{"id":897908,"date":"2020-09-02T14:43:49","date_gmt":"2020-09-02T20:43:49","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897908"},"modified":"2020-09-02T14:43:53","modified_gmt":"2020-09-02T20:43:53","slug":"construction-contract-meaning","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-meaning\/","title":{"rendered":"Substantial Compliance \u2013 When The Contract Doesn\u2019t Always Mean What It Says"},"content":{"rendered":"\n<p>Jack Byrom | <a rel=\"noreferrer noopener\" href=\"https:\/\/www.porterhedges.com\/texas-construction-law\/substantial-compliance-when-the-contract-doesnt-always\" target=\"_blank\">Porter Hedges<\/a><\/p>\n\n\n\n<p>As COVID-19 continues to result in government shutdown orders, labor shortages, and increased lead times to acquire materials, project owners, contractors, and subcontractors may begin to make claims of \u201cforce majeure,\u201d or may otherwise suspend or even terminate work.\u00a0 Often these notifications or directives can first happen over the phone &#8212; a contractor tells an owner that there is a manpower shortage, or that they are held up by an inability to work on the project site because a local order prohibits work from continuing.\u00a0 Many contracts require written notice of any such delays within a set period of time, so diligent parties will follow up such phone calls with a formal letter or email, but that does not always happen.\u00a0 So what happens months later when a contractor or subcontractor submits a claim for schedule extension or additional compensation?\u00a0 An enterprising party might remember the \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/contractors-time-to-send-your-covid-19-notice\/\" target=\"_blank\" rel=\"noreferrer noopener\">written notice<\/a>\u201d provision and take comfort in the fact the \u201c<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/words-actions-bind-terms-of-subcontract-agreement\/\" target=\"_blank\" rel=\"noreferrer noopener\">oral notice<\/a>\u201d they received months before does not meet the requirements of the contract.\u00a0 After all, the contract says \u201cwritten notice,\u201d so oral notice will never suffice, right?<\/p>\n\n\n\n<p>A recent Texas Court of Appeals decision says otherwise.&nbsp; In&nbsp;<em>James Const. Group v. Westlake Chemical Corp.,&nbsp;<\/em>594 S.W.3d 722 (Tex. App.\u2014Houston [14th Dist.] 2019, pet. filed Apr. 7, 2020), the Houston Court of Appeals examined a written notice provision in the context of a construction contract for the first time in more than a century.&nbsp; Specifically, the contract in&nbsp;<em>Westlake&nbsp;<\/em>required that, prior to termination, Westlake provide James Construction with written notice of any \u201cserious safety violations.\u201d&nbsp;&nbsp;<em>Id.&nbsp;<\/em>at 731.&nbsp; After providing such notice, Westlake had the authority to take unrestricted possession of the work or portion terminated and then pay for its completion and charge such costs to James Construction.&nbsp;&nbsp;<em>Id.<\/em>&nbsp; The parties did not dispute that such written notice was an express condition precedent to Westlake\u2019s rights to termination or to take unrestricted possession of the work.&nbsp; The parties further did not dispute that Westlake did not provide such written notice, but instead provided oral notices.&nbsp; At trial, the jury determined that the notices Westlake provided \u201csubstantially complied\u201d with the contract\u2019s notice provision.&nbsp;&nbsp;<em>Id.&nbsp;<\/em>at 740.<\/p>\n\n\n\n<p>On appeal, the parties argued over whether substantial compliance was the right test, or whether the contract\u2019s written notice provision, which was an express condition precedent, required strict compliance.&nbsp;&nbsp;<em>Id.&nbsp;&nbsp;<\/em>The court noted that this question had not been addressed by the Texas Supreme Court in more than 100 years, when the court held that \u201cless than strict compliance with [a contract]\u2019s certificate condition did not defeat the contractor\u2019s right of recovery.