ECL Software Blog

Do You Need Another Reason to Ensure You’re Licensed? Learn How You Could Waive Your Right to Payment

It may seem like a given to be a licensed contractor before doing work, but the truth is that some companies believe that they can get by with letting their license lap. We know that our clients keep their legal status on the up and up – which is why they want the highest-quality construction software services, but today we’re going to look at what can go wrong if the licenses are left to lapse.

The case of a North Dakota “contractor”

The case we’re discussing is one that took place in North Dakota. The company in question, Snider Construction, was involved in a lawsuit with the Dickinson Elks Building. In this case, an out-of-state contractor came in, did the work on December 26th, but didn’t get a contractor’s license until February 5th of the next year. The contractor later filed a lien for around $200,000 and won in the trial court.

The case was appealed

The owner did not agree with the verdict and he did appeal it. He claimed that North Dakota Building codes require than a contractor is licensed at the time they start work or form a contract. As a result, they cannot make a claim or take action related to the work performed under the contract because the contract was not valid.

Think of it this way: Since the contractor was required to be licensed in order to sign the contract, and it turned out that they weren’t, they cannot go to the owner of the building and require them to follow the contract because the contract has become null and void. At least, this is what the builder said. The law came down in the middle of these two perspectives.

The results of the appeal

The contractor didn’t get the $200,000 they were owed but they did have some recourse. The appellate court said that the contractor couldn’t recover labor and materials for the time during they were not licensed, they could recover in what’s known as “quantum meruit,” which essentially translates to unjust enrichment for materials and labor that were provided after they were legally licensed.

Would the results be the same in your state?

You’ll note that this case took place in North Dakota and the laws governing the rights of the contractor and the client are largely rights the states sets. As a result, the experience you might have in your own city may be different.

For example, Utah requires that a contractor has a valid license both when they sign the contract and throughout the project. Arizona requires that there’s a valid license at the time of the contract and at the time that any cause of action became relevant. As you can see, this case would likely have turned out differently in either of these states.

No matter where you do business, your construction company needs the best construction tools and resources. That’s what ECL Software is here to provide.