Unlicensed Contractors Take Another Hit

Unlicensed Contractors Take Another Legal Hit

By: Ian T. Kravitz, Esquire

We have written many times before about the dangers, costs, and penalties associated with unlicensed contracting in Florida. "In order to protect the public and to prod contractors into obtaining the required licensing, the Legislature has, as a matter of state policy, greatly disadvantaged the contractor who chooses not to obtain the legally required license." Earth Trades, Inc. v. T & G Corp., 38 Fla. L. Weekly S35 (Fla. 2013). The Florida Legislature has gone to great lengths to protect the public from the dangers of unlicensed contracting. Enacting laws placing both civil and criminal penalties on those participating in such activities. Throughout recent years, Florida Courts have continued to move toward a harsher line towards the contractors engaging in such activities.

Back in the 1990's, partially in response to lessons learned after Hurricane Andrew struck the State of Florida, the Legislature enacted statutory section 489.128 to provide that a construction contract "performed in full or in part" by an unlicensed contractor was "unenforceable in law," and the court had discretion to "extend this provision to equitable remedies." § 489.128, Fla. Stat. (1991). Courts interpreted this statute to provide that if a party to a construction contract was an unlicensed contractor, that no party to that contract could enforce such contract.

This often arose in cases where an unlicensed contractor was sued for defects or other contractual breaches by another party to such a contract. Once sued, the unlicensed contractor would inevitably defend such claims by claiming that the other party knew of the contractor's lack of proper licensure, and therefore, the two parties were in pari delicto, and therefore neither party could enforce such contract. Until now, many courts agreed with such an argument. See e.g., Castro v Sangles, 9637 So. 2d 989 (Fla. 3d DCA 1994). Through legislative amendments, and a more detailed analysis of the Florida Supreme Court of the in pari delicto defense, this is no longer the law of the land in Florida.

First, the Florida Legislature amended section 489.128 to read that "[a]s a matter of public policy, contracts entered into on or after October 1, 1990, and performed in full or in part by an unlicensed any contractor . . . shall be unenforceable in law or equity by the unlicensed contractor." The Legislature made clear that its specific intent was to "clarify[ ] that the prohibition on enforcement of construction contracts extends only to enforcement by the unlicensed contractor." Ch.2003-257, at 1290, Laws of Fla. Other parties to such a contract are no longer to be considered a party to which that statutory mandate was enacted to apply.

The Florida Supreme Court has now weighed in on this issue. In the case of Earth Trades, Inc. v. T&G Corp., (Fla. January 24, 2013). the Florida Supreme Court held on January 24, 2013, that whether or not a party to a contract with an unlicensed contractor is aware of the contractor's lack of license, "is insufficient as a matter of law to place the parties in pari delicto[,]" and the unlicensed contractor will be unable to rely upon such a defense.

In arriving at this conclusion, the Florida Supreme Court explained the difference between being in pari delicto and merely being in delicto. The Court explained that to be in pari delicto requires that the parties to the contract be relatively of equal fault. T&G had defended the claim by Earth Trades by asserting that T & G was aware that Earth Trades was unlicensed, and as such should not be able to enforce the contract between them. The Court agreed that T&G was as a result also a wrongdoer. The Court pointed out however that the penalties available against the unlicensed contractor were more severe than those available against T&G for knowing of such unlicensed activity. The Court went further to state that the 2003 amendments to section 489.128 Florida Statutes removed the language making contracts with unlicensed contractors unenforceable by either party and declared instead that only the unlicensed contractor was barred from enforcing such contracts. As a result, the Court held that "T & G's alleged knowledge of Earth Trades' licensure status, if proven, would make both parties wrongdoers, but they would not share substantially equal fault. Accordingly, they do not stand in pari delicto." T&G would be in delicto, but not in pari delicto, and as a result, would not be of equal wrongdoing to prevent T&G from enforcing the contract with the unlicensed Earth Trades.

As we have cautioned before, anyone engaging in contracting within the State of Florida, must take all steps necessary to ensure that proper licensure is in place before even offering to furnish work requiring a license. The costs, dangers, and penalties associated with unlicensed contracting can be severe, and any ability to be paid for work furnished will be unattainable, if you fail to do so. Your Construction Law FirmTM remains available to consult with you to ensure your compliance with the State's licensing laws.