&nbsp;&nbsp;<em>Id.&nbsp;<\/em>(citing&nbsp;<em>Linch v. Paris Lumber &amp; Gran Elev. Co.,&nbsp;<\/em>80 Tex. 23 (Tex. 1891)).&nbsp;&nbsp; The&nbsp;<em>Westlake&nbsp;<\/em>court further acknowledged that other Texas courts had held that written notice requirements could be strictly enforced, but not in a construction context.&nbsp;&nbsp;<em>Id.&nbsp;&nbsp;<\/em>However, overall, the court agreed that the overall weight of authority, including from federal court, required finding that Westlake\u2019s \u201cfailure to strictly comply with the written notice provisions . . . [did] not compel reversal.\u201d&nbsp;&nbsp;&nbsp;<em>Id.<\/em>&nbsp; at 746.&nbsp;&nbsp; Accordingly, the Court of Appeals held that substantial compliance with the notice provision could allow Westlake to recover from James Construction.&nbsp;&nbsp;<em>Id.&nbsp;<\/em>at 761.<\/p>\n\n\n\n<p>In recognition of the seriousness of this issue, this case is currently on appeal before the Texas Supreme Court.&nbsp; In its briefing filed with its petition for review, Westlake has argued that the substantial compliance doctrine should apply only to a constructive condition, rather than an express, written one.&nbsp; However, this is an important case that reflects a trend in case law even in federal courts in Texas that substantial compliance with notice provisions is sufficient.&nbsp;<em>See, e.g.,&nbsp;<\/em><em>South Texas Electric Co-op. v. Dresser-Rand Co.<\/em>, 575 F.3d 504, 507 (5th Cir. 2009<a href=\"https:\/\/1.next.westlaw.com\/Link\/Document\/FullText?findType=Y&amp;serNum=2019327146&amp;pubNum=0000506&amp;originatingDoc=I43df540020f411ea9076f88ee0fd553a&amp;refType=RP&amp;fi=co_pp_sp_506_507&amp;originationContext=document&amp;transitionType=DocumentItem&amp;contextData=(sc.History*oc.Default)#co_pp_sp_506_507\">)<\/a>&nbsp;(calling the applicability of \u201csubstantial compliance\u201d to contractual notice provisions \u201cwell-established Texas law\u201d).&nbsp; Unless and until the Supreme Court resolves this issue, parties in Texas\u2014and particularly in Houston\u2014should be aware of&nbsp;<em>Westlake&nbsp;<\/em>and its potential effect on written notice provisions.<\/p>\n\n\n\n<p>It is important to note that some Texas courts disagree that substantial compliance with a written notice provision is permissible.&nbsp; For instance, in&nbsp;<em>Osborne v. Mutzig,&nbsp;<\/em>the San Antonio Court of Appeals held that a written notice provision in a lease agreement that required a landlord to provide \u201cformal written notice\u201d of default to trigger a guarantor\u2019s obligations could be strictly enforced.&nbsp; 2003 WL 21010609 (Tex. App.\u2014San Antonio May 7, 2003) (mem op.).&nbsp; Accordingly, the landlord\u2019s oral notice was \u201cnot sufficient to give notice of a declaration of default.\u201d&nbsp;&nbsp;<em>Id.<\/em>&nbsp; Additionally, the Houston Fourteenth Court of Appeals, prior to&nbsp;<em>Westlake Chemical<\/em>, had a number of cases suggesting that written notice provisions require strict compliance unless specifically excused by a jury.&nbsp;&nbsp;<em>See Arbor Windsor Court, Ltd., v. Weekley Homes, LP,&nbsp;<\/em>463 S.W.3d 131 (Tex. App.\u2014Houston [14th Dist.] 2015, no pet.) (written notice provision must be enforced absent jury finding of excuse;&nbsp;<em>Emerald Forest Utility Dist. v. Simonsen Const. Co., Inc.,&nbsp;<\/em>679 S.W.2d 51 (Tex. App.\u2014Houston [14th Dist. 1984, writ ref\u2019d n.r.e.) (written notice provision must be enforced as drafted).&nbsp;&nbsp;<em>Westlake Chemical&nbsp;<\/em>controls over these Houston cases, of course, but they illustrate that this issue is not definitively under Texas law, and that some courts may be more sympathetic to requiring strict compliance with express conditions precedent.<\/p>\n\n\n\n<p>Finally, there is some authority suggesting that some careful drafting may protect written notice provisions from the substantial compliance doctrine.