As you might know, almost all larger counties have an online database you can search for deed records. However, you might not know that those same databases keep track of the lien affidavit filings as well. Here are links to the research databases around the DFW area:

Denton County Deed Record Search: https://www.dentoncounty.com/dept/county_clerk/recordsearch.asp

Dallas County Deed Record Search: http://roamdallaspropertyrecords.com/ailis/search.do

Tarrant County Deed Record Search: https://ccrecordse.tarrantcountytx.gov/RealEstate/SearchEntry.aspx

Collin County Deed Record Search: http://countyclerkrecords.co.collin.tx.us/webinquiry/

Each one works a bit differently but usually you can search for the name of the company in some form or fashion (sometimes it takes a little trial and error). Here is a search of somebody you may want to think twice before doing work for:

You will note that we put in the persons first and last name (you could have also put in a corporate name under the last name), and checked, land records. You will get results that look something like this:

As far as looking for Mechanic’s Liens that is the first highlighted area M/L AFDT, depending on the county it may say something different. It gets more interesting with the next two highlighted boxes. Abst Jdgmt means that they have lost in court and have a judgment against them and the abstract is in place to help the prevailing party secure their judgment on any real property owned by that person in that county, and I think we all know what it means when “USA” has a Fed Tax LN on someone.

This is just a quick example on how anyone can use public information to help protect their business. Obviously, if this is you and you are entering into business with someone who’s reputation you don’t know or may be a little dubious, it really pays to do your homework on the front end. If you would rather not do this yourself, then this is an example of what KMDA can do for you for all surrounding counties. We usually provide a report to our client that goes through the various businesses owned by that individual and tells you what type of Judgments and liens they might have against them.

Good Luck and Happy Researching!

Mechanic’s Lien Research to Protect Yourself is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

HB 1456 Goes into effect January 1st and pertains to Lien waivers.  You may recall it was just a few months ago I went over some of the pit falls of lien waivers in the blog post Lien Releases: Look Before You Leap.  Well HB 1456 changes how lien releases/waivers are handled.  It provides standard forms for conditional and unconditional lien waivers.  It also fixes something that has plagued the building industry, trying to force sub-contractors to sign an unconditional waiver before payment has been made in full for the invoice or work in question.

Here is the text from the law that fixes that issue:

“A person may not require a claimant or potential claimant
to execute an unconditional waiver and release for a progress
payment or final payment amount unless the claimant or potential
claimant received payment in that amount in good and sufficient
funds.”

One other item the new law provides are conditional and unconditional waiver forms that must be substantially complied withto be valid.

The law that arose from  HB 1390 pertains to how retainage notices were to be handled since September 1, 2011.  Back in 2009 (view it here: retainage claims) I wrote about when Retainage notices are due.  HB 1390 now allows the notices to be given at the end of the project instead of requiring the contractors and/or subcontractors to give Retainage Notices at the beginning of the project.  This is important because I very rarely saw the retainage notices being timely sent, if at all.

I am VERY excited about the changes in these laws.  These go so far in protecting the Texas Contractors and takes care of many of these issues that have come up in my legal practice almost daily in the past few years.  Again, the lawmakers have gone a long way to strengthen some of the loopholes that have been used time and time again by the unsavory.

Law Changes: Lien Waivers and Retainage Notices is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Currently, most contracts that the General Contractor requires sub-contractors to sign have an indemnification clause that limits the GC’s own liability and holds it squarely in the hands of the sub-contractor.  The great news is that those parts of any contract signed after January 1, 2012 will be void (with a few exceptions of course).

Here is a more thorough breakdown of how this law will change the way contracts need to be written:

• A GC can no longer require a subcontractor to indemnify the GC of their own sole or partial negligence.  Indemnity clauses violating this prohibition will be void and unenforceable.
• Unless you enter into a “Joint Defense Agreement” after a claim has been asserted, a GC’s contract can no longer require a subcontractor to defend the GC from claims based on the GC’s own negligence.
• Additional Insured endorsements to a subcontractor’s liability insurance policy that purport to provide coverage for the GC’s sole or partial negligence, so long as the claim arises from the Subcontractor’s work, are also no longer enforceable.  It is very likely that ISO specific Additional Insured endorsement forms will be prepared to cover this in Texas (but see below).
• NOTE:  These restrictions on indemnification (both with regard to claims and defense of claims) and on Additional Insured endorsements do NOT apply to on-the-job employee personal injury claims.  Accordingly, a GC can still make a Subcontractor defend and indemnify the GC for the Subcontractor’s own sole or partial negligence for a personal injury claim by an employee of the GC (or even other subcontractors of the GC).   This means that the current broad form intermediate or additional insured endorsements will still be enforceable in situations where personal injuries occur on the job in Texas.

