In fact, you didn’t even have a license.
A federal court in Alabama was tasked with determining whether an unlicensed contractor could recover from an Alabama project owner for in excess of $1.7 million in construction infrastructure and site work performed. In fact, the contractor “did not have a valid general contractor’s license” in the state of Alabama when it “assumed work on the project from its predecessor company.”
During the course of work on the project, the principals of an original contractor decided to go their separate ways, whereupon one of those principals announced that his new company would take over ongoing work. Roughly two months after the new company began working at the project, the contractor applied for a license with the Alabama Licensing Board of General Contractors – the license was issued within about 45 days. Then, some eight months later, the contractor added a “municipal and utilities” classification to its contractor license.
When relations between the owner and second contractor went south, the second contractor filed a lien on the project and then suit in federal court to enforce the lien.
The owner defended that suit by filing a motion for summary judgment, urging that because the contractor lacked a valid license when it started work, “as a matter of public policy,” the contractor could not recover for the work performed. Doubling down, the owner urged that once the contractor became licensed, even the lack of the “municipal and utilities” classification could be the basis for denying the contractor’s recovery.
Noting that the Alabama Supreme Court “has held that express or implied contracts with unlicensed contractors for work performed in Alabama or unenforceable as a matter of public policy,” the federal court nonetheless denied the owner’s motion for summary judgment. The court distinguished cases cited by the owner on the point, in which “the contractor did not have a valid license at any point during the execution or performance of the contract at issue.”
The federal court wrote: “The Alabama Supreme Court has permitted general contractors to seek recovery for services rendered without strict compliance with the general contractor's licensing statute,” the federal court noting Alabama cases where a contract was “ratified” after a contractor received a proper license. The court noted: “… the Eleventh Circuit observed that Alabama courts have stated: ‘the true test to determine whether a contract is unenforceable because of public policy is “whether the public interest is injuriously affected in such substantial manner that private rights and interests should yield to those of the public…. [T]he principle that contracts contravening public policy are unenforceable should be applied cautiously and only in cases plainly within the reason for it…”’”
Regarding the license classification issue, the federal court was similarly unpersuaded, finding “substantial compliance” by the contractor with the licensing statute: “[Owner] has not cited binding or persuasive authority to support the proposition that a contractor with a valid license cannot recover for work performed because the license did not have the correct classification.”
