The recent Florida Supreme Court’s decision in Earth Trades, Inc. v. T&G Corp., 2013 WL 264440 (Fla. 2013), demonstrates the harsh realities for an unlicensed contractor. In this case, a general contractor hired a site subcontractor. The subcontractor, alleging nonpayment, filed suit against the contractor and the contractor’s payment bond. The contractor argued that its site subcontractor was unlicensed and therefore was unable to pursue any cause of action against either the contractor or the payment bond. The contractor relied on Florida Statute s. 489.128 which provides in material part: “As a matter of public policy, contracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.”

 

The unlicensed subcontractor argued what is referred to as the in pari delicto doctrine.  This doctrine stands for the proposition that a party who has knowledge and participates in the wrongdoing cannot reap the benefits of the wrongdoing. In other words, the subcontractor was arguing that the general contractor knew it was unlicensed and, thus, cannot reap the benefits of the harsh effects of the statute that would prohibit it from any remedy associated with the contractor’s nonpayment.

 

The Florida Supreme Court held that this in pari delicto doctrine does not apply even if the contractor knows that the subcontractor was unlicensed and hires the subcontractor anyway.

 

General contractors and subcontractors that are required to be licensed by the state (Florida’s Construction Industry Licensing Board) need to ensure they are properly licensed. Otherwise, if they enter into a contract with a party and despite the other party knowing about the lack of license, they will be out of luck. This could mean the other party has no legal obligation to pay it and arguably could seek to recoup monies paid to the unlicensed contractor. Obviously, this could be avoided by ensuring proper licensure, especially now that the defense “well, the other party knew I wasn’t properly licensed” no longer applies.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.