Oral Contract With Contractor In California
In Asdourian v. Araj (1985), a contractor sought compensation from two property owners for remodeling work performed pursuant to oral contracts.
The owners contended that since any agreements between the parties were oral, they violated section 7159 and were thus void.
Although the Supreme Court acknowledged that, generally speaking, "a contract made in violation of a regulatory statute is void," it stressed that " 'the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances' " and " '[a] wide range of exceptions has been recognized.' " (Asdourian, supra, 38 Cal. 3d at p. 291.)
By way of example, the court pointed out that "the rule will not be applied where the penalties imposed by the Legislature exclude by implication the additional penalty of holding the contract void." (Ibid.)
In addition, the court noted that "in compelling cases, illegal contracts will be enforced in order to 'avoid unjust enrichment to a defendant and a disproportionately harsh penalty upon the plaintiff.'" (Id. at p. 292.)
The court explained, " ' "In each case, the extent of enforceability and the kind of remedy granted depend upon a variety of factors, including the policy of the transgressed law, the kind of illegality and the particular facts." ' " (Ibid.)
The court stated that the policy underlying section 7159 "is to encourage written contracts for home improvements in order to protect unsophisticated consumers." (Asdourian, supra, 38 Cal. 3d at p. 292.)
In reviewing the evolution of section 7159, the court determined the Legislature intended neither that the express misdemeanor penalty provision of the statute would be exclusive nor that all contracts made in violation of the statute would be void, thereby opening the door to enforcement of nonconforming contracts in appropriate cases. (Asdourian, supra, 38 Cal. 3d at p. 292.)
The court concluded Asdourian was just such a case, citing the fact that:
(1) the defendants were not members of the group primarily in need of the statute's protection, i.e., unsophisticated consumers;
(2) contracts made in violation of section 7159 are not " 'intrinsically illegal,' ";
(3) if the defendants were allowed to retain the value of the benefits bestowed by the plaintiff without compensating him, they would be unjustly enriched. (38 Cal. 3d at pp. 292-293.)