The good news is that, so far, it looks like the lawmakers got it right this time.  They finally put some laws in place to give equal bargaining power to general contractors and subcontractors.  If you are a General Contractor and you are depending on these provisions to protect yourself, as of January 1^st, you need to think again.  And as for Subcontractors, you no longer have to sign contracts with these provisions in them.

Beware of the Changes in the Contractual Indemnification Laws in Texas is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

In Texas, a suit to evict a tenant is known a suit for forcible detainer.  If you have a tenant in a property you own who is not willing to vacate the premises voluntarily, the only legal means of removing such tenant is through an eviction proceeding in a court of appropriate jurisdiction. For Texas, the court of appropriate jurisdiction is the justice of the peace for the precinct in which the tenant to be evicted resides. This article addresses eviction procedures for a tenant.  Please note that if the person to be evicted was residing at the property prior to a foreclosure, the requirements for eviction will vary from those described in the article.  In addition, evicting a tenant who receives federal housing assistance will have additional requirement not addressed in this article.

Of course, to obtain an eviction, you must have a legal basis for the eviction.  The purpose of a suit for forcible detainer is to determine who has a greater right of possession of the property.  A breach of the lease agreement is the typical legal basis for eviction.  If a tenant breaches its lease agreement, then the landlord has a greater right of possession in property because it was the lease which gave the tenant its right of possession.  In addition to failing to pay rent, and depending on the lease agreement, criminal activity, disturbing neighbors, damaging the property, having unapproved guests or residents, or failing to abide by any other requirement of the lease agreement can be a breach of the lease contract. However, maintaining possession of a property after the expiration of a lease agreement can also subject a tenant to an eviction.

Do I need an attorney?

It is not always necessary to have an attorney represent the landlord or property owner at an eviction trial.  Eviction trials in the justice of peace courts are informal and routine.  In addition, the relaxed rules of the justice of peace court allow persons other than the owner of the property to present the eviction case without an attorney.  However, in complex circumstances, it may be advisable to either have an attorney represent you at a justice of the peace eviction or at least obtain advice from an attorney.

Regardless of the outcome, tenants have a right to appeal a justice of the peace court eviction to a County Court at Law.  While there may be a bond required for tenant to appeal its case to the County Court at Law, if the tenant files a pauper’s affidavit, a sworn statement that the tenant cannot afford to pay a bond, the tenant can appeal without a bond.  In my experience, it is common for tenant’s to appeal an eviction to the County Court at Law, either because they don’t understand the eviction laws or they want to buy more time before they are forced to leave the property.

If a case is appealed to the County Court at Law, is very important to hire an attorney to handle the eviction case.  Unlike the relaxed rules of the justice of peace courts, all of the formalities of the Rules of Civil Procedure and Rules of Evidence apply and failure to strictly adhere to the requirements of such rules can result in losing the case.  In addition, under many circumstances, a landlord may not be allowed to argue a case on his own behalf in the County Courts at Law.  If a corporation or LLC owns the property made the basis of the eviction, the landlord is required to be represented by an attorney because in Texas only individuals can represent themselves in County and District courts. Moreover, a representative of an owner, such as a management company, apartment manager or an employee, cannot represent the landlord because individuals who are not attorneys can not represent others in County and District courts.

Provide a notice to vacate.

If the tenant is subject to a rental agreement, before filing the eviction suit, the landlord must provide the tenant with at least 3 days notice unless the written lease contract specifies a notice requirement which is shorter or longer.  For instance, if the lease requires a 10 day notice, the landlords must provide the tenant with a notice to vacate at least 10 days before filing a suit for eviction.  If the lease states that the landlord must only provide 24 hours notice, as many leases do, then the landlord is not required to provide more than 24 hours notice, although 3 days notice may still be advisable to provide time for the tenant to vacate without the need to file an eviction suit.  If the lease is silent as to a notice to vacate, then the statutory 3 days notice is required.  The notice period is calculated from the day on which the notice is delivered.  If the required notice is not provided, the case may be dismissed and the landlord would have to re-file after providing the required notice.

