Can an Unlicensed Contractor Use the Other Party’s Knowledge as a Defense to Enforcement of the Contract?
No. The Florida Supreme Court just ruled in Earth Trades, Inc. v. T&G Corporation that the other party’s knowledge that a contractor or subcontractor is not properly licensed to perform the construction work of the contract is legally insufficient to establish the defense that the parties stand in pari delicto or in equal fault.
T&G was the general contractor on a parking garage project and entered into a subcontract with Earth Trades to perform site work on the project. Earth Trades was not licensed to perform this site work. A dispute arose and Earth Trades sued T&G for breach of contract. T&G filed a counterclaim against Earth Trades for breach of contract. T&G argued that since Earth Trades was unlicensed that its breach of contract claims were barred as a matter of law under section 489.128, Florida Statutes. Earth Trades countered that T&G was also barred from enforcing the contract because the parties were in pari delicto because T&G was aware Earth Trades was not properly licensed. The in pari delicto defense is based on the principle that the plaintiff who participated in the wrongdoing may not recover damages resulting from the wrongdoing.
The Supreme Court held that the in pari delicto defense did not preclude T&G from enforcing the contract. The Court held that the unlicensed contractor and the party that hired the unlicensed contractor were not at equal fault as required by this defense. The unlicensed contractor is commiting a crime for which the first offense is a first-degree misdemeanor and the second is a third-degree felony. The party who hires an unlicensed contractor is subject to a cease and desist notice and a fine of up to $5,000. Additionally, the legislature made it clear that section 489.128 only punishes the unlicensed contractor and states that only the unlicensed contractor may not enforce its contract or lien rights.