Key Points

  • The Idaho Supreme Court held that Idaho Code section 54-5217(2) bars only unregistered contractors, not project owners, from suing to enforce a construction contract.
  • Contracts entered in violation of the Idaho Contractor Registration Act are voidable at the election of the project owner rather than void.
  • The court clarified its 2013 AED, Inc. v. KDC Investments decision to the extent it suggested such contracts are void as to all parties, while leaving intact its holding that unregistered contractors cannot enforce them.
  • The homeowners were not judicially estopped, but their implied-warranty claim and veil-piercing argument were waived for lack of argument and authority.
  • The court denied appellate attorney fees under Idaho Code section 12-120(3) because building a personal home is not a commercial transaction, awarded the homeowners costs, and remanded the breach-of-contract claim.

The Idaho Supreme Court held on Nov. 12 that homeowners who hire a builder whose state registration has lapsed can still sue that builder for breach of contract, reviving a couple's lawsuit over a house they say was left defective and unfinished.

Writing for a unanimous five-justice court, Justice Moeller concluded that a contract signed by an unregistered contractor in violation of the Idaho Contractor Registration Act is voidable rather than void. A voidable contract is one the wronged party may choose to enforce or to cancel. The ruling reverses the dismissal of John and Cheryl Kumm's breach-of-contract claim against The Work Shop & Sons Ltd.

The court called the question one of first impression. Idaho decisions had described contracts with unregistered builders as "illegal" and "void," but those cases involved contractors trying to collect, so the distinction never mattered. Unregistered contractors still cannot sue on such contracts, and the court clarified its 2013 decision in AED, Inc. v. KDC Investments to the extent it suggested the contracts are void as to everyone.

According to the opinion, the Kumms and the Work Shop agreed on July 23, 2021, to build a stick-frame home on the couple's property in Elk River. The company's registration had expired about 100 days earlier. The Work Shop said it had mistakenly failed to pay the annual administrative fee, and the state reinstated its registration that October.

The Kumms paid the company $305,033.57 between August 2021 and January 2022. They alleged that water leaked under the foundation, mold grew in the subfloor, the building was left open over winter and the site was graded improperly. The county building inspector issued multiple stop-work orders, and an April 2024 report put the cost of repairs and completion at $331,034.30.

The Work Shop said the work was unfinished rather than defective and that the Kumms kept it from completing the job. It counterclaimed for breach of contract, alleging that the couple terminated the agreement without cause.

District Judge Adam H. Green first granted the Kumms summary judgment on those counterclaims, holding that the agreement was void and that the company's lapse lasted "far too long" to qualify as substantial compliance. Green then dismissed the Kumms' own claims on the same ground, reasoning that they arose from a void contract. The judge said the couple had kept the ability to pursue claims in equity but had brought none, and called the outcome "essentially a draw."

The Supreme Court focused on the statute's text. Idaho Code section 54-5217(2) provides that no person acting as a contractor may "bring or maintain any action in any court of this state for the collection of compensation" without proving registration throughout the work. "Nowhere in the statute does it state or imply that a project owner may not bring or maintain an action, or that they will be otherwise penalized for entering into a voidable contract under ICRA," Moeller wrote.

The opinion acknowledged that the court, "along with many others, has often misused or conflated the words 'void' and 'illegal' when describing contracts that violate ICRA." It relied on the Michigan Supreme Court's 2015 decision in Epps v. 4 Quarters Restoration LLC, which held that contracts between an innocent homeowner and an unlicensed residential builder are voidable. It also cited the Washington Supreme Court's 2023 decision in Dobson v. Archibald, which found that state's registration statute bars the contractor's suit without rendering the contract void or illegal.

The court pointed as well to the act's stated purpose of protecting the public from "incompetent, dishonest, or unprincipled practitioners of construction." "If all such contracts are void in the strictest sense of the word, it would render the law ineffectual because it would leave a project owner harmed by an unregistered contractor with no remedy under the law," Moeller wrote.

The Work Shop had argued that AED controlled. That case involved an Idaho company, unlicensed in West Virginia, that contracted to sell and remove a bridge over the Ohio River and then sued. The court said the present case was materially different because the project owners were the ones seeking enforcement, and it clarified AED "only to the extent it may have mischaracterized a contract that violates ICRA as void as to all parties."

"This means that while the Work Shop cannot bring or maintain an action to enforce or seek compensation under the Agreement, the Kumms still can," Moeller wrote.

The court rejected the Work Shop's argument that judicial estoppel, a doctrine that bars a litigant from taking one position and later adopting an incompatible one, prevented the Kumms from defending the contract after calling it void below. The couple had argued only that the agreement was void as to the company, the court said. "Their position on appeal—that ICRA bars the contractor's recovery but does not extinguish the owner's right to enforce—is consistent with, not contrary to, the position they took below," Moeller wrote.

The court declined to consider the Kumms' implied-warranty claim and their bid to pierce the corporate veil, which would have held the company's owners, Kyle and Jessica Cromer, personally liable for alleged fraudulent billing. The couple had not supported either issue with argument or authority, the court said.

The justices denied the Kumms attorney fees on appeal under a state law that shifts fees in disputes over commercial transactions, holding that building a personal home is a personal or household transaction. As the prevailing parties, the Kumms were awarded costs.

Chief Justice Brody and Justices Bevan, Zahn and Meyer joined the opinion. The opinion notes that the matter was decided before Bevan's retirement and that he participated fully.

Kevin W. Roberts of Roberts | Freebourn, PLLC, argued for the Kumms. Jonathan D. Hally of Blewett, Mushlitz, Hally, LLP, argued for the Work Shop and the Cromers.

The case returns to the Clearwater County district court for further proceedings on the Kumms' breach-of-contract claim. The Supreme Court did not decide whether the Work Shop breached the agreement or what damages, if any, the couple may recover.