On September 23, 2023, a new statute came into effect that will impact general contractors and subcontractors related to a contractor’s right to stop work in the absence of a written change order.  Under Texas Property Code 28.0091, a contractor can decide not to follow an owners or contractor’s construction directive, if:

1.    the contractor or subcontractor has not received a written, fully executed change order for the owner-directed additional work; and

2.    the aggregate actual or anticipated value of the additional work plus any previous owner-directed additional work for which the contractor or subcontractor has not received a written, fully executed change order exceeds 10 percent of the contractor’s or subcontractor’s original contract amount

A contractor or subcontractor who elects not to proceed with the additional work will not be responsible for damages associated with not proceeding.

While the statute gives a contractor the right to not perform certain work, it is unclear exactly how the contractor might invoke the protection of the statute.  The statute does not require the contractor’s election be in writing, but it would be prudent to document any decision that impacts project schedule or cost.  Further, to avoid relying on less than perfect or complete recollection of events, the contractor should consider documenting the verbal field directive, conversations with the owner or upper-tier contractor about the directive, and whether the cost of the directive exceeds the 10% threshold.

Another issue not addressed in the statute is whether a it can be waived by contract. Many contracts require the contractor/subcontractor comply with field directives even in the absence of a written change order in anticipation that the written change order will be signed later.  Some contracts go farther, requiring a contractor not stop work while a dispute or disputed issue is being resolved.  The impact of the new statute on these types of contractual clauses is not immediately clear and will likely require interpretation by the courts or revisions to the statute in later Legislative sessions.

The attorneys in our Austin and Dallas offices have significant experience negotiating and litigating construction contracts.  Please contact us with any questions you may have at info@gstexlaw.com.

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