The 40% Deposit and the Missing License Number
Denise signs a $48,000 kitchen remodel contract at her dining table after a salesperson's presentation. The one-page contract lists cabinets, countertops, flooring, and labor but no brands, model numbers, start date, or completion date. It shows the contractor's business name and phone number but omits the MHIC license number. It requires a $19,200 deposit at signing, with the balance due when cabinets arrive. No cancellation notice is attached. Two days later, Denise's neighbor tells her the deposit is illegal. Denise emails the contractor to cancel, but he replies that the custom cabinets were ordered the same day and he will keep the deposit. The contractor is licensed and insured. Denise has paid nothing yet but refuses to pay. The contractor threatens to sue for the deposit and for lost profit.
1. Identify the home improvement contract violations in this agreement and explain why each matters.
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Maryland requires a written home improvement contract for work costing $500 or more, and this contract omits several required elements. The missing MHIC license number is a direct violation and prevents Denise from verifying the contractor's status. The contract also lacks a specific description of materials, start and completion dates, and a payment schedule tied to progress. Those omissions make the scope and timing unenforceable and give the contractor room to substitute materials or delay. The absence of a cancellation notice is serious because the contract was solicited at Denise's home; Maryland's door-to-door sales law gives her three business days to cancel and requires the notice. The $19,200 deposit also exceeds the statutory limit. Each defect supports an MHIC complaint and undercuts the contractor's claim that Denise is bound to the terms as written.
2. Can the contractor enforce the $19,200 deposit? Explain the maximum lawful deposit and what happens to any excess.
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No. Maryland limits a home improvement deposit to one-third of the contract price. One-third of $48,000 is $16,000, so the $19,200 demand is $3,200 too high. The contractor cannot enforce the excess, and if Denise had paid it, he would have to refund the overage. Ordering custom cabinets does not create an exception; the contractor could have scheduled a lawful deposit or used a progress payment clause. Because Denise paid nothing, the immediate issue is whether the contractor can sue for the deposit. He can seek only the lawful amount, and even that is affected by Denise's cancellation rights. The demand for lost profit is also weak because the contract itself is defective and the contractor cannot treat an unlawful deposit term as an earned fee.
3. Does Denise have a right to cancel, and what must the contractor do if she does?
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Denise likely has a three-business-day right to cancel because the contract was presented and signed at her home. The contractor was required to give her written cancellation notice, and he did not. On cancellation, the contractor must refund any payments within the statutory period, generally ten business days, and cannot keep the deposit simply because he ordered cabinets. He may have a separate claim only if he can prove a lawful, disclosed charge, but the defective contract and missing notice make that difficult. The contractor should stop work, provide a written accounting, and return any payment. If he refuses, Denise should file an MHIC complaint with the contract, emails, and proof of any payment. The contractor's threat to sue does not override the cancellation right.