The notice to vacate the premises must be delivered in one of three ways.  The landlord can hand deliver the notice to the tenant or a person over the age of 16 who resides at the premises.  Another method is to affix the notice to the inside of the front door to the premises.  If the landlord cannot obtain access to the inside of the front door, the landlord may securely affix the notice to the outside of the main entry door.  However, leaving the notice of the outside of the door is not recommended unless the landlord provides the notice by one of the other methods as well.  It is too easy for the tenant to claim that they never received the notice to vacate.  The third method, and the best, is to mail the notice.  Sending the notice by certified mail, return receipt requested is the best method, because it is the easiest method by which to prove proper service of the notice.  The landlord should be sure to keep a copy of the notice.  In addition, if the notice is hand delivered, the person who hand delivered the notice should be present at the eviction trial to testify that they hand delivered the notice.

The notice to vacate, as well as the eviction suit itself, should identify all individuals who are responsible for the payment of the lease as well “and all occupants.”  It will not do the landlord any good to evict one person on the lease only to the have another tenant argue that they do not have to vacate because the notice to vacate and/or the eviction suit does not mention them specifically.  Even if the landlord believes that there is only one person residing at the premises, always include “and all occupants” because there may be unknown persons residing at the premises.

Suit for Forcible Detainer.

Once the notice requirements expire, the landlord can file its eviction suit at the appropriate justice of the peace precinct.  The court will have forms that a landlord can fill out for the suit.  Be sure to identify the specific reason for the eviction (ie. failure to pay rent or the facts that establish that the lease agreement was violated).  If the Landlord is also seeking damages other than past due rents, the landlord can specify the basis and the amounts of such additional damages.  For instance, if the landlord is seeking damages to the property, the landlord should state what the damages are and how much the damages were calculated.

After the eviction suit is filed by the landlord, a constable will serve the tenant with a copy of the eviction suit and notice of the date and time for the eviction trial.  Be sure to appear for the eviction trial.  If the landlord does not appear at the justice of the peace court at the time of the eviction trial, the case will be dismissed.  The landlord must be sure to bring the following items in order to prove its case:

1)      The landlord must bring an executed copy of the lease;

2)      The landlord should bring a copy of the notice to vacate and proof that the tenant was provided with the notice;

3)      If the case is for non-payment of rent, the landlord should bring a copy of the ledger to establish the rents which have not been paid;

4)      If the case is based on a breach of the agreement other than failure to pay rent, the landlord should bring evidence of such breach or witnesses who have personal knowledge of the breach; and

5)      If the landlord is seeking damages other than past due rent, the landlord should bring witnesses who can testify as to the amount of the damages and any documents which support such damages including invoices and photos of the damage.

After the Suit.

Once a court has rendered a judgment, either party has five days to appeal.  Once the five days to appeal have expired, the landlord can obtain a writ a possession from the clerk for the court where the judgment was obtained.  A writ of possession will allow a county constable to force the occupants to vacate.  Typically, if a constable is forced to remove a tenant who is unwilling to vacate the premises voluntarily, the constable will request that the landlord provide labor to move the tenant’s property from the inside of the property to the outside.  The tenant’s property can be moved outside and left so long as it is not raining at the time.

Should the tenant file a pauper’s affidavit to allow the tenant to appeal the eviction without a bond, the landlord can challenge such pauper’s affidavit to prove that the tenant in not indigent and should pay a bond.  However, the landlord should take into consideration that challenging the pauper’s affidavit often increases the amount of time and the cost of obtaining the eviction judgment.  Appeals of an eviction are given a priority setting in the county courts by statute.  However, the challenge of a pauper’s affidavit requires a hearing prior to the appeal being heard.  Therefore, a challenge of a pauper’s affidavit requires an additional court appearance and because of the short time for an eviction appeal may result in a postponement of the appeal trial itself.

Valid Eviction: Basics to the Eviction of Renters in Texas is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Prohibiting yourself from collecting on additional work performed was one of the concerns raised in the Addicks case disussed last time due to a release or waiver with broad language. Another concern can be other disputes that you may have regarding a project. For example, I represented a client who contracted to remove stone veneer from an apartment complex and install new stone veneer. Problems arose and my client was terminated from the project and believed that he was entitled to breach of contract damages including lost profits. However, in an effort to mitigate his damages, he sold the stone and installation materials to the subsequent contractor that was hired to perform such work. At the end of the job, the owner requested that the subsequent contractor obtain a waiver for final payment from my client and provided the subsequent contractor with the waiver. The waiver was presented to my client as simply a waiver of liens in exchange for final payment for the material my client had provided to the subsequent contractor. However, after reading the waiver closely, my client realized that such waiver stated that he was agreeing to release any and all claims that he had against the owner and the property. Such waiver may have barred my client’s claims for lost profits against the owner. It is likely that the owner intended to sneak this waiver by my client to protect itself from the claims which it expected my client to file.

