Legal Question in Construction Law in California

Since you posted under the "construction law" heading, I'm assuming the oral contract had something to do with construction, but this is still not enough to determine whether the contract should have been in writing, or whether oral was sufficient, or if the 50% deposit was excessive. You also didn't say whether you have a license (if one were required). In any case, I'd think the prudent, lawful and honest thing to do is refund all of the deposit except for any costs or expenses you incurred in reliance upon the contract, if any, such as paint you bought and can't return because it's a custom color.

You have violated several provisions of the contractors license laws by not putting your contract in writing and by taking a deposit of more than 10% or $1,000, whichever is LESS. So unless you want trouble with your license and your license bond, I suggest you make a full refund, draw up a form contract that complies with the law, and stop taking more than 10% or $1,000 whichever is LESS, for your contracts.