Suppose CCP Management, Inc., entered into a property management agreement with

Question

Suppose CCP Management, Inc., entered into a property management agreement with Andrew Hoganmuller and several companies which Hoganmuller operated.

CCP now contends that Hoganmuller and the related companies failed to pay amounts due to CCP as the manager of rental properties under the property management agreement.

The principal object of the agreement was the performance of acts for which real estate broker and property management licenses were required. CCP, however, did not at any time possess a real estate broker license or a property management license.

CCP contends it is entitled to recover compensation for services for which no licenses were required regardless of whether other services that it provided required such licenses.

Was this a legal contract? If it is an illegal contract, is it void or voidable in whole or in part? Does the doctrine of severability apply? Are there any additional facts that we would need to find out in order to resolve this dispute?

Explanation / Answer

The basic question raised is about the legality of the contract. Given the principal object of the agreement was the performance of acts for which real estate broker and property management licenses were required. CCP entered into agreement for management of property without license. Before entering into agreement what transpired between both the parties is important, in particular about the requirement of licenses. Any party who withhold the crucial information deliberately to take advantage under the agreement is not allowed to do so, as per my understanding of the law even in case of law of contract. One can not be beneficiary of his/her own wrong doings.

In case, Hoganmullar and related companies did not insist for the licenses at the time of entering agreement and or have knowledge that CCP not have licenses and still enter into agreements, then as per my understanding this was legal contract. At best, it may be voidable if later on Hoganmuller insist for licenses for all services that require licenses partly or fully depending on the proportion of services with or without the requirement of licenses.

Hoganmuller and companies can not be allowed to continue to receive services from CCP and later on refused to pay for the services received under the agreement with the only plea that principal object of the agreement requires licenses which CCP lacks. The doctrine of severability does apply. The quality of services provided by CCP and the efforts of CCP for applying and acquiring the licenses to fulfill the eligibility condition may be relevant.

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