It is also important to consider whether the waiver or release is conditional or unconditional. A conditional waiver or release means the waiver or release is conditioned upon some additional requirement being met before the waiver or release is effective to waive or release a contractor’s rights. Typically, the “condition” in a conditional release is payment. For instance, the waiver from the Addicks case, quoted above, is a conditional release because it states, “This waiver constitutes a representation by [Contractor] that the payment referenced above, once received, constitutes full and complete payment…”. The document does not constitute a representation of full payment until payment is received. This is an important distinction. An unconditional release does not contain a condition and, therefore, is effective upon execution. If a contractor were to execute an unconditional release with a payment application and then never receive payment (or the payment bounced), the contractor may be stopped from later trying to collect on the payment because he unconditionally released his or her rights. Another scenario in which an unconditional release can create problems is when additional work, not contemplated by the original contract, has not been billed or paid. However, this can also be a problem with a conditional lien as discussed above.

It is extremely important that you understand any waivers or releases that you execute. Make sure that that you understand exactly what is being waived or released. The best rule of thumb is that if there is any work which has been performed or goods which have been provided which are not a part of a particular payment, make sure that you specify in writing on the same document (and on each and every waiver that you subsequently sign) that the waiver or release does not cover such goods or services. If you are in doubt, consult an attorney regarding the language of the waiver or release. The short time that it takes to discuss the waiver or release may pale in comparison to the costs of claims you may inadvertently waive or release.

Lien Releases: Look Before You Leap – Part 2 is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

One of the things I do when I have a new client come to me, if they are in a lawsuit, is ask to see their corporate books.  I do this to make sure that they have been following the customary corporate formalities.  Most clients are always shocked as to why I would want to see them:  to see how exposed they may or may not be at being held personally liable in the suit they are in. I talked generally about it in this article: Online Corporate Formation You Get What You Pay For focusing on how you may not be getting all the knowledge you need to protect yourself personally with online corporate formation.

Well Mr. Hill in Virginia has a nice post on this topic with a real world example of an Engineering company’s owner who didn’t follow the corporate formalities and paid the ultimate price with a judgment that he is now personally liable for.  Here is an excerpt of his post:

“Under most circumstances, even in a case such as this where fraud could have been alleged, the claims against the principal of the company would not have worked out for the plaintiff.  However, in a somewhat unusual decision, the Henrico, VA court found that, aside from failing to keep separate corporate and personal books and failing to maintain the “corporate formalities” required for the basic protections,”
You can read the full article here: Incorporation May Not Be a Shield if You’re not Careful

In previous years, simply not having a corporate book and having yearly meetings was enough to obtain personal liability against a corporate principle.  While, Texas has modified these decisions some requiring more than one formality not being followed, most people think just forming a corporation is enough.  That could not be further from the truth.  Not following the corporate formalities essentially negates even having a corporation.   This is why forming a relationship with a good attorney and CPA can help you in the long run protect not just your business but your family’s assets.

The Importance of Following Corporate Formalities is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Pay attention to what it is that you are waiving or releasing. Some waivers or releases state that you are only waiving or releasing your right to claim a lien or file a bond to the extent that you are being paid a certain amount in connection with such release or waiver. This is what many contractors assume they are agreeing to in executing a release or waiver in connection with payment. However, some language in waivers or releases go further. They may specify that you are waiving or releasing any and all claims for payment for work performed or goods provided through a certain date. Some final releases go even farther by specifying that you are waiving or releasing any and all claims of every kind against the owner, the project, the property and other contractors. Note the differences between what is being released and/or waived.

These releases can be become a problem when the person making the payment and the person signing the waiver have different ideas about what is being paid and one of the parties isn’t paying attention to the specific language in the waiver or release. As an example, consider Addicks Services, Inc. v. GGP-Bridgeland, L.P., 596 F.3d 286 (5th Cir. 2010). In such case, the contractor found after starting the project, that numerous issues arose including requests for additional work, delays due to inclement weather, and site accessibility problems. In accordance with the contract for the project, the contractor made written requests for information regarding the work, extensions of time, and change orders. However, while the requests were pending, the contractor submitted applications for payment and with such payments executed waivers for each payment received which stated:

Despite the blank space for exclusions, the contractor merely signed the waivers in exchange for payment without identifying any of the pending change orders. After the project ended the contractor sued the owner for payment of additional unpaid costs. The court found the unambiguous language of the waiver barred not only the contractor’s right to lien the project, but also the contractor’s right to sue for breach of contract!!

