Contract Drafting Essentials Every Contractor Should Know

The contract must state the name, business address, and licence number of the contractor, and — if applicable — the name and registration number of the home improvement salesperson who solicited or negotiated the contract.

Section 7159(d) works largely by prescribing headings followed by specified content. The contract form must carry a heading identifying the type of contract, reading “Home Improvement,” in at least 10-point boldface type, and a statement in at least 12-point boldface type reading that the owner is entitled to a completely filled in copy of the agreement, signed by both the owner and the contractor, before any work may be started.

Paragraph (8) of subdivision (d) addresses the contract price and includes, at subparagraph (C), a required statement regarding the down payment. Paragraph (9) addresses the details and a statement regarding progress payments. Both of those are among the items the bonding exemption removes, which is how they can be identified precisely — see below.

The substantive limits those statements describe live in section 7159.5: a down payment capped at one thousand dollars or 10 percent of the contract amount, whichever is less, and a schedule of payments in dollars and cents where payments are made before completion. The change orders guide covers those in detail.

The contract addresses the work schedule, including a heading reading “Approximate Completion Date.” Where applicable, it must carry the heading “List of Documents to be Incorporated into the Contract,” followed by the list of documents incorporated.

That second item is quietly useful and widely ignored. Plans, specifications, allowances, and scope exhibits become part of the contract through that list. A template with no such list, on a project where drawings and specifications govern, is leaving the most important documents outside the agreement.

Subdivision (e) requires notice provisions concerning cancellation, including the name and address to which a Notice of Cancellation may be mailed, immediately preceded by a statement advising the buyer that the notice may be sent to the contractor at the address noted on the contract, and the telephone number of the contractor or the contractor’s representative to assist the buyer with locating and filling out the Notice of Cancellation.

The contract must include a statement that, upon satisfactory payment being made for any portion of the work performed, the contractor — prior to any further payment being made — shall furnish to the person contracting for the home improvement or swimming pool work a full and unconditional release from any potential lien claimant claim or mechanics lien authorised under Civil Code sections 8400 and 8404 for that portion of the work for which payment has been made.

This is an operational obligation, not just contract language. It ties each progress payment to the delivery of releases for the prior one.

Paragraph (5) of subdivision (e) requires that a change-order form for changes or extra work be incorporated into the contract, and provides that such a form becomes part of the contract only if it is in writing and signed by the parties prior to the commencement of any work covered by a change order.

This is the requirement contractors are most likely to be missing without knowing it. The contract must carry the form, not merely describe the rule. A template that explains change orders in a paragraph but attaches no form does not satisfy the paragraph.

Section 7159.5(a)(8) exempts a contractor furnishing a performance and payment bond, a lien and completion bond, a bond equivalent, or a registrar-approved joint control covering full performance and payment from three specific contract items, and they can be named exactly: the statement regarding the down payment at subdivision (d)(8)(C), the details and statement regarding progress payments at subdivision (d)(9), and the Mechanics Lien Warning at subdivision (e)(4).

That contractor is also exempt from the substantive down payment and progress payment restrictions in section 7159.5, and may accept payment prior to completion.

The subdivision (d) and (e) lists are longer than what appears above. This page states the elements verified directly against the statute and does not attempt a complete enumeration, because an incomplete list presented as complete is worse than an acknowledged partial one — a contractor who ticks off every item here and stops has not audited their template.

Section 7159 also does not stand alone. Service and repair contracts subject to section 7159.10 run on sections 7159.10 through 7159.14 instead. Swimming pool work appears in the statute alongside home improvement. And section 7151 supplies the definition of home improvement that determines whether any of this applies at all.