Impacts on the Construction Industry from Texas’ 85th Legislative Session

While reforms to Texas lien law and the creation of a right to repair statute for commercial projects failed to pass, a number of statutes affecting the construction industry in Texas were enacted into law following the 2017 Texas legislative session. Several important pieces of construction legislation impact choice of law and venue for certain construction contracts, attorney’s fees for certain contract claims against the State, indemnity for architects and engineers under certain governmental contracts, and Americans with Disabilities Act (ADA) claims.

Choice of Law and Venue for Certain Construction Contracts. Since 2009, general contractors and subcontractors working on projects in Texas have had the ability to void contractual provisions making a contract or any dispute arising under a contract subject to another state’s law, litigation in the courts of another state, or arbitration in another state. Tex. Bus. & Comm. Code §§ 272.001, et seq.  Other project participants did not expressly have the ability to void such choice of law and venue provisions.  Effective September 1, 2017, Chapter 272 of the Texas Business and Commerce Code was amended to give all project participants – architects, engineers, general contractors, construction managers, subcontractors, suppliers, and material or equipment lessors – the ability to void these provisions.  This change in the law is prospective; it only applies to contracts entered into on or after September 1, 2017.  Contracts entered into prior to September 1, 2017 will be governed by the prior version of Chapter 272.

Attorney’s Fees for Certain Contract Claims Against the State. Chapter 2260 of the Texas Government Code requires a procedure for resolving certain contract claims against the state or a state agency for less than $250,000.  The procedure applies to contracts by which the state acquires goods or services and construction contracts and prior to June 15, 2017 prohibits an award of attorney’s fees. Chapter 114 of the Texas Civil Practice and Remedies Code applies to claims for breach of a written contract for engineering, architectural, or construction services or for related materials in which the amount in controversy is $250,000 or more and allows for the recovery of attorney’s fees.  As of June 15, 2017, Section 2260.003 of the Texas Government Code has been amended to allow for the recovery of attorney’s fees in claims against the state for breach of a written contract for engineering, architectural, or construction services or for related materials in which the amount in controversy is less than $250,000

Indemnity for Architects and Engineers under Certain Governmental Contracts. Chapter 2254 of the Texas Government Code – the Professional Services Procurement Act – provides a set of procedures that a governmental entity must follow when contracting for certain professional services, including architecture and professional engineering services.  Section 2254.0031 allows a governmental entity to require an architect or engineer to indemnify or hold harmless the state from claims and liabilities resulting from negligent acts or omissions of the design professional or its employees. A governmental entity may not require an architect or engineer to indemnify or hold harmless the state for claims or liabilities resulting from the negligent acts or omissions of the governmental entity or its employees. Effective September 1, 2017, Section 2254.0031 of the Texas Government Code was amended to establish that a governmental entity cannot require an architect or engineer to defend the state for claims or liabilities resulting from the negligent acts or omissions of the governmental entity or its employees.  In addition, the laws established in Section 271.904 of the Texas Local Government Code are now applicable to contracts between state agencies (including a department, commission, board, office, or other agency that is in the executive or legislative branch of state government, an institution of higher education, and entities in the judicial branch) and an architect or engineer selected under the Professional Services Procurement Act.  Section 271.904 sets forth an architect’s and engineer’s indemnification and defense obligations, allows a governmental entity to seek recovery of attorney’s fees in proportion to the design professional’s liability, and establishes a statutory standard or care for the design professional performing work for a governmental entity.  The statutory standard of care provision now requires an architect or engineer to perform services with the professional skill and care ordinarily provided by competent engineers or architects practicing under the same or similar circumstances and professional license, rather than practicing in the same or similar locality under the same or similar circumstances and professional license.  A subsection has also been added to Section 271.904 that provides: “Nothing in this section prohibits a governmental agency in a contract for engineering or architectural services to which the governmental agency is a party from including and enforcing conditions that relate to the scope, fees, and schedule of a project in the contract.”

Right to Repair Statute for Americans with Disabilities Act (ADA) Claims. Section 121.004 of the Texas Human Resources Code grants an aggrieved person with a disability a civil cause of action against a person who violates the provisions listed in Section 121.003, which prohibits discrimination against persons with disabilities.  Effective September 1, 2017, Sections 121.004 and 121.0041 require a claimant who files or intends to file an action alleging a failure to comply with applicable design, construction, technical, or similar standard required under Chapter 469 of the Texas Government Code – the Elimination of Architectural Barriers Act – or other applicable state or federal laws that require compliance with specified design, construction, technical or similar standards, including website accessibility guidelines, to give notice of intent to file a claim and provide an opportunity to correct the violation before judicial intervention.  Under the new notification process, written notice describing the alleged violation must be given at least 60 days prior to the date an action is filed, and the notice may not demand damages or offer to settle the claim without a determination of whether a condition stated in the notice is excused by law or may be remedied.  The alleged violator must either correct the alleged violation before the earliest date on which the claimant may file the action or explain to the claimant why no violation occurred and no correction is necessary.  If an action is filed, the alleged violator can abate the action if the court finds by a preponderance of the evidence that (1) the alleged violator initiated action to correct the alleged violation during the time allowed, (2) the alleged violator could not complete the corrections within that time, and (3) the corrections will be completed by the end of the abatement period.  If the alleged violator has provided the notice of correction or has completed corrections during the abatement period, the claimant is authorized to file a motion to dismiss the action without prejudice or the alleged violator is authorized to file a motion for summary judgment.