Here is Part 2: Lien Releases: Look Before You Leap – Part 2

Lien Releases: Look Before You Leap – Part 1 is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

Ok, I didn’t get a written change order and now the owner is disputing payment for the work, what should I do?
While obtaining written change orders prior to performing change order work is always the best practice, should a contractor perform change orders without a written change order, there is still an opportunity to collect on such change orders in some circumstances.  In Buxani v. Nussbaum, the owner and contractor entered into a construction contract which stated, “Any alteration or deviation from above specifications involving extra costs will be executed only upon written change orders, and will become an extra charge over and above the estimate.”   The evidence in such case showed that the owner of the project ordered the extra work orally and that the owner accepted such extra work.   When the contractor sued the owners for the unpaid amounts, the owners counter-sued for breach of the original contract requiring change orders to be in writing.   Does this factual scenario sound familiar?  I know you’ve all been there.  It might make you feel better to know that the trial court found that an oral contract existed for the goods and services which were not contemplated by the written contract.  The owner argued that mutual assent (a requirement for a contract, whether oral or written) could not be implied when an express contract covering the subject matter already existed.   In response the court stated, “The Buxanis, however, fail to take into account the differences between their written contracts and the oral agreement.  The extra items and services were above and beyond what was included in their written contract with Nussbaum.”   The appellate court held that the parties entered into an additional oral agreement that did not breach the original contract.

Will a promissory note to pay out the change orders protect me from the Owners’ later denying payment?
Another consideration in attempting to enforce a change order which was not executed in writing can be whether the owner later ratifies an oral agreement regarding a change order.  ”A ratification rests upon a person’s assent to a prior act or an act of another.”   Such ratification can be expressed or it can be implied from one’s conduct.   “Ratification of a contract occurs when a party recognizes the validity of the contract by acting under the contract, performing under the contract, or affirmatively acknowledging the contract.”  A party cannot withdraw the ratification and avoid the agreement, once the agreement has been ratified.   Also, when a party’s actions are inconstant with an intent to avoid an agreement, such actions have the effect of ratifying the agreement.   The Court used this reasoning to hold that an owner could ratify an oral request, acceptance and promise to pay for such services, by later confirming its promise to pay or by partially paying for such services.  When faced with this situation, it is advisable that Contractors who are owed money by an Owner, obtain verification, in writing, in the form of a promissory note so that the evidence does not come down solely to a he said she said situation.

My contract requires change orders to be in writing, however, I complied with a request from the owner for an on-the-job change without getting prior written approval.  Can the owner’s now deny paying me by arguing that I can’t enforce our agreement because it was not in writing?
Another consideration in attempting to collect on a change order which was not approved in writing prior to the performance of such change order is whether a contractual provision requiring written change orders was waived by the owner. “Waiver, the voluntary relinquishment of a known right, is sometimes spoken of as intentional conduct inconsistent with assertion of a known right.”   “Silence or inaction, for so long a period of time as to show an intention to yield the known right, is enough to prove waiver.”

In Travis-Williamson County Water Control and Imp. Dist. v. Page, the construction contract at issue specified that no claim for extra work would be allowed unless ordered in writing.   The evidence in the case showed that the owner of the project ordered the extra work orally and that the owner accepted such extra work.   The court held that such evidence constituted waiver as a matter of law.   By orally requesting, accepting and promising to pay for goods and services from a contractor, which were not contemplated by the written contract on the project, without requiring that such additional agreements be reduced to writing, an owner can be considered to have engaged in voluntary and intentional actions which were inconsistent with an assertion of a contractual provision that requires written change orders.

Courts throughout Texas have held that a change order provisions in construction contracts can be waived: Generally, a provision in a construction contract providing that any alterations or deviations must be executed in writing is binding, and there can be no recovery unless the writing requirement is met. State v. Martin Bros., 138 Tex. 505, 160 S.W.2d 58 (1942); D. H. Overmyer Co. v. Harbison, 453 S.W.2d 368 (Tex.Civ.App. El Paso 1970, no writ); Stave v. F & C Engineering Company, 438 S.W.2d 647 (Tex.Civ.App. Houston (14th Dist.) 1969, writ ref’d n.r.e.). However, such a provision can be waived by the actions and conduct of the parties. Mood v. Methodist Episcopal Church South, of Cisco, 296 S.W. 506 (Tex.Comm’n App.1927, holding approved); Travis-Williamson County Water C. & I. Dist. v. Page, 358 S.W.2d 158 (Tex.Civ.App. Austin 1962), rev’d in part on other grounds, 367 S.W.2d 307 (Tex.Sup.1963); Housing Authority of City of Dallas v. Hubbell, 325 S.W.2d 880 (Tex.Civ.App. Dallas 1959, writ ref’d n.r.e.).  The court went on to hold that an award of costs of extra goods and services was warranted under the theory that the written change order provision had been waived and that recovery was proper under the theory of quantum meruit.

