Potential Significant Issues Exist for Those Who Do Business with Unlicensed Contractors

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September, 2008

By Robert B. Jacobs and David W. Floren, Attorneys at Law

 Anybody who has been in the contracting business for any length of time probably knows at least one contractor who is doing work without a license. But the fact that unlicensed individuals may be doing contract work doesn’t make such work legal.

  Unlicensed contractors have their own problems to deal with. But many suppliers and subcontractors may not realize that the simple act of knowingly supplying an unlicensed contractor with supplies or materials is itself a criminal act punishable by a fine of up to $1,000 and imprisonment in the county jail for up to 6 months. See Business and Professions code section 128. Section 128 doesn’t apply to cash sales for less than $100.00.

  Section 128 makes it a misdemeanor for any person, company, partnership, limited liability company, firm or corporation to knowingly sell equipment, supplies or services that are to be used in the performance of a contract that violates any licensing requirement of the Business & Processions Code. The Contractors’ State Licensing Law is a licensing requirement of the Business & Professions Code, thus Section 128 applies to contracts entered into by contractors, licensed or unlicensed.

  There is currently no published California judicial opinion explaining if or how Section 128 would apply to subcontractors, suppliers or materialmen who do business with on a project they know is in violation of the contractor’s licensing laws. If Section 128 is enforced against a supplier who knows his materials are being sold to an unlicensed contractor, that supplier might not be entitled to recover from that contractor. A question exists as to whether or not the supplier or subcontractor would be able to enforce a mechanics’ lien against the owner’s real property after violating Section 128.

  In order to avoid any of the issues raised by Section 128, the best policy is to do business only with licensed contractors.


The Law Office of Robert B. Jacobs provides legal services in the areas of Construction, Business, and Real Estate Law. The office is located in Pleasanton, California and can be reached at (925) 847-8680. The foregoing article is not a complete discussion of the applicable law, and competent counsel should be consulted concerning any specific situation or issue.