California Contractors License Law Practice Exam 2026 - Free Contractor License Practice Questions and Study Guide

If a contractor receives a cancellation notice, they are legally required to refund the down payment in a timely manner. This obligation stems from California’s consumer protection laws, which ensure that consumers have the right to cancel certain types of contracts, particularly after signing a contract for services or construction work. When a cancellation notice is received, it indicates that the consumer has exercised their right to discontinue the agreement.

In this context, a timely refund is necessary to protect the consumer's interests and maintain ethical business practices. The contractor must respond quickly to the cancellation to ensure compliance with the law and foster good customer relations. This requirement emphasizes the importance of transparency and accountability in contracting practices, reinforcing trust between contractors and clients.

Options that suggest continuing work, holding funds, or negotiating new terms do not fulfill the legal obligations surrounding cancellations. Therefore, timely refunding of the down payment is the correct and responsible action that aligns with California Contractors License Law.