A Louisiana court recently reiterated the importance for all parties to a construction contract to ensure, prior to executing the contract, that the contractor is licensed in Louisiana. In Ioannis Maroulis v. Entergy Louisiana, LLC, et al., the Louisiana Fifth Circuit Court of Appeal ruled that if a contractor is not licensed in Louisiana per La. R.S. § 37:2150, any contract that the contractor enters into is absolutely null and void ab initio in violation of Louisiana contractor licensing laws, which are enacted to protect the interests of the public.
The Fifth Circuit also clarified that the “clean hands” doctrine does not apply to situations in which a performance is sought that would require the court to enforce the terms of an absolutely null contract. As such, when a performance has already been rendered by an unlicensed contractor, the “clean hands” doctrine applies and the unlicensed contractor can recover its costs (but not profit) in rendering the performance under the theory of unjust enrichment. However, if the performance sought by the other party has not yet been rendered (as was the case in Ioannis), the party seeking performance will recover nothing because the court will not enforce any provision of an absolutely null contract.
In sum, Louisiana courts will not enforce contractual claims that arise out of an absolutely null contract with an unlicensed contractor, even if the breaching party had knowledge that the contractor did not have a valid contractor’s license in Louisiana. Recovery will not be permitted because a contract made in violation of a prohibitory law is illegal and its enforcement is precluded, even though work has been done or materials furnished. For this reason, it is in the best interest of all parties to a construction contract to ensure, prior to executing the contract, that the contractor is properly licensed under La. R.S. § 37:2150.
