1. (1) If a court determines that a public improvement contract is void because the contracting agency letting the contract failed to comply with any statutory or regulatory competitive bidding or other procurement requirements, and the contractor entered into the contract without intentionally violating the laws regulating public improvement contracts, then, unless the court determines that substantial injustice would result, the contractor is entitled to reimbursement for work performed under the contract as follows:

   1. (a) If the work under the public improvement contract is substantially complete, the contracting agency shall ratify the contract.
   2. (b) If the work under the public improvement contract is not substantially complete, the contracting agency shall ratify the contract and the contract shall be deemed terminated. Upon termination, the contractor shall be paid in accordance with ORS 279C.660, unless the court determines that payment under ORS 279C.660 would be a substantial injustice to the contracting agency or the contractor, in which case the contractor shall be paid as the court deems equitable.
   3. (c) For the purposes of this section, a ratified contract shall be deemed valid, binding and legally enforceable, and the contractor’s payment and performance bonds shall remain in full force and effect.
2. (2) Notwithstanding subsection (1) of this section, if a court determines that a public improvement contract is void as a result of fraudulent or criminal acts or omissions of the contractor or of both the contracting agency letting the contract and the contractor, the contractor is not entitled to reimbursement for work performed under the contract.

3. (3) This section does not apply to a public improvement contract if:

   1. (a) The contracting agency’s employee that awarded the public improvement contract did not have the authority to do so under law, ordinance, charter, contract or agency rule; or
   2. (b) Payment is otherwise prohibited by Oregon law.
4. (4) The contractor and all subcontractors under a public improvement contract are prohibited from asserting that the public improvement contract is void for any reason described in this section.

[2003 c.794 §136]