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Can An Unlicensed Contractor Recover For Breach Of Contract?

I. The New Mexico State Legislature Requires business owners to comply with occupational licensure requirements.


Sometimes “playing by the rules” is difficult for low and middle income business owners.  Government regulations increase the cost of compliance and makes organizing a small to medium-size business difficult.  Adding in the expense and difficulty obtaining licensure, its clear to see that the New Mexico State Legislature and its administrative agencies create substantial boundaries to entry and place tremendous burdens upon New Mexico’s working class.  According to the Institute for Justice’s “License to Work” study, in New Mexico, 51% of “low-income occupations” require licensing, the typical license fee is $158 per year, one exam is required, and more than one year of formal education is required.  The same study suggested that New Mexico’s Legislature has created the 12th highest burden on low-income entrepreneurs of any state in the union.        


Following the above information, New Mexico requires businesspeople to “play by the rules” of occupational licensure.  If business owners fail to submit to the government’s demands, their interests will be hurt and the law will actively punish them.  Like all other laws, it’s important for business owners to get the occupational licenses they need to conduct business in New Mexico and stay on the “right” side of the law.  


II. Can an unlicensed contractor recover for breach of contract?


Squarely within the need for occupational licensure is contracting.  New Mexico demonstrates a harsh, punitive law framework that expressly disallows unlicensed contractors to recover under the law even when a valid contract was signed for their efforts.  NMSA 1978, §60-13-30(A); Nickels v. Walker, 74 N.M. 545, 549, 395 P.2d 679, 682 (1964). Perhaps worst of all, the statute bars suits by unlicensed contractors even when they seek compensation for construction work fully and satisfactorily performed. Triple B Corp. v. Brown & Root, Inc., 106 N.M. 99, 101, 739 P.2d 968, 970 (1987).


Realizing that these rules and regulations hurt business and working-class New Mexicans, former Governor Susana Martinez signed Executive Order 2018-48 on October 3, 2018. In her order, Governor Martinez included an interesting provision that established “consumer choice.”  The provision essentially allows an individual to bypass occupational licensure when: (1) the individual or individual’s employer informs each prospective customer that the individual is not licensed by the State of New Mexico, and (2) the customer signs a written contract acknowledging the disclosure.  The disclosure to potential customers may include a statement that the person is certified, recognized, or otherwise issued a qualification by a relevant private industry group, trade organization, or association.  However, it does appear that “medical services to human beings” are exempt from the order.  


III. The takeaway:


We STRONGLY recommend that individuals get occupational licensure before practicing construction and associated trades.  Failure to do so almost certainly precludes an unlicensed contractor’s ability to recover.  There is substantial certainty that New Mexico’s Courts will protect contracts entered in to by licensed business owners (including contractors).  There’s equal certainty that New Mexico’s Courts will do whatever they can to “effectuate the legislature’s intent” and ensure that hard-working, proficient, unlicensed contractors never recover a penny for the work they successfully completed.  While former Governor Martinez’s executive order appears to have created an “end run” around the legislature’s mandates, there is NO case law on the topic yet and carrying on and completing work without a license is a risky practice.  Further, bear in mind that Governor Martinez was replaced by a Governor who does not appear to share her values of tackling regulation and that her regime will likely occupy the office for the next three to seven years.  


If you’re an unlicensed contractor and are uncertain as to how to get a license or what type of license you need, contact us.  

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