Construction Contracts in Texas

Construction contracts are the legal foundation for any successful project. In Texas, these agreements are vital not only for outlining scope and payment terms but also for managing risk and setting expectations between property owners, contractors, subcontractors, and suppliers. A poorly drafted or incomplete contract can lead to disputes, delays, and financial losses.

This page covers essential components of Texas construction contracts, including key clauses, enforceability, negotiation strategies, and common contract-related disputes.

1. Why Construction Contracts Matter

Texas law generally supports the freedom to contract, meaning courts will enforce the agreement as written unless it violates public policy or statutory law. Because of this, every word in a construction contract matters. Well-drafted contracts:

• Clarify responsibilities
• Allocate risk
• Set deadlines
• Establish how payments and change orders are handled
• Define how disputes will be resolved
• Protect your legal rights if things go wrong

Whether you are an owner, general contractor, or subcontractor, having a clear and enforceable contract is essential.

2. Types of Construction Contracts

There are several types of construction contracts commonly used in Texas, each with its own advantages and legal considerations:

• Lump Sum (Fixed Price) – A single price for the entire project
• Cost Plus – The actual cost of labor and materials, plus a fee or percentage
• Time and Materials – Payment based on hourly labor and cost of materials
• Unit Price – Pricing based on individual units (e.g., per square foot or per item)

Each type of contract must be tailored to fit the project’s size, complexity, and risk profile. For larger projects, parties may also use AIA (American Institute of Architects) standard form contracts.

3. Key Terms in Texas Construction Contracts

Every construction contract should clearly address the following areas:

• Scope of work – A detailed description of the services or materials to be provided
• Payment terms – Schedule of payments, retainage, and conditions for release
• Change orders – Procedures for altering scope, cost, or time
• Time for performance – Start date, completion date, and extensions
• Termination – Grounds and procedures for ending the contract early
• Warranties – Express or implied guarantees about workmanship or materials
• Insurance and indemnity – Responsibility for liability, damage, or personal injury
• Dispute resolution – Mediation, arbitration, or litigation procedures

Failure to define these clearly can create ambiguity that leads to expensive disputes later.

4. Enforceability Under Texas Law

Texas courts will generally enforce construction contracts as long as:

• The agreement is in writing
• There is mutual assent (offer and acceptance)
• There is valid consideration (something of value exchanged)
• The terms are not unconscionable or illegal

Oral construction contracts may be enforceable in some cases but are far riskier. Written contracts are strongly preferred, especially for residential projects, which are subject to additional consumer protection rules.

5. Residential Construction Contracts

Residential construction in Texas is governed by additional requirements, including the Texas Residential Construction Liability Act (RCLA). Under RCLA:

• Homeowners must provide written notice and allow the contractor an opportunity to inspect and repair alleged defects
• Builders must comply with performance standards
• Certain disclosures are required in the contract, including the homeowner’s rights and the contractor’s registration (if applicable)

Failing to comply with RCLA can limit a contractor’s ability to defend against claims or recover payment.

6. Negotiating Construction Contracts

Whether you’re a general contractor or a property owner, you should carefully review and negotiate terms before signing. Strategies include:

• Clarify vague or boilerplate language
• Limit liability where appropriate
• Ensure change order procedures are workable
• Verify insurance requirements
• Define what constitutes “substantial completion”
• Avoid one-sided indemnity clauses

An experienced construction attorney can help review and revise contracts to reflect your actual intent and reduce future exposure.

7. Common Contract Disputes

Many legal disputes in construction stem from unclear or incomplete contracts. Typical issues include:

• Disputes over payment or retainage
• Delays and missed milestones
• Unauthorized change orders
• Claims of defective workmanship
• Scope of work disagreements
• Termination without cause

Having a comprehensive and enforceable contract can reduce the risk of litigation or arbitration.

8. Change Orders and Extras

Change orders are modifications to the original contract. In Texas, courts require written documentation of changes unless there is strong evidence of mutual agreement. Best practices include:

• Always document change orders in writing
• Include pricing and time impact
• Obtain signatures from all affected parties
• Keep a clear audit trail

Without proper documentation, contractors may not be able to recover the cost of extra work, even if the owner benefited.

9. Dispute Resolution Clauses

Many Texas construction contracts include clauses requiring mediation or arbitration. Each option has pros and cons:

• Mediation – Informal and non-binding, but can preserve relationships
• Arbitration – Binding but typically faster and less expensive than court
• Litigation – Public and governed by court rules, often slower and more costly

The chosen method should align with the size and complexity of the project.

10. When to Seek Legal Help

Contract disputes can derail even the most well-planned construction projects. Legal counsel is recommended when:

• Drafting or reviewing a construction contract
• A party refuses to perform
• Payment is being withheld
• A dispute arises over scope, delays, or defects
• You are unsure of your rights or responsibilities

Getting legal advice early can often prevent larger problems down the road.

Conclusion

Construction contracts are more than paperwork — they are the legal roadmap for how your Texas project will proceed, be paid for, and resolved if problems arise. Understanding and negotiating key contract terms is one of the best ways to protect your interests and avoid unnecessary conflict.

At Guerra Days Law Group, we help clients across Texas draft, review, and enforce construction contracts that align with their goals. If you’re involved in a project and need legal guidance, contact us today for a consultation.