Where a subcontractor lacked a contractor’s license, the Supreme Court of Florida held that pursuant to state statute the contract was unenforceable by the unlicensed contractor. This meant that the prime contractor could not be liable to the Sub for breach of contract. The Subcontractor argued that the prime contractor was equally at fault for entering into the contract while knowing the Sub was not licensed, and that that the common law defense of in pari delicto should be applied to prohibit the Prime from refusing to honor the contract. That defense refers to “the principle that a plaintiff who has participated in wrongdoing may not recover damages resulting form the wrongdoing.” That defense theory was rejected by the court because even if the plaintiff and defendant were both wrongdoers, the court stated the defense only applies if the parties participated in the same wrongdoing and with comparatively equal fault. Here, the wrongdoing of the Sub was paramount. In reaching that conclusion, the court cited the state statute that imposed substantial penalties on an unlicensed contractor – including forfeiting the rights or remedies of enforcement of the contract. Although the state could impose a $5,000 fine on the Prime for having hired an unlicensed contractor, the potential penalties on the unlicensed Sub are far more extreme, including a $10,000 fine and a first-degree misdemeanor for the first offense, and a third-degree felony for a second offense. For these reasons, the court held the in pari delicto defense was not available to the unlicensed Subcontractor. Earth Trades Inc. v. T & G Corp., 2013 WL 264440 (Fla. 2013).
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. 15, No. 5 (May 2013).
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