Do Arizona Contractors Need an Arizona License to Work in Mexico?
The answer, in a recent Court of Appeals ruling, is good news for contractors and a warning for owners contemplating a breach of contract.
Construction in Mexico has generated business for many Arizona contractors. If you have done work south
of the border or are contemplating it, have you considered what licensing
requirements the State of Arizona places on you? The Arizona Court of Appeals’
recent ruling in
Baker v. Dolphin Beach may be useful.
August 2007, an unlicensed Arizona contractor, Scott Baker, entered into a
written contract with an Arizona property management company, Dolphin Beach
Rental & Management, to service A/C units on condos in Puerto Peñasco, Sonora.
All discussions between
Baker and Dolphin Beach took place in Arizona, and the contract was signed in
Arizona. Baker was not a licensed Arizona contractor when he signed the
contract, nor was he licensed during the time he performed work under the
Dolphin Beach utilized
Baker for a few months and paid him for his work, but in January 2008 the
company stopped using him, and Baker sued Dolphin Beach in Arizona Superior
Court for breach of contract.
Beach asked the trial court to dismiss Baker’s suit, arguing that, since Baker
was not a licensed contractor,
A.R.S. § 32-1153
barred him from suing to enforce the contract. (The statute prohibits
contractors from taking legal action in state courts to enforce a contract for
work that they were not licensed to perform when they entered into the contract
or when the cause of action arose.) The trial court agreed with Dolphin Beach
and dismissed Baker’s suit. Baker appealed the dismissal.
The Court of Appeals saw things differently than the trial court. In its ruling, the Court
noted that the state’s power to require licenses is generally limited to
activities inside state borders. The Court went on to state that “A.R.S. §
32-1153 applies to prevent unlicensed contractors from suing in state court in
Arizona to recover ‘compensation for the performance of any act for which
[the statute] requires a license’” [Court’s emphasis added].
Did the statute require a
license? No. The Court, reasoning that the statute does not govern construction
activity outside of Arizona, ruled that (a) Baker did not need an Arizona
contractor’s license to perform contracting work in Mexico, and (b) A.R.S. §
32-1153 did not bar Baker from trying to enforce his contract in state court.
(The Court acknowledged
that Baker was an Arizona resident, Dolphin Beach was an Arizona LLC, and the
contract was negotiated and signed in Arizona, but that was not a factor in the
The Court reversed the
dismissal of Baker’s lawsuit and sent the case back to Superior Court for trial
to determine whether Dolphin Beach actually breached the contract and, if it
did, the extent of any damages to which Baker might be entitled.
The lessons in Baker v. Dolphin Beach for owners and contractors appear to be
outside of Arizona does not require an Arizona contractor’s license.
In the event of an
alleged breach of an Arizona contract for work performed outside the state’s
borders, Arizona’s court system is available to unlicensed or improperly