Tazia said:
My response:
You don't.
California's Supreme Court recently upheld a law that gives
unlicensed contractors "no standing" in court -- leaving them no
legal options for pursuing claims for payment, damages, etc.
11 Cal. Jur. 3d Building and Construction Contracts § 212 (1996)
California Jurisprudence, Third Edition
Current through the 2001 Cumulative Supplement
Building and Construction Contracts
Steven J. Cone, J.D.
III. Regulation of Contractors
G. Preventing or Punishing Conduct Violating the Contractors' State License
Law
5. Prohibition on Enforcement of Contract
b. Persons and Transactions to Which Statute Applies
Topic Summary; Topic Contents; List of Topics; Index
§ 212. IN GENERAL
The statute disallowing claims for payment by unlicensed contractors, [FN91] applies even though the defendants were aware that the plaintiff contractor was unlicensed [FN92] and where the unlicensed contractor actually performed none of the work involved. [FN93] It also prevents a licensed contractor from recovering on a contract entered into by an unlicensed subcontractor acting as the contractor's undisclosed agent. [FN94]
Cases:
An unlicensed contractor was barred by B & P C § 7031, from bringing an action against a city for breach of contract, notwithstanding that the contract did not call for payment of money by the city to the contractor, but gave the contractor the exclusive right to run a "fill" operation on the land, under which it would collect dumping fees from third parties. Section 7031 bars a suit for breach of contract as well as for the collection of compensation for performance of any act by an unlicensed contractor. Properly construed, the term "compensation" embraces damages suffered by a contractor lacking the requisite license under the law for breach of a contractual obligation where either (1) the making of the contract or (2) the performance during which the breach occurs comes within the licensing requirement. Plaintiff agreed to perform specific work--processing, grading, compacting fill, and paving--for the benefit of defendant, in exchange for which defendant agreed to provide plaintiff with an exclusive renewable permit for fill rights for the site. The fill rights were plainly the "compensation" or "agreed contract price" for plaintiff's work. The fact that plaintiff's compensation under the contract was a permit to fill a site rather than cash did not take the breach of contract action outside the bar of § 7031. K & K Services, Inc. v. City of Irwindale (1996) 47 Cal.App.4th 818, 54 Cal.Rptr.2d 836, review den. (Oct 2, 1996).
[FN91]. B & P C § 7031(a), discussed in § 207.
[FN92]. Pickens v American Mortg. Exchange (1969, 1st Dist) 269 Cal.App.2d 299, 74 Cal.Rptr. 788; Vallejo Development Co. v Beck Development Co. (1994, 1st Dist) 24 Cal.App.4th 929, 29 Cal.Rptr.2d 669.
[FN93]. Those who enter into construction contracts must be licensed, even when they themselves do not do the actual work under the contract. Vallejo Development Co. v Beck Development Co. (1994, 1st Dist) 24 Cal.App.4th 929, 29 Cal.Rptr.2d 669.
Phillips v McIntosh (1942) 51 Cal.App.2d 340, 124 P.2d 835 (work was performed by the unlicensed contractor's husband who acted as manager of the company).
[FN94]. Muth v Leineke (1970, 3rd Dist) 9 Cal.App.3d 433, 88 Cal.Rptr. 1 (that contractor was licensed did not constitute substantial compliance with B & P C § 7031).
For discussion of undisclosed principals and agents generally, see Agency (Rev) §§ 146 et seq.
"Compensation" under B & P C § 7031, which bars an action to recover compensation by an unlicensed contractor, can take nonmonetary forms; thus, an action for payment in stock or the granting of a city permit, rather than cash, is subject to the statutory bar. However, the licensing law has been held not to bar certain forms of recovery by unlicensed contractors. Where the unlicensed contractor is also party to a separate contract, the unlicensed status will not bar the contractor from obtaining relief for breach of the separate contract. Moreover, there are cases permitting an unlicensed contractor to assert a setoff based on a contract for building services, notwithstanding that the contract is otherwise unenforceable due to the absence of a license. The theory is that although the unlicensed contractor cannot recover for work in his or her own action, the lack of a license will not bar offsetting as a defense sums which would otherwise be due under the illegal contract, e.g., for services performed. Courts will not impose penalties for noncompliance that are in addition to those specified by statute. The purpose of the statute is to protect the public, not to provide a shield against the satisfaction of obligations. Moreover, the peripheral involvement of unlicensed contract work will not shield defendants from all tort liability. Ranchwood Communities Ltd. Partnership v. Jim Beat Const. Co. (1996) 49 Cal.App.4th 1397, 57 Cal.Rptr.2d 386.
[FN7]. B & P C § 7031(a), discussed in § 207.
[FN8]. B & P C § 7031(a).
In an action on a written contract for the construction of a swimming pool, the trial court erred in determining that the plaintiff had substantially complied with the Contractors' State License Law, where the pool construction license under which the plaintiff purported to act had been obtained by representing to the Contractors' State License Board that a person already licensed for the specialty was engaged in a joint venture with the plaintiff, where the plaintiff had transferred equipment having substantial value to the licensee in return for the use of his name, and where it was uncontradicted that the person whose name was used at no time performed any function whatsoever in the management or operation of the business. Such an arrangement permitted the plaintiff to engage in a specialty in which he had not demonstrated qualification by examination and for which he had not been licensed as an individual, in violation of the stated purpose and the spirit of the Contractors' State License Law, and it rendered the purported license a nullity. Rushing v Powell (1976, 5th Dist) 61 Cal.App.3d 597, 130 Cal.Rptr. 110.
The fact that B & P C § 7031 provides an exemption where joint venturers are each individually licensed but have not obtained an additional license for the joint venture but does not exempt corporations owned and managed by a licensed contractor, does not deny equal protection of the laws to corporations. Although such persons have not technically complied with the requirements of the licensing law, the public still receives the protection contemplated by the law, inasmuch as each of the joint venturers is licensed and is legally responsible for the work performed. By contrast, there is no guarantee that an unlicensed corporation is responsible and competent as it is not necessarily managed by licensed contractors. Thus, there is a rational relationship between the state's legitimate goal in enacting the Contractors' State License Law and the class singled out for special treatment under § 7031. Knapp Development & Design v Pal-Mal Properties, Ltd. (1985, 2nd Dist) 173 Cal.App.3d 423, 219 Cal.Rptr. 44.
IAAL