Are there any practical hints you can provide me to help me collect monies owed on my change orders?
Despite the fact that a contractor may be able to collect on change orders which were not executed in writing prior to the performance of such change orders, there are some things that contractors should consider in such circumstances.  When a contractor performed a change without a prior written change order, the contractor should invoice such changes as soon as possible.  A contractor should not wait until the end of a project to request payment for a change order.  Moreover, when a change order is performed without a change order, it is also important for the contractor to carefully examine any lien releases which it executes pursuant to a payment on the project.  If the contractor is asked to sign a lien release which states that the contractor has been fully paid up to a particular date, the contractor must not sign such lien release unless the payments include all change orders performed as of the date indicated in the release, as well a contractual work, or the lien release specifically excludes change orders.

CHANGE ORDERS – The Good, The Bad, and The Ugly – Part 2 is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

I want to take some time to discuss with you something that comes up daily within the lawsuits we litigate for our contractors.  Change Orders.  I know, it’s a dirty word.  However, through our practice we have commonly dealt with the issues that arise from the Change Orders and believe that we have developed a strategy to help prevent future change order disputes.  Hopefully, this article will help you answer some of the most common questions we hear regarding the change order process.

What is a change order?

Change orders are a common part of construction projects.  Additional goods and/or services on a project (those in addition to the initial contract) should be provided and/or performed only upon approval of the owner.  Unfortunately, it is far too common for contractors to fail to adequately document change orders.   Properly documenting a change order can not only avoid disagreements over additional costs on a project, but, a properly documented change order can make resolving a disagreement over additional costs easier and less expensive to resolve.  Often times, it is only at the end of a project, when a contractor attempts to collect for additional costs that a contractor may realize the importance of a written change order.

What information should a change order include?

The best way for a contractor to insure that it is able to collect on change orders from an owner is to document the change the change order prior to undertaking the work contemplated by the change order.  Unless specified otherwise in the parties’ contract, a written change order does not necessarily need to be in a particular form, but should contain certain essential information.  A change order should contain the following:

1. The name of the parties, typically the owner and the contractor;
2. Identity of the scope of the change in as much detail as possible.  The scope of the change should include any additional work to be performed, any additional materials to be provided, and ideally, the reason for the change.
3. The change order should also identify the price of the change.  If the price of the change is unknown prior to the execution of the change, then the change order should specify that there will be an additional cost and the basis for determining such cost.  For example if the price will be cost plus a specified amount of profit, the change order should specify such.
4. One of the most important things to include in the change order is the signature of the owner, indicating its approval.
5. If the project is a residential project, the contractor should have both the husband and wife sign the change order to insure the contractor’s right to lien the property in the event of non-payment.

What should I do if my contract specifies that “all change orders must be in writing and signed by the owner?”

It is extremely important for contractors to carefully examine their initial contracts to determine whether the contract requires written change orders.  Many construction contracts specify that the contractor is not allowed to request additional funds unless a written change order is executed and signed by the owner prior to the change being performed.  If a construction project specifies that all changes must be in writing and signed by an owner, it is even more important for a contractor to execute written change orders before performing additional work or providing additional materials which are not part of the initial contract.  A contractor can count on an owner attempting to avoid paying for a change that was required to be executed in writing but was not.  If the contractor is providing the contract for the project, the contractor should seriously consider removing any provision requiring written change orders just in case a written change order is not executed. A contractor who is not diligent about executing written change orders should not include a written change order provision in their contracts.

There are numerous reasons why it may be inconvenient for a contractor to fully document a change order prior to undertaking the additional work or cost.  If a contract does not require written change orders to be executed, a contractor should still make an effort to document the change orders in the event a dispute arises. The second best option to executing a formal change order is to execute an informal change order.  A contractor should keep a pen and note pad with him with which he can note the scope of the change and the cost or method of calculating the cost and have the owner sign the page.

What should I do if I didn’t obtain a written change order prior to the work being commenced, as set forth in my contract?

Sometimes there may be reasons why it may be impractical to informally execute a written change order.  For example the change may be immediately necessary and the owner may not be available to execute a written change order.  Sometimes the owner is a person or entity which is out town or out of state.  If the contractor cannot obtain a change order executed by the owner prior to proving goods and/or services in addition to those in the contract, the contractor should document such change through more than just an oral communication with the owner. In the event that a dispute arises regarding change orders, some documentation can prevent a judge or jury from having to decide between what a contractor says and what an owner says.  Although not as good as a written change order, following up an orally approved change order with an email that discusses the change and the cost can be helpful.  Even if a contractor merely recites its discussion with the owner regarding the change and cost, it is better than a mere oral communication.  However, a contractor can request that owner approve a change order via email.  I always recommend putting something at the bottom of the email stating “if you disagree with the contents of this email and the change order described herein, please notify me within 24 hours.  Otherwise, XYZ Company will continue to act upon this mutual understanding and this email will constitute our written change order.”

