Contractor License Limits in North Carolina

Catherine and Dustin Barr had plans and specs ready to begin construction of their North Carolina home. They selected HolTon Construction Concepts to do the work and signed two contracts, $1,000,000 for construction of the residence and $870,000 for the detached garage. Both house and garage to be built on the same parcel.

Why Two Contracts?

When the contracts were signed, March 2022, Holton held an intermediate general contractor's license – projects valued up to $1,000,000. Breaking the job into two contracts kept Holton within limits of his license. On December 20, 2022, Holton upgraded to an unlimited license, nearly a year before completion of the Barr project.

Work was finished on November 15, 2023. The Barrs signed a final lien waiver and moved in. But there was a problem. Several subs claimed they had not been paid in full. The Barrs didn’t like that. They filed suit for breach of contract. Holton filed a counterclaim for breach of contract, alleging the Barrs caused cost overruns and failed to pay what was owed subs. The trial court ruled in favor of the Barrs and dismissed Holton's breach of contract counterclaim. Holton appealed.

The sole issue before the appellate court: Was Holton Construction Concepts properly licensed for the Barr job? North Carolina’s Supreme Court has held that “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor. It cannot be validated by the contractor's subsequent procurement of a license.”

But Holton was not “unlicensed”. Holton held a perfectly valid intermediate license. Plus the Barr job was deliberately broken into two contracts, both of which fell within the $1,000,000 limit.

How Would You Decide This Case?

The appellate court had no trouble with the “two contracts” issue. Under North Carolina’s Administrative Code 12.0211: “[A]ll structures and units on the same parcel of land shall be considered as a single project.”

But counsel for Holton cited the North Carolina case of Dellinger v. Michal, a cost-plus contract. “The cost of the house will be figured on a cost plus 10% basis with a ceiling of $186,880.00.” The contractor held a $175,000 limited license when the contract was signed. The final construction cost was $237,259. According to the Dellinger court, the contractor exceeded his limit only because of “changes and additions made to the contract after plaintiff began construction.” Plus, the contractor did work valued at only $2,800 under the limited license. The Dellinger court held that “the value of the work done by plaintiff was never in excess of his license limit”. The contractor “should be allowed to prove his case.”

Should Holton be allowed to prove his case? Not in the opinion of Judge Gore (Barr v. HolTon): The Dellinger contract was different. The contract price was indeterminate -- a cost plus deal with a maximum price. Nothing in the agreement required the contractor to exceed his license limit. Cost overruns resulted from changes requested by the owner after work started. Plus, the contractor upgraded to an unlimited license long before reaching the maximum allowed for a limited license.

Take-away from Barr v. HolTon

Of course, it’s best to have a license appropriate for the job. But the court’s opinion gives North Carolina contractors some options: If some job could bump up against your license limit, either write a cost-plus agreement or document every price increase with a written change order. Either option should preserve your right to file suit. If you need help with either, have a look at Construction Contract Writer. The trial version is free.

• Catherine and Dustin Barr had plans and specs ready to begin construction of their North Carolina home. They selected HolTon Construction Concepts to do the work and signed two contracts, $1,000,000 for construction of the residence and $870,000 for the detached garage. Both house and garage to be built on the same parcel.

  Why Two Contracts?

  When the contracts were signed, March 2022, Holton held an intermediate general contractor's license – projects valued up to $1,000,000. Breaking the job into two contracts kept Holton within limits of his license. On December 20, 2022, Holton upgraded to an unlimited license, nearly a year before completion of the Barr project.

  Work was finished on November 15, 2023. The Barrs signed a final lien waiver and moved in. But there was a problem. Several subs claimed they had not been paid in full. The Barrs didn’t like that. They filed suit for breach of contract. Holton filed a counterclaim for breach of contract, alleging the Barrs caused cost overruns and failed to pay what was owed subs. The trial court ruled in favor of the Barrs and dismissed Holton's breach of contract counterclaim. Holton appealed.

  The sole issue before the appellate court: Was Holton Construction Concepts properly licensed for the Barr job? North Carolina’s Supreme Court has held that “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor. It cannot be validated by the contractor's subsequent procurement of a license.”

  But Holton was not “unlicensed”. Holton held a perfectly valid intermediate license. Plus the Barr job was deliberately broken into two contracts, both of which fell within the $1,000,000 limit.

  How Would You Decide This Case?

