Legal Question in Construction Law in California

contractor working under suspension

If a sub-contractor signs a

contract and performs the work of

that contract, however during the

contruction, it is found that the sub-

contractor is working under

suspension, and signed the contract

while under suspension, does the

contract become void, and can the

prime stop any further payment to

the sub-contractor? Also, what

compensation can the prime seek

from the sub-contractor?

Asked on 4/11/09, 10:34 pm

1 Answer from Attorneys

Bruce Beal Beal Business Law

Re: contractor working under suspension

The California Supreme Court has recently held that an unlicensed subcontractor could not recover unless it was licensed at all times during a construction project, regardless of whether the contractor had been unjustly enriched.

That said, the California Court of Appeals has held that under the Labor Code a general contractor may be assessed for contributions to unemployment insurance, disability insurance and employment training, as well as personal income tax withholding, for work performed by unlicensed subcontractors engaged by the general.

The Business & Professions Code gives CONSUMERS who have contracted with unlicensed contractors the ability to sue for restitution or reimbursement of all monies paid to the unlicensed contractor for any act or contract.

I am unaware of cases where a general successfully sued for reimbursement of all monies paid to an unlicensed sub, although the reasoning of the California Supreme Court above might support this result.

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Answered on 4/13/09, 1:45 pm

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