California Contractors License Law Practice Exam

When does a notice to cancel a contract become effective?

1. When the homeowner signs it

2. When the customer deposit it in the mail

3. When both parties agree to the cancellation

4. When the contractor receives it

The correct answer is: When the customer deposit it in the mail

The effectiveness of a notice to cancel a contract is primarily determined by the principle of "mailbox rule," which states that an acceptance or a notice of cancellation becomes effective when it is mailed, provided it is properly addressed and prepaid. This principle applies even if the other party does not receive it immediately or at all. Therefore, a notice to cancel a contract becomes effective at the moment the homeowner deposits it in the mail. This means that once the homeowner has taken the step to send the notice, the cancellation is legally acknowledged from that point onward, regardless of when the contractor actually receives the notice. In this context, options related to the contractor's receipt or the need for signature and agreement from both parties are not necessary conditions for the effectiveness of the cancellation notice. Thus, the focus is on the action of mailing as the decisive factor.