  The appellate court had no trouble with the “two contracts” issue. Under North Carolina’s Administrative Code 12.0211: “[A]ll structures and units on the same parcel of land shall be considered as a single project.”

  But counsel for Holton cited the North Carolina case of Dellinger v. Michal, a cost-plus contract. “The cost of the house will be figured on a cost plus 10% basis with a ceiling of $186,880.00.” The contractor held a $175,000 limited license when the contract was signed. The final construction cost was $237,259. According to the Dellinger court, the contractor exceeded his limit only because of “changes and additions made to the contract after plaintiff began construction.” Plus, the contractor did work valued at only $2,800 under the limited license. The Dellinger court held that “the value of the work done by plaintiff was never in excess of his license limit”. The contractor “should be allowed to prove his case.”

  Should Holton be allowed to prove his case? Not in the opinion of Judge Gore (Barr v. HolTon): The Dellinger contract was different. The contract price was indeterminate -- a cost plus deal with a maximum price. Nothing in the agreement required the contractor to exceed his license limit. Cost overruns resulted from changes requested by the owner after work started. Plus, the contractor upgraded to an unlimited license long before reaching the maximum allowed for a limited license.

  Take-away from Barr v. HolTon

  Of course, it’s best to have a license appropriate for the job. But the court’s opinion leaves North Carolina contractors another option: If some job could bump against your license limit, either write a cost-plus agreement or document every price increase with a change order. Either option should preserve your right to file suit. If you need help with either, have a look at Construction Contract Writer. The trial version is free.

  
  

• Catherine and Dustin Barr had plans and specs ready to begin construction of their North Carolina home. They selected HolTon Construction Concepts to do the work and signed two contracts, $1,000,000 for construction of the residence and $870,000 for the detached garage. Both house and garage to be built on the same parcel.

  Why Two Contracts?

  When the contracts were signed, March 2022, Holton held an intermediate general contractor's license – projects valued up to $1,000,000. Breaking the job into two contracts kept Holton within limits of his license. On December 20, 2022, Holton upgraded to an unlimited license, nearly a year before completion of the Barr project.

  Work was finished on November 15, 2023. The Barrs signed a final lien waiver and moved in. But there was a problem. Several subs claimed they had not been paid in full. The Barrs didn’t like that. They filed suit for breach of contract. Holton filed a counterclaim for breach of contract, alleging the Barrs caused cost overruns and failed to pay what was owed subs. The trial court ruled in favor of the Barrs and dismissed Holton's breach of contract counterclaim. Holton appealed.

  The sole issue before the appellate court: Was Holton Construction Concepts properly licensed for the Barr job? North Carolina’s Supreme Court has held that “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor. It cannot be validated by the contractor's subsequent procurement of a license.”

  But Holton was not “unlicensed”. Holton held a perfectly valid intermediate license. Plus the Barr job was deliberately broken into two contracts, both of which fell within the $1,000,000 limit.

  How Would You Decide This Case?

  The appellate court had no trouble with the “two contracts” issue. Under North Carolina’s Administrative Code 12.0211: “[A]ll structures and units on the same parcel of land shall be considered as a single project.”

  But counsel for Holton cited the North Carolina case of Dellinger v. Michal, a cost-plus contract. “The cost of the house will be figured on a cost plus 10% basis with a ceiling of $186,880.00.” The contractor held a $175,000 limited license when the contract was signed. The final construction cost was $237,259. According to the Dellinger court, the contractor exceeded his limit only because of “changes and additions made to the contract after plaintiff began construction.” Plus, the contractor did work valued at only $2,800 under the limited license. The Dellinger court held that “the value of the work done by plaintiff was never in excess of his license limit”. The contractor “should be allowed to prove his case.”

  Should Holton be allowed to prove his case? Not in the opinion of Judge Gore (Barr v. HolTon): The Dellinger contract was different. The contract price was indeterminate -- a cost plus deal with a maximum price. Nothing in the agreement required the contractor to exceed his license limit. Cost overruns resulted from changes requested by the owner after work started. Plus, the contractor upgraded to an unlimited license long before reaching the maximum allowed for a limited license.

  Take-away from Barr v. HolTon

  Of course, it’s best to have a license appropriate for the job. But the court’s opinion leaves North Carolina contractors another option: If some job could bump against your license limit, either write a cost-plus agreement or document every price increase with a change order. Either option should preserve your right to file suit. If you need help with either, have a look at Construction Contract Writer. The trial version is free.