson solicited or negotiated the contract, the name and registration number of the home improvement salesperson.
- Include the following statements:
- A statement that, upon satisfactory payment being made for any portion of work performed, the contractor shall, prior to further payment, furnish a full and unconditional release from any potential mechanics lien claimant.
- A statement, in at least 12-point boldface type, that “You are entitled to a completely filled in copy of this agreement, signed by both you and the contractor, before any work may be started.”
- A statement describing what constitutes substantial commencement of work under the contract.
- A statement that the project owner may not require a contractor to perform extra or changed work without providing written authorization prior to the commencement of work covered by the change order.
- Include the following headings:
- “Contract Price,” followed by the amount of the contract.
- If late payments are subject to a finance charge, the heading “Finance Charge,” followed by the amount of the finance charge.
- “Description of the Project and Description of the Significant Materials to be Used and Equipment to be Installed,” followed by a description of the project and of the significant material sand equipment to be installed.
- If a downpayment will be charged, the heading “Downpayment,” followed by the amount of the downpayment and a statement that a downpayment may not exceed $1,000 or 10% of the contract price, whichever is less.
- If progress payments will be made, the heading “Schedule of Progress Payments,” followed by the amount of each progress payment and the work to be performed for each progress payment and a statement that it is against the law for a contractor to charge for work not yet completed other than a downpayment.
- “Approximate Start Date,” followed by the approximate start date and, “Approximate Completion Date,” followed by the approximate completion date.
- “Note About Extra Work and Change Orders,” followed by the statement extra and changed work become part of the contract if a change order is signed by the parties prior to commencement of the extra or changed work.
- If applicable, the heading “List of Documents to be Incorporated into the Contract,” followed by a list of documents incorporated into the contract.
- Include the following notices:
- A notice that the project owner has the right to require the contractor to have a payment and performance bond.
- A notice regarding whether the contractor carries commercial general liability insurance and workers’ compensation insurance.
- A notice concerning mechanics liens.
- A notice, in at least 12-point type, regarding the California Contractors State License Board.
- A notice concerning the project owner’s Three-Day Right to Cancel.
- For any contract written for the repair or restoration of residential property damaged by a sudden or catastrophic event in which a state of emergency has been declared, a notice concerning the project owner’s Seven-Day Right to Cancel.
Provisions Required if Your License Has Been Suspended or Revoked
Not exactly a construction contract requirement more so than a requirement that you comply with before you enter into a construction contract, is that if your license has been suspended or revoked two or more times in an 8-year period, Business and Professions Code section 7030.1 requires that you disclose such suspensions and/or revocations “prior to entering into a contract to perform work on residential property with four or fewer units.” The disclosure, which can be included in a bid, must be in capital letters in 10-point roman boldface type or in contrasting red print in at least 8-point roman boldface type.