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Construction Law
Construction Contracts & Beyond: Actual Notice is Not
Substantial Compliance in Texas
Shelly Masters
By Shelly Masters and Brian Pounds
In James Construction Group, LLC v. Westlake Chemical Corporation, the Texas Supreme Court reaffirmed and strengthened the long-standing doctrine that, when it comes to contract interpretation, the plain language of the provision at issue is gospel and Texas courts are no friend to parties seeking to avoid or ignore that language.
Although the facts of James v. Westlake are lengthy, at its core the relevant dispute is a simple contractual notice issue. Westlake and James entered into a construction contract that allowed Westlake to terminate the contract for default, and recover excess damages, only after satisfying the express condition precedent of providing James with three (3) separate written notices. Sometime after the project commenced, Westlake sent James numerous emails alleging various safety allegations and eventually decided to terminate James. However, it was undisputed that Westlake never provided any written notice of termination; instead, Westlake terminated James orally at a meeting.
James argued that this failure to provide written notice meant that Westlake had not complied with the contract, and therefore, James was not obligated to pay Westlake’s excess costs. The Texas Supreme Court agreed.
The court explained that “substantial compliance is the appropriate standard when evaluating whether a party complied with a contractual notice condition, and under Texas law, “a party’s minor deviations from a contractual notice condition that do not severely impair the purpose underlying that condition and cause no prejudice do not and should not deprive that party of the benefit of the bargain.” But the court then made it clear that “substantial compliance with a condition precedent requiring written notice may not be achieved without a writing in some form.” Accordingly, James was not liable for Westlake’s excess damages.
The potential implications of the court’s opinion are numerous and may provide a formidable legal tool, especially for defense litigators. What is seemingly crystal clear is that where a contract states that written notice is required, written notice means written notice. For construction lawyers, this has the potential to arise in any number of disputes. For example, the AIA A201-2007 specifically requires written notice for, among other things, notice of claims (§ 15.1.3), claims for additional costs (§ 15.1.4), and claims for additional time (§ 15.1.5). While the term “written” has
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FDCC ANNUAL FIVES 2023
Brian Pounds