Can an unlicensed general contractor enforce a construction contract in North Carolina? “No,” and as Judge Conrad explains, “[t]his is an unyielding rule.”
JCG & Associates, LLC vs. Disaster America USA, LLC, 2021 NCBC Order 76 (N.C. Super. Ct. Dec. 9, 2021) involved a dispute between several Brunswick county homeowners and an unlicensed general contractor, Disaster America USA, over home restoration work in the wake of Hurricane Florence.
The initial contracts were between the homeowners and Disaster America USA, who was not a licensed general contractor in NC. Those contracts were later assigned to affiliate, Disaster America NC, which did have a general contractor’s license.
After delays and disagreements, the homeowners terminated the contracts and sued Disaster America USA for negligence, fraud, unfair/deceptive trade practices, and constructive fraud. They also sought a declaration that the contracts were illegal and unenforceable because Disaster America USA was never licensed as a general contractor. Assignee, Disaster America NC, counterclaimed against the homeowners for breach of contract and quantum meruit.
In this order, Judge Conrad decided the homeowners’ motion for partial summary judgment. In North Carolina, a party who contracts to perform construction services valued over $30,000 must have a general contractor’s license. N.C. Gen. Stat. § 87-1. The homeowners argued that their contracts with Disaster America USA were illegal and unenforceable because Disaster America USA was never licensed, and this illegality could not be cured by assigning the contract to a properly licensed entity. As a result, the homeowners sought summary judgment on assignee Disaster America NC’s contract-based claims for breach and quantum meruit.
Disaster America advanced a series of arguments to try to get around Section 87-1’s licensure requirements. Judge Conrad rejected all of them.
Disaster America USA first claimed it had permission to use the license of licensed general contractor, JCG & Associates, LLC, pointing out that each of the contracts cleverly listed “DISASTER AMERICA USA, LLC/JCG & ASSOCIATES, LLC” as the general contractor. Putting aside the fact that JCG & Associates (a co-plaintiff) denied even knowing who Disaster America USA was, Judge Conrad rejected this argument, explaining that the contracting party “must be licensed,” and the contracts were with Disaster America USA, not JCG & Associates.
Disaster America then argued that it didn’t need a license under Section 87-1 because these were not construction contracts. Judge Conrad called this argument “meritless.” Id. ¶ 19. The contracts were titled “Construction Agreements” and described things like roof removal, roofing, siding, trim, and other services that were clearly construction work. Judge Conrad concluded that “[w]ithout question,” Section 87-1 applied and required a general contractor’s license for this type of work. Id.
Finally, Disaster America USA argued that any illegality was cured when Disaster America USA assigned these contracts to a licensed entity, Disaster America NC. Citing several cases, Judge Conrad held that the illegal and defective contracts “cannot be validated by the contractor’s subsequent procurement of a license.” Id. ¶ 16. Likewise, assignment to a licensed contractor “does not cure the illegal contract.” Id.
In the end, Judge Conrad relied on the “unyielding” rule that a contract entered into by an unlicensed contractor is illegal and unenforceable by the contractor, and he entered judgment in the homeowners’ favor on Disaster America NC’s breach and quantum meruit claims.
Key Takeaway: When it comes to performing work as a general contractor, North Carolina’s licensure requirements are “unyielding.” If you don’t have a proper license, you don’t have an enforceable contract, and you have no claim. No license, no contract, no claim.