Next time, in Part 2 of this segment, we will discuss various cases that have come down in Texas that relate to construction change orders and specifically discuss how these cases affect you the contractor.  Hint – the case law is helpful for those that didn’t get their change orders in writing.

Written by:  David Fink, Associate Attorney of Kelly M. Davis & Associates, LLC

CHANGE ORDERS – The Good, The Bad, and The Ugly – Part 1 is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney

• What happens when you bid a contract but later find out that there are site conditions which were unforeseen at the time that you signed the contract?  What if your contract says that you are responsible for these conditions and should discover them through your own on-site inspection?
• What if you have a disagreement about what should be included within your scope of work?  How does the law normally handle these disagreements?
• What if you have a written contract but did not get your change orders confirmed through a written change order or new agreement?  Are you able to recover in a lawsuit under Quantum Meruit (which basically is a fairness principle)?
• Under what circumstances can a contractor require you to sign a Release of Lien prior to getting paid?
• What happens if you are sued for an accident on the job that occurs long after you had control over that scope of the project?  In what circumstances are you liable for the damages?

Contractors and subcontractors face at least one of these issues on practically every project.  Hopefully, this overview will help give you the current status of where various courts stand on these issues within the State of Texas.

What is a Subcontractor’s Liability for Unforeseen Circumstances Not Discovered During Its On-Site Inspections:

MasTec North America, Inc. v. El Paso Field Services, L.P, 317 S.W.3d. 431, (Tex.App-Austin, 2010, no pet.) (mem. op).

MasTec North America, Inc. (“MasTec”) won a bid to replace gas pipelines owned by El Paso Field Services L.P. (“El Paso”). In the contract, El Paso implied that it had exercised due diligence in locating all foreign crossings within the right-of-way. However, MasTec still agreed to perform a site inspection and use its findings to prepare the bid.

El Paso prepared the specifications and listed 280 crossings. Using these specifications, MasTec inspected the right-of-way for foreign crossings before finalizing its bid. During construction, MasTec encountered approximately 794 foreign crossings. El Paso refused to compensate MasTec for the extra costs caused by the additional crossings, and MasTec subsequently filed suit. The jury found that El Paso failed to exercise due diligence as promised; however, the judge entered a judgment notwithstanding the verdict in favor of El Paso because of the lump sum bid submitted by MasTec and the fact that, according to contractual provisions, the assumption of risk fell on MasTec.  MasTec appealed.

The court of appeals held that, under the contract, it was the responsibility of El Paso to exercise due diligence when locating and listing all the foreign crossings in the specifications and accordingly, MasTec was not required to assume the risk in this situation. MasTec’s representation that it was familiar with the site was limited by El Paso’s failure to exercise due diligence when preparing its specifications.

What Happens When the Language within the Scope of Work Section of a Construction Contract is Ambiguous?

C.A. Walker, Inc. v. Total Roofing Services, Inc., 2010 WL 1505070 (Tex. App-Austin 2010, pet. filed).

General contractor C.A. Walker, Inc. (“Walker”) retained Total Roofing Services (“TRS”) to perform roofing work related to the construction of a grocery store. The section in the scope of work regarding composite metal panels referred to composite metal panels in general as well as tasks specific to roofing.

A dispute quickly arose about whether TRS was responsible for buying and installing all composite metal panels. Walker asserted that the scope of work required TRS to purchase and install all the composite metal panels for the structure, including the panels on the building facade. However, TRS took the position that it was only responsible for installing the panels related to the roofing system. In the end, Walker bought the composite metal panels for the building facade, and TRS installed them. After the project was completed, TRS filed suit against Walker because it had not been paid for installing the additional panels, which was outside its scope of work.

Walker filed a counterclaim, asserting TRS breached the contract first by not providing the composite metal panels for the building facade. During trial, TRS claimed the contract’s scope of work was ambiguous and extrinsic evidence showed the parties did not intend for TRS to provide the composite metal panels for the building facade.

The trial court agreed with TRS and Walker appealed. The court of appeals affirmed the decision of the trial court, finding the contract ambiguous. However, because the scope of work repeatedly mentioned “roofing,” it was reasonable to infer that the scope of work was limited to composite metal panels required to construct the roof.

