Licensed Contractor, Unlicensed Work
The Arizona Court of Appeals rules that a licensed contractor can sue to collect only for work covered by its license.
On a construction job, it is not unusual for a licensed
subcontractor to perform additional services that fall outside the scope of its
license. In many instances, the unlicensed work is incidental to the main focus
of the services for which the sub is licensed and is requested by the general
contractor as a matter of convenience.
However, a recent case involving a general contractor
that used the performance of unlicensed services as an excuse not to pay a
subcontractor for even his licensed work illustrates the risks of venturing
beyond the licenses scope.
A general contractor, Armor Designs, hired a licensed
electrical subcontractor, Antonio Chavira, to disassemble equipment at Armors
plant in Phoenix. The work was completed, and Armor paid Chavira in full.
then hired Chavira to reinstall the same equipment at Armors new plant. After
Chavira completed the installation work some electrical, some not Armor refused
to pay him, claiming that 18 of the 77 invoiced tasks for which he sought
payment were outside of his license.
Chavira sued Armor for breach of contract. In Superior
Court, Armor argued that A.R.S. § 32-1153 barred Chavira from using the courts
to collect because he had performed significant work for which he had no
A.R.S. § 32-1153 states:
No contractor [shall] maintain any action in any court
of the state for collection of compensation for the performance of any act for
which a license is required ... without ... proving that the contracting party ... was
a duly licensed contractor when the contract sued upon was entered into and when
the alleged cause of action arose.
The trial court dismissed Chaviras lawsuit, and he
The sole issue in Chaviras appeal was whether A.R.S. §
32-1153 did indeed bar him from suing to recover any payment for work he
performed if some of the work was not covered by his license.
Chavira argued that, because he was a licensed
electrical contractor when he entered into the contract with Armor and during
the time he did the work, he should be allowed to recover payment for, at least,
his electrical work.
Armor countered that, because Chavira was not licensed
to perform all of the work he performed, the statute barred him from recovering
for any of his work.
The Court did not buy Armors argument. While
acknowledging that the plain language of § 32-1153 prohibits an unlicensed
contractor from bringing an action to recover payment for unlicensed acts, the
Court of Appeals also cited prior cases in which it found that
language of the statute allows a licensed contractor, or one who has
substantially complied with the licensing requirements ... to sue for payment for
work performed under the license.
The Court sent the case back to Superior Court, where
Chavira could pursue his breach of contract claim against Armor for the value
of the work that was completed under his license.
Lesson for Contractors
While the Courts ruling was a partial victory for
Chavira, it sends a clear message to contractors that working outside the
confines of your license is risky business.
You can sue a non-payer in an
attempt to get your money, but your recovery will not include work for which you
are not properly licensed.
Read the Courts opinion in
Chavira v. Armor Designs
See related article, Achieving Substantial Compliance