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Posts Tagged ‘licensed contractor’

After January 1, 2013 Type One Indemnity Outlawed for Commercial Construction

December 17, 2012 Leave a comment

Effective on  January 1, 2013, “Type I” indemnity clauses covering an indemnitee’s concurrent active negligence will no longer be enforceable under California law for commercial construction.  On October 9, 2011, California Governor Edmund G. Brown, Jr. signed into law Senate Bill 474 on this indemnity issue.  The new law  broadens the class of indemnity provisions that are unenforceable under California law.

Under the current law as of the date of this blog post, provisions in construction contracts whereby a lower tiered subcontractor indemnifies an owner or general contractor against liability caused by the indemnitee’s “sole negligence or willful misconduct” are unenforceable. See Cal. Civ. Code § 2782(a). Additionally, provisions in construction contracts on public projects are unenforceable if they impose on the contractor, or relieve the public agency from, liability for the public agency’s own “active negligence.” Cal. Civ. Code § 2782(b).  Due to these limitations, owners and general contractors often included “Type I” indemnity provisions in lower tiered agreements, whereby a lower tiered subcontractor would agree to indemnify the owner/contractor, even against liability caused by the owner/contractor’s own “active negligence.”  

Under the new law, such “Type I” indemnity provisions will no longer be enforceable. Newly added California Civil Code Section 2782.05 provides that contract clauses that purport to require a subcontractor to “insure or indemnify” a contractor, construction manager or other subcontractor against claims for damages that relate to the active negligence or willful misconduct of the indemnitee, or for defects in design, or against claims that do not arise out of the scope of work of the indemnitor, are unenforceable. Public agencies and private owners are already essentially prohibited from including Type I indemnity provisions in their agreements. See Cal. Civ. Code § 2782(b)(2) and 2782(c)(1) (newly added under SB 474). The new law expands the coverage of that prohibition to include downstream or lower tiered subcontractors and suppliers of goods.   Please see the full text of Civil Code Section 2782.05 for full details of the law.

All Rights Reserved © 2012 by Michael L. Mau, Esq. & The Mau Law Firm

 

Twenty-Nine Palms v. Bardos remind us of the Importance of a Contractor’s License

November 12, 2012 Leave a comment

In Twenty-Nine Palms Enterprise Corp. v. Bardos (2012), [No. E051769] the Fourth Dist. Court of Appeals issued its ruling affirming a  Judgment against an unlicensed contractor.  This was an Indian tribal corporation’s suit against a construction company seeking to recover money paid for constructing a road and parking lot for a casino, on the ground that defendant was unlicensed at the time of the contract.  Relevantly, B&P Code Section 7031, subdivision (b), provides that an unlicensed contractor must disgorge all compensation earned under a contract.  The Trial Court’s judgment was in favor of the plaintiff owner.  The Court of Appeals affirmed, and found that in relation to contractor licensing:  1) an unlicensed sole proprietor contractor could not use the alter ego doctrine to allow it  to borrow another company’s license as that would be improper use of an equitable doctrine; and 2) there was no triable issue of fact on the issue of substantial compliance with the contractor’s state license laws.  The net result, the owner who paid the unlicensed contractor $751,955.00, now has a judgment to get reimbursed that amount from that unlicensed contractor.  This is a stark reminder to all California contractors, make sure your state contractor’s license is valid and in effect while you are performing construction work.

All Rights Reserved © 2012 by Michael L. Mau, Esq. & The Mau Law Firm

Templo v. Gardner Construction Enforces Arbitration Clause from a Construction Contract

August 22, 2011 Leave a comment

In Templo Calvario Spanish Assembly of God v. Gardner Construction Corp. (2011) ([No. F060838. Fifth Dist. Aug. 16, 2011.] the Court of Appeals enforced an arbitration clause from an interesting factual background. This was a contract dispute involving the enforceability of an arbitration provision contained in a construction contract, where the contractor was unlicensed. So the question was whether the contract, and thus arbitration clause in that contract, were automatically void? The trial court had vacated the arbitration award finding that the construction contract with an unlicensed contractor was automatically void. However. the Court of Appeals reversed this decision. The Appellate Court held that under the case precedent of MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, the construction contract was not automatically void just because the contractor was unlicensed. Instead, it confirmed that the Contractors State License Laws still bars suit to collect compensation for unlicensed work.

All Rights Reserved © 2011 by Michael L. Mau, Esq. & The Mau Law Firm

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