Is a General Contractor Permitted to Withhold Payment because Subcontractor has not Submitted an Lien Release Affidavit?

Solar Applications Engineering, Inc. v. T.A. Operating Corp., 377 S.W.3d 104 (Tex 2010).

Solar Applications Engineering, Inc. (“Solar”), the general contractor, entered into a contract with TA Operating Corporation (“TA”) for the construction of a truck stop. Section 14.07(A)(2) of the contract stated that the final Application for Payment should include “(i) … (iii) complete and legally effective releases or waivers (satisfactory to [TA]) of all Lien rights arising out of or Liens filed in connection with the Work.”

When the project was nearing completion, a dispute arose between TA and Solar, and TA soon terminated Solar because Solar had filed a lien on the project.  Shortly thereafter, Solar submitted its “Application and Certification for Payment” to TA for the alleged balance.  TA refused pay, asserting that Solar must submit a lien release affidavit in order for Solar to receive payment.

Solar filed suit for breach of contract on the basis of substantial performance.  TA counterclaimed for delay and defective work. The trial court found mainly for Solar, but the court of appeals found that even though Solar had substantially performed, TA was not required to pay the balance because providing a lien release was a condition precedent to final payment.

The Texas Supreme Court of Texas disagreed with the court of appeals. In the absence of conditional language (e.g. “if,” “provided that,” or “on the condition that”), the terms of the contract should be interpreted as a covenant. Because Section 14.07(A)(2) lacked any conditional language, the Supreme Court held that the lien-release provision was a covenant rather than a condition precedent, and the failure to provide such a release could not prevent Solar from recovering.

Can Quantum Meruit be used as an alternative Method of Recovery of Damages in a Construction Situation where there is a Written Contract?

Rasa Floors, L.P. v. Spring Village Partners, Ltd., — S.W.3d. –, No. 01-08-00918-CV, 2010 WL 4676978 (Tex. App.-Houston [1st Dist] Nov. 18, 2010, no pet.).

Spring Village Partners, Ltd. (“Spring Village”) hired Rasa Floors, L.P. (“Rasa”) to replace the floor in an apartment complex based on a bid quote of $1.50 per square foot.  However, no formal agreement was executed.  Rasa completed the work and submitted invoices for payment, but Spring Village refused payment on the belief that the invoices exceeded the bid amount.  Rasa sued Spring Village on a sworn account, and alternatively for breach of contract or recovery in quantum meruit.

The jury awarded $5,000.00 to Spring Village based on its finding that Rasa breached its warranty and $30,000.00 to Rasa under its quantum meruit claim, finding that Rasa performed, and Spring Village accepted the work.  The trial court rendered judgment on the breach of warranty claim, but ignored the jury’s quantum meruit findings. Both parties appealed.

On appeal, Spring Village claimed Rasa’s quantum meruit cause of action was disqualified by the jury’s finding that an express contract covered the claim. The court of appeals disagreed, noting that in construction cases, a breaching plaintiff can recover under quantum meruit for the value of services and materials provided, taking away the amount of damages caused by his breach, even if an express written contract between the parties existed. Thus, Rasa was granted the jury’s award less the $5,000.00 due to its breach of warranty.

When can a Subcontractor be Liable for Damages Resulting in Unsafe Site Conditions?

Foreman v. Allen Keller Co., — S.W.3d. —, No. 04-08-00490-CV, 2009 WL 2767049 (Tex. App.-San Antonio Oct. 1, 2009, pet. granted).

Allen Keller Co. (“Keller”) was hired by Gillespie County to carry out flood and erosion control work at a bridge. Before construction began, there was a small gap between the bridge’s guardrail and a river embankment. The specifications required the gap to be widened by ten feet, thereby extending the gap from five to fifteen feet. In June 2003, the Keller completed performance as specified, and the County inspected and accepted the work. In January 2004, a passenger was drowned when a car lost control and slid into the river through the newly extended gap created by the construction.  The parents of the deceased sued Keller, alleging it created a dangerous condition by extending the gap.  At trial, Keller was granted summary judgment on the basis that it owed no duty as a matter of law as the accident did not occur on the contractor’s property and the work was inspected and accepted by the county.

The court of appeals overturned the decision, citing that in Texas “one who creates a dangerous condition may owe a duty to make the premises safe, even if he is no longer in control of the property at the time of the injury,” and that “an independent contractor who has created a dangerous condition on real property is not relieved of any duty of care to the public merely because his work is accepted.”

Texas Construction Law Case Update 2011 is a post from: Kelly M. Davis & Associates, LLC - Dallas Construction Attorney