California Construction Contract Law
California Residential and Commercial Contracts Are Not the Same.
California's detailed home-improvement contract rules are especially important for contractors working directly with homeowners. Commercial construction has a different contract environment, so the page separates the two instead of implying that every homeowner notice and cancellation rule applies identically to commercial work.
Construction Companion combines contractor experience, attorney-developed terms and a dedicated California legal layer relevant to the agreement being used.
California legal layer reviewed: October 2026
Residential / Home Improvement Requirements
Written Home Improvement Contracts Over $500
CSLB states that California requires a written contract for home-improvement projects over $500 in combined labor and materials. The home-improvement agreement and later changes must be written, legible and understandable, with the required consumer information included where applicable.
Business & Professions Code §7159
California's home-improvement framework addresses far more than a scope and price. Contractor identity and license information, project description, contract price, approximate dates, payment information, required notices, cancellation language and specified formatting can all matter to the written agreement.
Down Payments and Progress Payments
For ordinary California home-improvement contracts, the down payment is generally limited to $1,000 or 10% of the contract price, whichever is less. The contract also needs a detailed payment schedule, and payments generally cannot exceed the value of work performed or materials delivered, apart from the permitted down payment and statutory exceptions.
Change Orders Must Be Written
When the contract price or scope changes, CSLB requires the change to be documented in a written change order signed before the changed work begins. The written project record should show what changed and the effect on price or payment.
Cancellation Rights and New 2026 Contact Requirements
Qualifying California home-improvement transactions can carry statutory cancellation rights. From January 1, 2026, CSLB also says home-improvement contracts must include the contractor's email address, allow buyers to cancel by email, and include a telephone number to help buyers locate and complete the Notice of Cancellation. The correct cancellation framework depends on the transaction and applicable exception.
Mechanics Liens and Preliminary Notices
California's payment framework includes mechanics-lien warnings and surrounding notice rules. Subcontractors and suppliers can have lien rights, and preliminary-notice requirements form part of the wider project paperwork contractors and owners may need to manage.
2026 Subcontractor Disclosure — SB 517
Effective January 1, 2026, contractors using subcontractors on home-improvement projects must provide subcontractor information when requested, including the subcontractor's name, contact information, license number and classification. CSLB also confirms that the prime contractor remains responsible for the overall project.
Residential Solar Has an Additional California Layer
For covered residential solar transactions, CSLB requires its Solar Energy System Disclosure Document on the front or cover page of the solar contract in boldface 16-point type. The disclosure and contract must also follow California's language rules tied to the sales presentation or marketing used with the consumer.
Commercial Construction Contracts
California Commercial Contracting
Commercial Work Needs Its Own Contract Structure.
The detailed §7159 home-improvement framework above is aimed at home-improvement transactions and should not simply be copied across every commercial project. Commercial roofing, solar, HVAC, electrical, plumbing and painting projects can involve different payment structures, authorized representatives, change procedures, retainage, schedules of values, closeout requirements and business-to-business risk allocation.
California licensing, mechanics-lien law, permits, local requirements and project-specific rules can still matter to commercial contractors. Public works can introduce an entirely separate statutory layer as well. That is why Construction Companion uses dedicated commercial agreements rather than treating the residential paperwork as the commercial contract.
California Contractor Licensing Still Matters Across the Industry
CSLB says a contractor license is generally required when a project needs a building permit, employee labor is used, or the total cost of one or more contracts on the project is $1,000 or more. The minor-work exemption is limited, and contractors cannot split a larger project into smaller contracts to avoid licensing requirements.
Local and Project-Specific Requirements Still Apply
State law is only one part of the project. Building permits, inspections, adopted codes, AHJ requirements and local rules can differ across Los Angeles, San Diego, San Jose, San Francisco, Sacramento, Fresno and other California jurisdictions.