On May 18, the Georgia Supreme Court confirmed protective measures for contracts regulated by a licensing scheme designed to protect goods and services imperative for the general public. In San Miguel Produce, Inc. v. L.G. Herndon Jr Farms, the court held that if a contracting party must meet certain licensing requirements, yet fails to do so, under a “comprehensive regulatory scheme in the public interest” in order to form certain contracts, then said party cannot receive legal relief under a breach of contract claim because a contract cannot be formed if a valid license is not first acquired.
The case concerned contracts formed between third party dealers of agricultural products from Georgia farmers and the companies seeking to purchase said products. Before dealers enter into sales contracts, the dealers must first acquire a license under the Georgia Dealers in Agricultural Products Act (Act). The Act seeks to “protect farmers from unfair trading practices by agricultural dealers” by requiring the licensed dealer to post surety bonds and meet “record-keeping and prompt payment requirements.” The Act further prohibits certain types of misconduct, such as selling substandard products or securing a deal via false statements, and “provides for the investigation of complaints, inspections, and quality assurance” while also making it a misdemeanor “for any dealer in agricultural products to violate any provision of the Act.”
Under Georgia law, the court determined, the licensing scheme outlined above required “more than the mere obtaining of a business license and mere reading of the Act discloses without contradiction that it is an enactment for the protection of the public.” Given this clarity of Act intention, the court followed the “well-established Georgia law” that says that “when a statute requires a person to obtain a license before engaging in a certain business, and the terms of the statute show that it is intended not merely as a revenue measure but to regulate that business in the public interest, a person seeking to recover under a contract to engage in such business must prove that he held the appropriate license in order to enforce his claims under the contract.”