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01/31/13 It's The Law: Unlicensed Contractors May Not Get Paid

It's The Law

Unlicensed Contractor May Not Get Paid

(1/31/13)

Question:

I am a handyman. I recently did some work for a customer. The customer asked me to do some plumbing work as part of my contract. I told them I was not licensed to do plumbing, but he told me it was okay. I agreed and now he refuses to pay me for any of work because I did not have the proper license to do some of it. Can he get away with it?

Answer:

Illegal contracts are generally unenforceable. If a contract is contrary to the public policy of Florida, violates a Statute or Florida's Constitution, it is generally unenforceable. If the illegal portion can be refused without nullifying the contract as a whole, the remaining portions of the contract are enforceable.

Unfortunately for you, Florida addresses unlicensed contracting by a specific statute. Section 489.128, Florida Statutes, provide that contracts by an unlicensed contractor are unenforceable in law or equity by the unlicensed contractor. Florida courts have interpreted that statute to render the entire contract unenforceable if any portion requires for performance for which the contractor does not hold a valid license.

In your case, there is an added twist. Your customer knowingly asked you to perform unlicensed contractor work. If your customer was smart enough, this action might have been similar to entrapment by law enforcement in the criminal arena. In equity, where one party knowingly encourages another to take some action to the other party's detriment and/or accepts the benefit of that action, he is generally barred from raising technical deficiencies as a defense.

Some Florida contractors have pursued that line of defense in connection with unlicensed contracting cases. They have asked the courts to allow the common law defense of "in pari delicto." That defense means a plaintiff who has participated in some wrongdoing may not recover damages resulting from the wrongdoing. In 2010, Florida's 5th District Court of Appeal ruled that §489.128 precluded use of this principle in unlicensed contractor cases. A year later, the 3rd District Court of Appeal ruled to the contrary. On January 25, 2013, Florida's Supreme Court issued a decision resolving the dispute for all Florida courts in the case of Earth Trends, Inc. T & G Corporation.

Florida's Supreme Court first explained that "in pari delicto" does not require simply that both parties be wrongdoers. Instead, the parties must participate in the same wrongdoing." And, they must be "equally at fault." The court further explained that the defense is not automatically applied in every case where illegality appears. Since it is founded on public policy, it can be superseded by other public policy and particularly where allowing the defense would defeat a legislatively declared policy.

In Earth Trades, T & G was the general contractor. T & G refused to pay Earth Trades because Earth Trades was unlicensed. Earth Trades argued that T & G knew it was unlicensed and was therefore barred from raising the lack of a license in defense by the doctrine of "in pari delicto". Florida's Supreme Court ruled the lack of a license is a complete bar to recovery. The statute was so clear it barred the defense of "in pari delicto".

In explaining its decision, the Court not only confirmed that the public policy of Florida as set forth in the Statute outweighed the doctrine, but also that the parties were not wrongdoers of relatively equal fault. Hiring an unlicensed contractor can subject the customer to a fine of up to $5,000.00, plus a Cease and Desist Notice. But, unlicensed contracting is a criminal act. A fine of $10,000.00 may be imposed on an unlicensed contractor. And, the Legislature in 2003 amended the statute to remove language making contracts with an unlicensed contractor unenforceable by either party. Hence, the person hiring an unlicensed contractor could still enforce the contract. The only person barred from enforcing the contract by the statute is the unlicensed contractor.

The statute and Florida cases combine to bar any claim a contractor might have when any portion of the contract involves unlicensed activity. That makes it important for handymen and others in the construction industry to be fully aware of the licenses required for different services. This makes it imperative that contractors make sure their contracts only call for performance of services for which they hold a valid license.

By: William G. Morris, Esquire

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.

Questions for this column can be sent to: William G. Morris, e-mail: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722 or

The Marco Island Eagle

Other articles of interest can be viewed at our website, www.wgmorris.com.

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