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Where an HVAC subcontractor lacked the relevant license to do business in Washington, D.C. as a refrigeration and air conditioning contractor, its subcontract on a project was illegal and, therefore, void. It thereby forfeited any right of the to recover its fees and out of pocket costs from the general contractor (“GC”).   Even though the GC was aware that the subcontractor had no D.C. license at the time they entered the subcontract, “the doctrine of unclean hands does not entitle [HVAC] to recover in the instant action.”

“The rule is well-established in the District of Columbia that a contract made in violation of a licensing statute that is designed to protect the public will usually be considered void and unenforceable, and that the party violating the statute cannot collect monies due on a quasi-contractual basis either.” HVAC Specialist, Inc. v. Dominion Mechanical Contractors, Inc., 201 A.3d 1205 (District of Columbia 2019).

In this case, the GC didn’t raise the issue regarding lack of subcontractor license in its defense against the subcontractor claim for almost four years after litigation was initiated. In fact, it appears it never raised this as an “affirmative defense” until it belatedly filed a motion to dismiss the action based on the lack of subcontractor license.

The subcontractor argued that the court system and subcontractor were prejudiced by the long delay in raising this argument. The court was not persuaded, and explained,

“Whether or not that is so, we conclude that under the public policy exception to the waiver rule, which is precedential law in our jurisdiction, the affirmative defense of illegality is not waivable in the context of a contract entered into in contravention of a District of Columbia law, such as a licensing requirement, that is “designed to protect the public,” Sturdza, 11 A.3d at 257, and that “affords significant protections to the public.”

 

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 ConstructionRisk 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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 22, No. 2 (Feb 2020).

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