&nbsp; A federal court applying Texas law looked at specific language to uphold an express condition precedent that a contractor provide written notice of a warranty claim to a subcontractor before the subcontractor became obligated to make any repairs.&nbsp;&nbsp;<em>Kiewit Offshore Servs., Ltd. v. Dresser-Rand Global Services, Inc.,&nbsp;<\/em>2016 WL 4564472 (S.D. Tex. Sep. 1, 2016).&nbsp; In&nbsp;<em>Kiewit Offshore,&nbsp;<\/em>the contractor argued that it provided email notices to the contractor of several warranty issues sufficient to trigger the contractor\u2019s warranty obligations.&nbsp; The parties\u2019 contract required all such notices to be either hand-delivered or sent by certified mail.&nbsp; The contractor argued its email notices substantially complied with this provision.&nbsp; The Court disagreed, even though the Court generally noted that substantial compliance was the prevailing law in Texas.&nbsp; Instead, the Court noted that the parties\u2019 contract stated explicitly that \u201cneither telephone nor email shall constitute valid means for communicating notice.\u201d&nbsp;&nbsp;<em>Id.&nbsp;<\/em>at *6.&nbsp; Because email was specifically agreed as insufficient notice, the Court found that the contractor had not met its express condition precedent, and that the subcontractor therefore had no warranty liability under the contract.&nbsp; This ruling suggests that parties can foreclose the issue of substantial compliance by expressly stating in contracts that oral notice is not sufficient.<\/p>\n\n\n\n<p>So where does this leave parties to contracts with written notice provisions?&nbsp; As experienced parties are aware, written notice provisions are used in clauses related to force majeure, warranty obligations, dispute resolution, termination, and others.&nbsp; Parties frequently make these provisions express conditions precedent in the hopes of protecting themselves from being ambushed at a later date.&nbsp; Under&nbsp;<em>Westlake,&nbsp;<\/em>these provisions could all be turned on their heads with a simple oral notice.&nbsp; So how do parties proceed?&nbsp; If a party has an obligation to provide written notice under a contract, it is always recommended that the party comply and provide written notice as soon as practicable.&nbsp; If a situation arises that is so urgent that it requires oral notice, it is recommended to always follow up such oral notice with a written communication after the fact.&nbsp; Parties who receive oral notice of an event for which a written notice is required should insist on written notices of same, but should also carefully document the date that oral notices were provided in the event a dispute arises.&nbsp; Whether email is sufficient written notice or not is also still in flux in the law.&nbsp; In drafting your contract, you should specify whether email will be sufficient notice or not. Taking these steps should mitigate any uncertainty provided by&nbsp;<em>Westlake&nbsp;<\/em>until other appeals courts or the Supreme Court weigh on in this critical issue.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jack Byrom | Porter Hedges As COVID-19 continues to result in government shutdown orders, labor shortages, and increased lead times to acquire materials, project owners, contractors, and subcontractors may begin to make claims of \u201cforce majeure,\u201d or may otherwise suspend or even terminate work.\u00a0 Often these notifications or directives can first happen over the phone&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-meaning\/\">Continue reading <span class=\"screen-reader-text\">Substantial Compliance \u2013 When The Contract Doesn\u2019t Always Mean What It Says<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224],"class_list":["post-897908","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Substantial Compliance \u2013 When The Contract Doesn\u2019t Always Mean What It Says - Advise &amp; 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