Introduction. In Chambers County v. Pelco Construction Co., the general contractor unilaterally terminated its contract after the project owner stopped work for 40 days. No. 01-18-00832-CV, 2020 WL 7776078, at *1 (Tex. App.—Houston [1st Dist.] Dec. 31, 2020, no pet. h.). The general contractor made payment demands upon the owner for work performed and the owner refused to pay. The jury found in favor of the contractor on its breach of contract claim. On appeal, judgment was reversed because the general contractor failed to give 7 days notice before terminating the contact as required by its provisions.
Background. Chambers County awarded Pelco a $565,000 contract to rebuild a fire station destroyed by Hurricane Ike. The day before Pelco submitted its second payment application, Dannenbaum, the architect and designated representative for Chambers County, ordered Pelco to stop work while administrative paperwork was being reviewed and approved by FEMA. After 40 days, Dannenbaum instructed Pelco to resume working. Pelco refused and provided notice that it was terminating the contract effective immediately. Pelco also demanded payment for work performed and submitted a 3rd payment application in the amount of $52,243.50. Dannenbaum did not issue a certificate of payment for this 3rd application. Pelco filed suit for breach of contract and Chambers County countersued for breach.
The jury found in favor of Pelco and against Chambers on the breach of contract claims. The jury awarded Pelco $52,243.50 for work performed, $35,667 in lost profits and made findings entitling Pelco to recover attorney fees. The trial court entered judgment in favor of Pelco based upon the verdict.
On appeal, Chambers contended that the court erred in entering judgment in favor of Pelco on its breach of contract claim because Pelco failed to give notice as required by the contract. The provisions of the contract entitled Pelco to terminate the contract if work had been stopped for 30 days due to no fault of Pelco. The contract further stated that in this event:
the Contractor may, upon seven days’ written notice to the Owner and Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages.
Chambers County v. Pelco Constr. Co., supra, *9.
Holding. The court of appeals held that this language required Pelco to give 7 days’ advance notice to Chambers before terminating the contract. Since Pelco failed to comply with this condition precedent, Pelco was not entitled to recover for breach of contract. The court of appeals reversed the trial court’s judgment and rendered that Pelco take nothing.
Lessons learned. Texas has a strong history of strictly enforcing the written provisions in a contract. Thus, a party who terminates a contract without complying with corresponding notice provisions does so at its peril. Always give the required notice before terminating a contract, especially in Texas. See Multi-Million Dollar Fraud Verdict Reversed.