Recovery
Generally Barred for Unlicensed Contractors
In
Utah, “[n]o contractor may...commence or maintain any action...for collection
of compensation for performing any act for which a license is required...without
alleging and proving that he [or she] was a properly licensed contractor when
the contract sued upon was entered into, and when the alleged cause of action
arose.” Utah Code Ann. § 58–55–604. An unlicensed contractor may receive
voluntary payments for the work he performs, but he generally is not allowed to
use the legal system to compel payment.
This statutory bar against suing for payment is a codification of prior
common law. It extends to all causes of
action that could be used to try to collect, including quantum meruit claims
and lien foreclosure actions.
Purposes
of Licensing
“Licenses
are required basically for one of two purposes: to protect the public against
fraud, incompetence, illegality, or irresponsibility; or to solely or primarily
raise revenue.” Fillmore Products, Inc. v. W. States Paving, Inc., 561 P.2d 687,
689 (Utah 1977). According to Utah
courts, unqualified contractors place the property, financial well-being, and
even the lives of the public in peril. The requirement of a contractor to be
licensed exists to protect the public. The prohibition of unlicensed
contractors from suing to collect payment is meant to prevent an unlicensed contractor
from illegal providing services and adds to the “other penalties imposed
against him expressly by statute including criminal sanctions.” Id.
Exceptions
Allowing Recovery
Prohibiting an unlicensed contractor
who provided good work from getting paid is a harsh sanction. Because it is so harsh, Utah courts have
recognized “common law exceptions to the general rule of non-recovery.” Govert
Copier Painting v. Van Leeuwen, 801 P.2d 163, 169 (Utah Ct.App.1990). “The Utah Supreme Court has allowed an
unlicensed contractor to recover “from one who is otherwise protected from the
harm the licensing requirements were designed to prevent[.]” Govert Copier Painting v. Van Leeuwen,
801 P.2d 163, 170 (Utah Ct. App. 1990) “In order to recover on its contract
claim, [an unlicensed contractor] must demonstrate that despite its failure to
have a contractor's license, the purpose of the licensing statute was met—the
protection of the public.” Id.
Presently, Utah appellate courts have recognized four circumstances in
which an unlicensed contractor may sue to collect payment:
1.
“First, unlicensed contractors have
been allowed to recover when the party for whom the work is to be done
possesses skill or expertise in the field…
2.
Second, an unlicensed contractor may
recover if the work it performed was supervised by a licensed contractor…
3.
Third, if the reason a contractor
fails to obtain proper licensure is minor and does not undermine its ability to
perform its work, the unlicensed contractor may recover…
4.
Finally, courts have considered
whether the contracting party relied on the subcontractor's representations
that he was properly licensed and whether the subcontractor has posted a
performance bond.” A.K. & R. Whipple Plumbing & Heating v. Aspen Const., 1999
UT App 87, ¶¶ 13-20, 977 P.2d 518, 522-24
Other circumstances may allow an
unlicensed contractor to sue to collect payment. For example, other jurisdiction have dealt
with the issue of persons who specifically hire unlicensed contractors with no
intention of ever paying the unlicensed contractors. For an exception to apply to the general rule
of non-recovery, it is not enough for a contractor to show that he provided good
work, even if he disclosed that he was not licensed. The contractor must demonstrate that the public
was protected against possible the dangers of hiring an unlicensed contractor.
As always, if you have any questions about your situation,
you are welcome to contact one of Whiting & Jardine’s real estate lawyers
for legal advice.
For more specific
information about this particular subject, please call my office at
801-691-7770 for a free consultation or see the following web pages:
2.
Construction Law: http://whitingjardine.com/practice_areas.php?part=construction
Disclaimer: This blog is for general information and
educational purposes only. Nothing in this blog should be construed as
legal advice for any particular situation. The statements in this blog
may be generalized, contain speculation, be based on opinion, or be
made inaccurate by updates or clarifications to the law. No
attorney-client relationship is created by virtue of this blog.
To receive competent legal advice for your situation, you should seek
competent, licensed legal counsel in the appropriate jurisdiction and practice
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