Court of Appeals of Texas

Case no.: 14-24-00793-CV
Date filed: April 7, 2026

A Texas appellate court has ruled a no-damages-for-delay clause did not deprive a trial court of jurisdiction over a contractor’s claim for delay damages “due and owed” under a construction contract. Contractual limitations of liability cannot narrow the statutory waiver of governmental immunity for public project owners.

The Texas Local Government Contract Claims Act waives a local government’s immunity from suit for breach of a construction contract. The waiver pertains to suits for “the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delay or acceleration.” Tex. Loc. Gov’t. Code section 271.154(a)(1).

The Harris County Department of Education Public Facility Corp. awarded a contract to Paradigm Construction LLC to construct an adult education center. The contract included the following delay damages disclaimer:

“[I]t is expressly agreed that the extension of the Contract Time shall be Contractor’s sole remedy for any delay unless the same shall have been caused by acts constituting interference by the Owner which materially interfere with Contractor’s performance of the Work, and then only to the extent that such acts continue after the Contractor’s reasonable prior written notice to Owner of such interference.”

Paradigm subsequently claimed commencement of construction had been delayed for months due to the county’s failure to obtain building permits from the City of Houston. Paradigm alleged the county’s architect, cre8 Architects, had submitted construction drawings at least 30 times before receiving approval. This delay occurred during a period of rapidly escalating construction costs, and Paradigm had been unable to hold subcontractors to their prices.

Paradigm sued the county for delay damages. The county moved to dismiss the suit for lack of jurisdiction, arguing that this could not be a claim for money owed under the contract because the contract expressly disclaimed owner responsibility for delay damages. While the contract allowed recovery for owner interference with the work, Paradigm had not alleged interference, just shoddy performance by the county’s architect. The Harris County District Court denied the county’s motion, and the county appealed.

The Texas Court of Appeals said the Contract Claims Act waives government immunity for amounts owed under a construction contract, including damages that are the “direct result of owner-caused delays.” The contract between the county and Paradigm disclaimed owner responsibility for delay damages. But it is the statute, not the terms of a particular construction contract, that determines the scope of waiver of immunity.

“[W]hen faced with similar arguments that amounts are not ‘due and owed’ because of contractual provisions limiting liability, the Supreme Court of Texas has stated on more than one occasion, ‘The purpose of section 271.153 is to limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists.’ Kirby Lake Development, Ltd. v. Clear Lake City Water Authority, 320 S.W.3d 829, 840 (Tex. 2002).”

The court agreed with the trial court that it had jurisdiction over the contractor’s suit for delay damages, despite the contract disclaimer. “A local government entity’s immunity from a breach-of-contract-claim for delay damages is waived if the claim falls within the terms of the statute, regardless of whether the terms of the contract would foreclose liability.”

When the trial court addresses the merits of the contractor’s claim, it will have to apply the disclaimer to the facts. Did the county’s mishandling of the permitting process constitute owner interference? Did the contractor provide the required written notice?

The contractor may have felt notice was superfluous and unnecessary. The project owner had actual knowledge of the delay in obtaining building permits and knew work could not commence without them. But, compliance with written notice requirements is always advisable. It avoids subsequent arguments over the matter.

Participants:
For Harris County: Charles Rush, Houston, Texas
For Paradigm Construction: Denis Ducran, Houston, Texas

Before: Judges Christopher, Wilson, and Bridges

Opinion by: Judge Christopher

Outcome: Trial court jurisdiction affirmed

Source: Please click here to read the complete opinion.