Texas public policy has long favored freedom of contract. By in large, Texas courts will uphold what the parties bargained for in the contract. Of course, the parties negotiating the contract are in the best position to allocate risk as they see fit. However, there are several Texas statutes that cannot be waived or otherwise altered, thereby overriding, to some extent, the parties’ freedom of contract. A few notable examples of such “statutory overrides” impacting the construction industry are discussed below.

Shortening the Statute of Limitations

Under Texas Civil Practice and Remedies Code §16.070, a person may not contract to limit the time to bring suit on that contract for a period shorter than two years.

Prompt Pay

A party cannot waive the statutory prompt pay obligations for private or public projects, Chapter 28 of the Texas Property Code for private projects and Chapter 2251 of the Texas Government Code for public projects.  Among other items, the Prompt Pay states address when payments must be made, when payments can be withheld, when work can be suspended, and how much interest attaches to late payments.

Anti-Indemnity

Under Chapter 151 of the Texas Insurance Code, “broad-form” indemnity (where one party—the indemnitor—agrees to indemnify and hold harmless the other party—the indemnitee—for the indemnitee’s own negligence) for property damage in a construction contract is void, unless it falls into one of several specifically identified exemptions or exclusions.  For instance, “broad form” indemnity is available for bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.  Board form indemnity is also available for property damage and personal injury for construction projects involving single homes, townhomes, duplexes, or projects involving residential land development.

Mechanics’ Liens

A party cannot waive or alter a parties’ ability to obtain a mechanic’s or material lien under Chapter 53 of the Texas Property Code unless it follows the strict statutory guidelines for a conditional and unconditional lien release on progress payments and final payment.

Right to Cure on Governmental Projects

A party cannot waive the statutory requirement that governmental entities notify counterparties of construction defects through production of detailed reports before bringing a claim or without affording those counterparties an opportunity to cure.  Texas Government Code Ch. 2272.

Understanding which statutory overrides affect construction contracts assists the parties in negotiating enforceable agreements and avoiding unpleasant surprises in litigation or arbitration.  The attorneys in our Austin and Dallas offices routinely negotiate and litigate/arbitrate construction contracts and are available to answer any of your questions. You may contact us at info@gstexlaw.com.

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