No License, No Contract: N.C. Court of Appeals Reaffirms Bright-Line Rule

Mary Stewart Wilson and Andrew Atkins

In North Carolina, contractor licensing is a threshold issue, not a technicality. A recent decision from the North Carolina Court of Appeals underscores that contractors must have the proper license classification at the time of contracting, or risk rendering the agreement unenforceable.

In Barr v. Holton Construction Concepts, LLC, No. COA25-751 (N.C. App. Mar. 18, 2026), the Court held that a general contractor’s licensing authority is determined at contract formation and that a later license upgrade cannot retroactively validate a contract that was unlawful from the outset. In doing so, the Court distinguished and narrowed Dellinger v. Michal, 92 N.C. App. 744 (1989).

Background

Homeowners contracted with Holton Construction Concepts, LLC, to build a house and a detached garage on a single parcel of land for a fixed contract price of $1.87 million. At the time the contract was executed in March 2022, Holton held an intermediate general contractor’s license, authorizing projects up to $1 million.

Nine months later, after substantial construction work occurred, Holton upgraded to an unlimited general contractor’s license. Holton completed construction, and the homeowners moved in, but subcontractors later submitted claims that they had not been paid and filed a lien on the property. The homeowners sued Holton, asserting several claims including breach of contract and fraud and Holton counterclaimed for breach of contract. The trial court granted summary judgment and dismissed Holton’s counterclaim, and Holton appealed. The appellate court upheld the trial court’s grant of summary judgment, holding that, because Holton lacked authority under Chapter 87 to undertake the project at its formation, its breach of contract counterclaim was unenforceable as a matter of law.

Analysis and Implications

It was undisputed that at the time of contract formation, Holton lacked authority under Chapter 87 to undertake the $1.87 million project. Holton, relying on Dellinger, argued that its upgrade to an unlimited license nine months later brought it into compliance with Chapter 87 and permitted enforcement of the contract.

In Dellinger, a general contractor entered into a cost-plus contract with a ceiling of $186,880. At the time of contracting, the general contractor held a $175,000 limited license. After the general contractor began construction, the owner made changes and additions, bringing the final construction cost to $237,259. However, the general contractor upgraded to an unlimited license just two months after contract execution, having performed only $2,800 of work under its limited license.

The Court distinguished Dellinger on several grounds. First, in Dellinger, the contract did not obligate the general contractor to exceed his license limit at the outset. The price was indeterminate, subject to a cost-plus structure, and the initial ceiling exceeded the license limit by a modest amount, about $10,000. In contrast, Holton made a definite commitment at contract formation to undertake a project that exceeded its license limitation by 87%. The court emphasized that Dellinger presupposes a contract that is lawful at formation.

Second, Holton did not upgrade its license until nine months after contract execution. By that point, substantial construction work had occurred. In contrast, the general contractor in Dellinger promptly upgraded its license before performing substantial work under its limited license, thus the value of the work completed by the general contractor in Dellinger was never in excess of its license limit.

The Appellate Court summarized: “This is not a case where unforeseen cost increases pushed a lawful contract beyond the license limit; this is a case where the contractor knowingly undertook a project far exceeding its authorized capacity from the outset.”

The takeaway is straightforward: Chapter 87’s licensing requirements are a threshold issue, not a technicality. Contractors must ensure their license classification aligns with the full scope and value of the project at the time of contracting. Failure to do so can render a contract unenforceable, regardless of subsequent compliance, performance or equitable considerations.

For more information about this decision or its implications, please contact Mary Stewart Wilson, Andrew Atkins or your regular Smith Anderson attorney.