Court of Appeals of Texas

Case no.: 12-24-00347-CV
Date filed: December 10, 2025

A Texas appellate court has ruled that a public project owner breached the contract when its consulting engineer failed to calculate, at the time of final acceptance, money owed the contractor for suspended work.

Smith County awarded a contract to Baker & Company Construction LLC to widen and improve a road. Section 25 of the contract stated that in the event the county issued a stop work order, “such expense, as in the judgment of the ENGINEER is caused by such stopping of said work, shall be paid by the [county] to [Baker].” The contract defined the engineer as the Smith County engineer “or his authorized representatives, including consulting engineers.” The county had retained C. T. Brannon Corp. as the consulting engineer on the project.

At two points during the contract performance, Baker encountered utility infrastructure that obstructed the work. The first instance involved utility poles that had not been relocated in a timely manner. The second was a subsurface water main. In each case, the county ordered a work stoppage, for which Baker demobilized its workforce and equipment from the site, only remobilizing when the county had lifted the suspension. Baker notified the county and its engineer, Brannon, that Baker would seek additional compensation for the costs of the suspensions.

Baker completed the project, and the county issued final acceptance of Baker’s work. The contractor applied for final payment, including the increased costs caused by the suspensions. Section 51 of the contract governed final payment:

“Upon final acceptance of the completed work, the ENGINEER shall proceed to make final measurement and final statement of the value of all work performed and materials furnished under the terms of this agreement and provide to the [county], who shall pay to [Baker] on or before the 15th working day after the date of final acceptance the balance due to [Baker] under the terms of this agreement….”

Baker attempted to discuss suspension costs with Brannon, The engineer, however, never expressed an opinion on what, if anything, the contractor was owed for the suspensions. The county declined to include suspension costs in the final payment, and Baker sued for breach of contract, seeking payment of those costs.

The county asked the trial court to throw the case out. The Texas Local Government Code holds public project owners liable only for damages recoverable under the construction contract. The county argued Baker was seeking damages outside the contract. The trial court agreed, and Baker appealed.

The Court of Appeals of Texas said the contract had clearly called for compensation for government-ordered work stoppages. The amount was to be determined by “the judgment of the Engineer.” Upon the county’s final acceptance of the work, the engineer was required to calculate everything owed under the contract.

“The parties do not dispute that the Engineer accepted Baker’s completed work. Thus, in fulfilling his obligations to make the final measurement and statement of the value of all work performed and materials furnished under the contract, the Engineer was required to determine, in his judgment, the amount of the expenses Baker incurred which were caused by the two suspensions of work ordered by the County…. [O]nce the time for final payment to Baker passed and the Engineer had not made the necessary determination as to Baker’s incurred expenses under Section 25, the County was in breach of the agreement.”

The court rejected the county’s argument that because the contract left the matter to the judgment of the engineer, the county could not be held liable for the manner in which the engineer exercised that judgment.

“[T]he County maintained control to compel its Engineer to exercise such judgment when Baker made it known that it sought to recover such expenses. To conclude otherwise would mean that the Engineer simply could decline to make such a determination, thereby allowing the County to avoid its obligation to pay such expenses, if any, which are due and owing…. [W]e conclude that when the Engineer failed to meet this obligation under the contract, the County had an obligation to compel him to comply with the terms of Section 25 to avoid breach.”

The appeals court did not address the methodology for measuring the costs of the suspensions. This was left to the trial court upon remand.

When a contract assigns responsibility for an exercise of judgment, doing nothing is not a viable option. This is true regardless of how contentious the task.

Participants:
For Baker & Company Construction: Gregory Harwell
For Smith County: Nolan Smith

Before: Judges Worthen, Hoyle, and Davis

Opinion by: Judge Worthen

Outcome: Trial court order reversed; matter remanded

Source: Please click here to read the complete opinion.