Recent Tennessee Construction Cases Regarding Effects of Unlicensed Contracting and “Time is of the Essence” Clauses in Contracts

September 18, 2020
Firm Publication

While neither of the recent cases discussed below establishes new law, they serve as good reminders of principles and requirements that can be important to participants in construction projects in Tennessee. The first case, Sifuentes v. D.E.C, LLC, addresses the effects on a subcontractor’s remedies of not being licensed as a contractor as required in Tennessee. The second case, Clark v. Givens, involves the effect of a construction agreement not containing a “time is of the essence” provision.

Unlicensed Subcontractor

Sifuentes v. D.E.C, LLC was a suit by an electrical subcontractor against a general contractor to recover amounts for breach of contract, quantum meruit (also called unjust enrichment), promissory estoppel, and promissory fraud. The trial court dismissed on summary judgment all claims because the subcontractor was not licensed as an electrical subcontractor as required in Tennessee and, thus, could not pursue those claims. On appeal, the Tennessee Court of Appeals ruled the quantum meruit claim should not have been dismissed, but otherwise affirmed the trial court’s judgment.

The court based its ruling primarily on case law in Tennessee related to the effects of a contractor being unlicensed and on Tenn. Code Ann. § 62-6-103, which limits recovery by unlicensed contractors to “actual documented expenses that can be shown by clear and convincing proof.” While disagreeing with the trial court’s reasoning that this provision creates a statutory cause of action for unlicensed contractors, the Court of Appeals said the statute limits the measure of recoverable damages for an unlicensed contractor, consistent with applicable law. Therefore, the claim for quantum meruit, which technically seeks the value of the benefit conferred on the other party when there is no enforceable express contract, was not barred by the subcontractor’s unlicensed status.

Time is of the Essence

Clark v. Givens involved claims between a residential homeowner and a contractor arising out of an oral contract for construction services. Among the issues involved on appeal was whether the trial court erred in dismissing the parties’ claims and rescinding the oral contract for the parties’ mutual mistake as to the time for completion. The Court of Appeals ruled the trial court erred, based on established case law that a party’s failure to complete a project within the time for completion does not constitute a material breach absent a provision in the contract making time of the essence.

If you have any questions about how these cases might impact your business, please contact a member of the firm’s Construction Contracts & Dispute Resolution Practice.