Another Case on Substantial Compliance

Law Talk

We have written other articles and discussed several cases in our book California Construction Law, regarding California License Law, and more specifically Business and Professions Code section 7031. In the MW Erectors case, which we discussed in our book, we filed an Amicus Brief in opposition citing other options. Unfortunately we did not prevail. We believe the laws in this area are extremely harsh. The case discussed below continues that harshness.

A new case, Great West Contractors, Inc. v. WSS Industrial Construction, Inc., has upheld the decisions in the above referenced cases. In this case, a subcontractor, (WSS Industrial Construction ("WSS"), was barred from bringing a suit against Great West Contractors because WSS was not licensed at all times. WSS is a corporation that had applied for, but not yet obtained, their corporate contractor's license at the time it submitted its bid. WSS had entered into the contract, ordered parts, and submitted plans before the corporation was actually licensed. However, it had not started actual construction of the site. The RMO of WSS was licensed as an individual and a partnership, but not on behalf of the corporation. The MW Erectors case we have discussed showed that MW Erectors was unlicensed for only a few days, but not "at all times during construction," and since that case, the law states that "…except as expressly otherwise provided, a contractor may not sue to collect compensation for performance of ‘any act or contract' requiring a license without alleging that he or she was duly licensed ‘at all times during the performance of that act or contract.' "

Business and Professions Code section 7031(e) gives the only exception to the contractor's licensure requirements. It states that the courts can find there is substantial compliance with the license requirements, "if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, (3) and did not know or reasonably should not have known that he or she was not duly licensed." This was not the case with WSS, just at it was not with the MW Erectors case, because the corporation was not licensed.

Therefore, the Appellate Court denied WSS's case, even though the Appellate Court itself agreed that they "are cognizant of the harshness of this result. But the law is clear."