Validity of Construction Contracts with Unlicensed Contractors

Louisiana Law holds that a contract is absolutely null when it violates a rule of public order. In Louisiana certain construction projects require that the contractor be licensed by the State Licensing Board for Contractors. In addition, some projects need to be permitted in order to comply with local ordinances.

Pertinent Facts:

In the recent decision of Korrapati vs. Augustino Brothers Construction, LLC, et al., the Louisiana 5th Circuit, amongst other rulings, found that a contract with an unlicensed construction company was an absolute nullity.

The pertinent facts in Korrapati are as follows: Korrapati was planning to have her daughter’s wedding at her house. In preparation, Korrapati hired Augustino Brothers, LLC “(Augustino”) to perform various construction projects. In addition, Augustino agreed to obtain all necessary permits needed to perform the work. Augustino was owned solely by its member, Mr. Perdomo (“Perdomo”). When Perdomo executed the construction contract, he knew that Augustino did not have a contractor’s license, however, began work on the project.

At some point during the project, Korrapati learned that Augustino was not a licensed contractor. In addition, Korrapati learned that Augustino did not obtain the necessary permits for the projects. Korrapati terminated her contract with Augustino and sued for breach of contract.

Louisiana Law Re: Unlicensed Contractors

Louisiana Civil Code Article 2030 states that “A contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit or immoral. A contract that is absolutely null may not be confirmed.” At trial, Perdomo admitted that Augustino was not a licensed contractor at the time it entered into the contract with Korrapati. With that testimony, the 5th Circuit confirmed the trial court’s decision that the contract was null.

Recovery of Monies for Work Performed

Contractors can recover monies for the work performed, even if they are unlicensed. However, such contractors will likely be viewed negatively by the courts

It is undisputed that Augustino did a substantial amount of work under the contract. However, the quality of the work was disputed. When Korrapati filed suit, she requested all of her monies paid be returned. Korrapati put forth multiple experts showing that all of Augustino’s work was deficient, so much so, that Korrapati demolished all of its work. Korrapati only paid a fraction of the cost to have the work demolished. However, the Court ruled that Augustino could not recover any monies for the work performed because it was all justifiably demolished.

Louisiana courts have consistently held that construction work that requires a licensed contractor will be null if that contractor is not licensed. However, those contractors still have a claim for unjust enrichment for the competent work they performed.