It’s all in the name: Tennessee regulation requires construction contracts be in the specific name on the contractor’s license
We all know—or should know—that Tennessee requires valid and appropriate contractor’s licenses in order to perform most all construction related activities over $25,000. However, we have seen many contractors fail to pay attention to the details on the licensing issues, and suffer significant consequences as a result. In Tennessee, if a contractor is found to have contracted in violation of the statutes and regulations governing contractor’s licenses, the contractor is limited to recovering only its actual documented expenses by clear and convincing evidence. Tenn. Code Ann. § 62-6-103(b). This means the contractor is not entitled to any profit or overhead, and is only entitled to recover the actual expenses associated with the improvements that inured to the direct benefit of the property in question. The contractor is also not entitled to any contract rights, such as recovery of attorney’s fees. Also, if the contractor is found to have violated these statutes and regulations, the contractor will be found to have committed a per se violation of the Tennessee Consumer Protection Act, which carries the potential for treble (3 times) damages and attorney’s fees. So, the consequences of violating the contractor licensing statutes and regulations are significant.
With that in mind, it is important to make sure that the name on the contract is the name on the contractor’s license. While the contractor licensing statutes almost certainly require that the name on the licenses be the same on the contractor, a somewhat recent Tennessee regulation makes this explicitly clear:
Upon receiving a certificate of licensure from this Board, the licensee has an affirmative responsibility to enter into contracts and operate its related contracting business under the name in which it is licensed in order to notify and prevent confusion on the part of the public at large of an entity’s licensure status. Contracting in a name different than that in which an individual or entity is licensed by this Board is considered a violation of this chapter, and will be cause for appropriate disciplinary action.
Tenn. Comp. R. & Regs. R. 0680-01-.25(1). This means, for instance, that even if a limited liability company or corporation is wholly owned by one individual, and that individual holds an appropriate license in the individual’s name, but not in the name of the entity, the entity is prohibited from entering into any contracts for which a contractor’s license is required in Tennessee. Otherwise, the entity is precluded from recovering any amount other than its actual documented expenses by clear and convincing evidence, and is subject to a claim for violation of the Tennessee Consumer Protection Act. Also, an individual licensee may be personally liable for the individual’s actions in assisting the entity contract in violation of the contractor licensing statutes and regulations, despite the otherwise limited liability protection as a member or shareholder of the entity. Tenn. Code Ann. § 62-6-136(c). Therefore, it is imperative that contractor’s – before they enter into contracts requiring a contractor’s license in Tennessee – ensure that the name on the contract matches the name on the license. Because, as explained above, it’s all in the name (on the license).