Who is Signing the Construction Contract? Make Sure The Entity That Has The Contractor’s License Is The One Signing Your Contract

When you have more than one company, make sure the contractor signing the construction contract is the person who holds the contractor’s license for that particular company.

When Can a Court Rewrite a Contract?

Courts usually are extremely reluctant to rewrite (or “reform”) an agreement between two contracting parties. But that is exactly what could happen in Panterra GP, Inc. v. Superior Court of Kern County (2022) 74 Cal.App.5th 697 (“Panterra”). A case that could have far-reaching implications for both licensed and unlicensed contractors working in California.

Unlicensed Entity is Listed on the Contract & Owner Refuses to Pay When Dispute Arises

The main issue in Panterra revolves around a costly contract drafting error that could have been easily avoided. The general contractor, Panterra GP, Inc. (“Panterra GP”), filed a lawsuit against the project owners seeking millions of dollars after the defendants refused to pay for renovation work Panterra GP did on the Studio Movie Grill in Bakersfield, CA. When the project owners drafted the written contract, they mistakenly listed a different entity, Panterra Development Ltd., L.L.P., (“Panterra Development”) as the contractor for the project, when the parties had really intended to list Panterra GP as the project’s contractor. Panterra GP is the general partner of Panterra Development, and the contract was signed by the president of Panterra GP.

The problem with listing Panterra Development as the contractor is that Panterra Development is not a licensed contractor in California—only Panterra GP held the proper license to act as a general contractor on the project. Panterra GP alleges that it performed the remodeling work on the project, as evidenced by the fact that all the permit applications and building permit properly list Panterra GP and not Panterra Development.

Expensive Drafting Error Results in Extensive Litigation

After the remodeling work was completed by Panterra GP, the project owners refused to pay the $2,609,666.00 owed under the contract. Panterra Development later filed a mechanics lien identifying itself (and not Panterra GP) as the contractor. Panterra GP then filed a lawsuit asking the court to reform the contract to reflect the true intentions of the Parties, so that it could recover the millions of dollars that the defendants allegedly owed under the agreement. However, the trial court dismissed Panterra GP’s case because Panterra Development was unlicensed and listed as the contractor.

However, the Court of Appeal reversed in the trial court in favor of Panterra GP because the project owners may be able to prove at trial that the unlicensed Panterra Development—rather than the licensed Panterra GP— really did perform as the contractor on the project and that the written contract was not mistaken. So the case was sent back to the lower court for trial.

How Can This Be Avoided? Always Make Sure the Company on the Contract is Correct and Licensed

Panterra GP will get its day in court to try and prove that it did in fact act as the general contractor on the project so it can recover the millions it is owed under the contract, but this entire dispute could have been avoided if the parties had simply listed the correct entity (Panterra GP) on the contract as they had allegedly intended.

Conclusion: be careful whoever is signing the contract, signs on behalf of the party who will actually perform the work.  

Ghassemian Law Group has very experienced attorneys who can help you or your company not make the mistakes made in this case that had them end up in a lawsuit.  Come to us to prevent lawsuits before it is too late.  Being proactive can save you and your company, tens of thousands of dollars, if not hundreds of thousands.  Call us and let us help you before things go wrong.