Legal Question in Construction Law in California

A contractor cannot charge for work or materials not provided to the project. Furthermore, it is illegal to take more than $500 (might have been upped to $1000) as a deposit. So it sounds like your contractor is in serious violation of the Contractors State License laws. Now the bad news. Unless you make something a contingency, unexpected events are a risk you take when you sign a contract. So you are guilty of breach of contract if you can't go forward. Measure and proof of damages is a complex area of law, but the basic rule is you are liable for the amount of the contract less the cost to the contractor if they had performed. The contractor may argue that the 30% is "liquidated damages," meaning a reasonable estimate of what that number would be, since it is hard to crystal ball what he would have made. I can tell you that after 30 years in construction law, NO contractor makes 30% on a job without committing criminal fraud. Bottom line is that both you and the contractor are in pretty weak positions. If you are both reasonable, you should be able to negotiate an appropriate amount to compensate him for any work he did do and any expenses incurred, and some reasonable amount for lost profits. If he is not reasonable, file a complaint with the Contractors State License Board and make a claim against his license bond for the illegal prepayment.