Hawaii Unlicensed Contractor Liability: 2

Proudly Serving Honolulu, Maui, Kauai and the Big Island

In my previous blog I discussed whether, under Hawaii law, a homeowner must pay for services provided by an unlicensed contractor. This blog will consider whether a subsequent procurement of a Hawaii license by a previously unlicensed contractor can validate a contract that was agreed upon while the contractor was still unlicensed.

It is my opinion that a subsequent procurement of a license by an unlicensed contractor will not validate a previously illegal contract. I will explain. In Hawaii, a contract made with an unlicensed contractor is, as a matter of law, an illegal contract since it is in violation of HRS chapter 444. Therefore, it seems likely that if a contractor obtains a license after the contract is created, he still will not be able to collect payment for work performed while previously unlicensed. See HRS 444-22. The statute itself provides that the failure to obtain a license shall prevent such persons from recovering for work done or material and supplies so long as “such person failed to obtain a license. . .prior to contracting for such work.” (emphasis added). The clear language of the statute indicates that a license must be obtained before the contract was made in order to prevent the harsh consequences of HRS 444-22.

Although there is no Hawaii case directly on point, this is consistent with other state court rulings applying statutes similar to Hawaii’s existing law. The North Carolina Supreme Court interpreted their statute strictly, holding that a contract “cannot be validated by the contractor’s subsequent procurement of a license.” Brady v Fulghum, 308 SE.2d 327, 331 (NC, 1983) affirmed by Jenco v Signature Homes, Inc., 468 S.E.2d 533, 535 (NC. App., 1996), and Currin & Currin Const., Inc. v Lingerfelt, 582 S.E.2d 321, 324 (NC. App., 2003). That North Carolina Court also rejected the unlicensed contractor’s argument of “substantial compliance.” Id. North Carolina courts have consistently read the statute strictly and without exceptions. Admittedly, North Carolina has subsequently changed its statute which superseded this holding. The current North Carolina statute expressly allows payment to a contractor who subsequently procures a license so long as that contractor substantially complied with the licensing requirements. California has also changed their statute to allow for “substantial compliance by the contractor”. As of the creation of this blog, the Hawaii legislature has not so modified its statute.

The plain language of the Hawaii statute provides that the failure to obtain a license shall prevent such persons from recovering for work done or material and supplies so long as “such person failed to obtain a license. . . prior to contracting for such work.” (emphasis added). It is likely that a Hawaii court will enforce this statute strictly and require that the procurement of a license must be made before the contractor (i) agrees to do the work and (ii) begins performance.