The Texas Deceptive Trade Practices Act (DTPA) protects consumers from fraudulent business practices that, before its creation in 1973, had allowed unscrupulous business owners to take advantage of unwary consumers. The DTPA has been modified and changed several times since its creation by the Texas Legislature. However, one constant in the statute has been its definition of a consumer.

What is a consumer under the DTPA?

The DTPA defines a consumer as “an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services”.

What does “seek or acquire” mean? While seemingly straightforward, there are a few wrinkles to this definition. Courts have found that there actually does not need to be a contractual relationship established. While counter-intuitive, it does make sense for the purpose of the DTPA, because many times a fraudulent transaction will not satisfy the actual elements of a legal contract.

Another wrinkle is that the person suing under the DTPA does not need to be the one who sought or acquired the good or service. Instead, the question is whether the person bringing the claim was supposed to benefit from the purchase. In Wellborn v. Sears, Roebuck & Co., a mother used the DTPA to make a claim for her deceased son. The mother had bought a defective garage door opener. The court said that while there was no contractual relationship between the son and the seller, the son “acquired” the garage door opener and its benefits by being a part of the household.

What does “purchase or lease” mean? While a plain reading of this language may not ring any alarm bells, Texas courts have interpreted the phrase broadly. The consumer bringing the DTPA claim does not need to be the one who bought the goods or services. For instance, a person who receives a defective good as a gift can qualify as a consumer under the DTPA because the good was “acquired” by “purchase”.

Exceptions to the Rule

For persons involved in the construction industry, several exceptions to consumer status are of particular interest. Under the business consumer exception, a business with total assets of $25 million or more or subsidiary of a company with total assets of $25 million of more is not a consumer for purposes of the DTPA. It is important to note, however, that an individual with $25 million or more will still be a consumer under the DTPA. For example, Jeff Bezos could qualify as a consumer under the DTPA, but Amazon cannot.

The DTPA also does not apply to professional service contracts which are premised upon the consumer receiving “advice, judgement, opinion, or similar professional skill.” Design services rendered by architects and engineers generally fall within this exception. In contrast, a general contractor would not likely fall into this exception because it does not merely offer advice and judgement, but also organizes work on a given project and hires subcontractors to complete the project. There are important exemptions to this exception, such as if a professional misrepresents a material fact, fails to disclose certain information or breaches an express warranty.

The DTPA is inapplicable to a transaction or series of transactions which costs more than $100,000. This exception does not apply if the transaction was for the consumer’s residence, defined as “a single-family house, duplex, triplex, or quadruplex or a unit in a multiunit residential structure in which title to the individual units is transferred to the owners under a condominium or cooperative system.” Most work done for residential homeowners will fall under this exemption, though other statutes, such as the Texas Residential Construction Liability Act, may supersede the DTPA.

The DTPA is a complex statute. It provides broad protections for consumers, and as Texas courts have interpreted the Act, defines consumers very broadly.  Understanding the nature of your transaction and including risk mitigation provisions in your contracts, such as disclaimers of reliance, can greatly influence the applicability of the DTPA.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have regarding the DTPA or Texas law.

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