Construction Litigation and Arbitration in Texas
Disputes are inevitable in the construction industry, and when they cannot be resolved informally, parties may turn to litigation or arbitration. Each method has advantages and drawbacks, and the process you follow is often determined by the language of the construction contract.
This page explains how construction litigation and arbitration work under Texas law and provides guidance for contractors, owners, and developers navigating legal disputes.
1. Common Types of Construction Disputes
Texas construction litigation and arbitration often involve:
• Breach of contract
• Payment disputes or nonpayment
• Construction defects
• Delay and disruption claims
• Termination disputes
• Mechanic’s lien enforcement
• Warranty or indemnity claims
• Insurance coverage disputes
Choosing the right forum to resolve these disputes can impact the outcome, cost, and time required to reach a resolution.
2. Litigation vs. Arbitration: Key Differences
Litigation:
• Handled in Texas state or federal courts
• Public process with formal rules of procedure and evidence
• Decisions may be appealed
• Suitable for complex or multiparty disputes
Arbitration:
• Private and confidential
• May be faster and less expensive
• Limited discovery
• No right to appeal in most cases
• Controlled by the arbitration agreement and applicable rules (e.g., AAA, JAMS)
The decision between litigation and arbitration is often made at the contract drafting stage.
3. Enforcing Arbitration Agreements in Texas
Texas courts generally enforce written arbitration clauses, even when one party later prefers litigation. To be enforceable, the arbitration agreement must:
• Be in writing
• Clearly state the parties’ intent to arbitrate
• Identify the disputes subject to arbitration
• Not be unconscionable or overly one-sided
If a valid arbitration clause exists, courts may stay or dismiss a lawsuit in favor of arbitration.
4. Filing a Construction Lawsuit in Texas
Construction litigation begins with a petition filed in the appropriate court. Key considerations include:
• Jurisdiction – County where the project is located or where the defendant resides
• Venue – May be specified in the contract
• Statutes of limitation – Generally four years for breach of contract; two years for negligence
• Service of process – Formal delivery of legal papers to the opposing party
Parties may seek damages, injunctive relief, declaratory judgments, or lien foreclosure depending on the nature of the dispute.
5. Pre-Litigation Requirements
Certain Texas laws require specific steps before filing suit. For example:
• Residential Construction Liability Act (RCLA) requires a 60-day notice and opportunity to cure
• Prompt Payment Act may require notice of late payment
• Contracts may require mediation or alternative dispute resolution before litigation
Failure to comply with pre-suit procedures may delay or bar the claim.
6. The Litigation Process
The general phases of construction litigation include:
• Pleadings – Initial claims and responses
• Discovery – Exchange of documents, depositions, interrogatories
• Motions – Requests for dismissal or summary judgment
• Mediation – Attempt to settle before trial
• Trial – Judge or jury determines the outcome
• Appeal – Review by a higher court (if applicable)
Construction cases often involve complex factual and expert evidence, requiring technical knowledge and specialized legal counsel.
7. The Arbitration Process
Arbitration proceedings generally follow these steps:
• Filing a demand for arbitration with the agreed provider (e.g., AAA)
• Appointment of an arbitrator or panel
• Preliminary hearing to set deadlines and procedures
• Limited discovery, if permitted
• Presentation of evidence and arguments at a hearing
• Issuance of a binding written award
Arbitration may be completed in less time than litigation but offers limited options for appeal or correction.
8. Pros and Cons of Arbitration
Pros:
• Privacy and confidentiality
• Faster resolution in many cases
• Greater control over procedure
• Arbitrators with industry expertise
Cons:
• Limited discovery
• No appeal rights
• Upfront fees for arbitrators and administration
• Less formal record for future claims
Arbitration works best when both parties seek efficiency and finality.
9. Alternatives to Litigation and Arbitration
Many construction disputes are resolved before formal proceedings begin. Alternatives include:
• Direct negotiation between project participants
• Mediation with a neutral third party
• Contractual dispute resolution boards
• Informal settlement conferences
Early intervention often preserves business relationships and saves costs.
10. When to Hire a Construction Attorney
Legal representation is crucial when:
• Contract performance is in serious dispute
• You receive a demand letter or lawsuit
• A lien has been filed or challenged
• Mediation or arbitration is scheduled
• You need to preserve or enforce rights under a contract
An experienced construction attorney can help you assess risks, preserve evidence, and choose the best dispute resolution strategy.
Conclusion
Construction litigation and arbitration in Texas involve high stakes, complex claims, and strict procedures. Whether you are pursuing payment, defending a defect claim, or enforcing contract rights, it’s essential to understand your options and obligations.