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Contractor began construction on a $4.2 million home for Cher (movie star and singer/entertainer) based on a oral agreement that Cher would execute a written contract that had allegedly been negotiated between the parties.  Although Cher is alleged to have promised to sign the contract, she never signed it.  The contractor performed work under the oral agreement based upon its understanding and belief that Cher would honor an alleged promise to pay for the work being performed.  Ultimately, however, Cher terminated the work and refused to pay the contractor over $400,000 that was then due.

In the suit for breach of contract against Cher, the trial court dismissed the complaint because the contractor didn’t obtain a signed, written contract.  On appeal, the California Court of Appeal reversed that decision.  The court stated that the California Business and Professions Code requires that “every contract and any changes in a contract, between an owner and a contractor, for the construction of a single-family dwelling to be retained by the owner for at least one year shall be evidenced in writing signed by both parties.”    According to the court, this provision of law is intended to provide safeguards to consumers who contract for “home improvement” work.  And as a general rule, the court notes that a contract made in violation of a regulatory statute is void. Significantly, however, the court concluded that the general rule concerning a voidable contract has flexibility so that it does not have to be applied in its fullest rigor under any and all circumstances.

Citing other case precedent, the court stated that the purpose of the regulation is to protect “unsophisticated consumers.”  In this case, Cher was not an “unsophisticated consumer.”  Factors considered by the court were that Cher was a sophisticated homeowner who had prior experience with residential construction projects, she had the assistance of counsel in negotiating the contract (which was never signed),  she had permitted the contractor to complete a substantial portion of the work and finally, Cher would be unjustly enriched by not compensating the contractor for the work performed.

For these reasons, the court held that non-compliance by the contractor with the California code was not an absolute bar preventing the contractor from suing to enforce the oral agreement with Cher.  The case was reversed and remanded to the trial court for further proceedings, and presumably a trial.  Arya Group, Inc. v. Cher, 91 Cal. Rptr. 2d 815 (Cal. App. 2000).

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 2, No. 8 (Aug 2000).

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