Texas Construction Law: What Happens When a Contractor Walks Off the Job?
Understanding Contractor Abandonment Under Texas Law
Contractor abandonment is a significant breach of contract in Texas construction law, occurring when a general contractor ceases work on a project without reasonable justification and with no intent to resume work. Typical indicators of abandonment include extended absence, removal of equipment, or repeated failure to communicate progress, completion dates, or anything at all. Texas courts look for unequivocal conduct inconsistent with continuing the contract.
Legal Standards
Texas law recognizes abandonment as a clear basis for owner action. For abandonment to be actionable, owners generally must show either a willful cessation of all work, or actions indicating no reasonable grounds for the contractor’s conduct. However, project scope changes or financial difficulties may not rise to actionable abandonment. The abandonment inquiry is fact-intensive and must be assessed on a case-by-case basis.
Notice and Documentation Requirements
Texas law requires that, upon contractor abandonment, owners must promptly provide written notice to applicable subcontractors under Section 53.107 of the Texas Property Code. This notice must be issued within 10 days of abandonment and include project details, names and addresses of parties, and the official date of abandonment or contract termination. Proper notice preserves the owner’s rights regarding retainage and protects against unwanted liens by unpaid subcontractors.
Exclusion From Residential Construction Liability Act
With respect to residential construction, claims against contractors for wrongful abandonment are excluded from the procedural hurdles of the Texas Residential Construction Liability Act (RCLA). This provides owners with potentially faster and broader remedies, as RCLA’s notice and opportunity-to-repair requirements do not bind these claims, allowing owners to proceed directly with damage actions in certain cases.
Termination and Mitigation
Following documented abandonment, Texas law generally allows the owner to terminate the defaulting contractor and retain another to complete the work. Owners must follow contractual procedures (such as notice and opportunity to cure, if required) and should thoroughly document all correspondence, work progress, and expenditures. Clear and prompt mitigation—such as securing the job site and preventing further loss—is both legally expected and financially prudent.
Remedies: Recovery of Damages
Upon a showing of contractor abandonment, Texas owners may pursue several legal remedies:
Expectation damages: The cost to complete the contract (or correct defective work) minus any unpaid contract balance;
Incidental and consequential damages: Including expenses for storing materials, securing the site, and lost use revenue (assuming there are no contractual hurdles to claiming these damages, such as damages waivers); and
Attorney’s fees and possible punitive damages if the abandonment also involves fraud or misapplication of funds under the Texas Trust Fund Act.
If the original contractor was bonded, owners may file a claim against the surety for project completion (in case of a performance bond) or compensation to pay off subcontractor liens (in case of a payment bond). The owner’s diligent documentation and written notices are crucial for any recovery action against bonds or insurers.
Avoiding and Addressing Liens
A major risk after abandonment is mechanics’ or materialman’s liens from unpaid subcontractors and suppliers. Texas law offers some protection to owners who pay contractors in good faith and in compliance with statutory retainage and notice provisions. Proper abandonment notice also ensures the owner’s statutory protections remain intact and minimizes exposure to third-party claims.
Fraud, Trust Fund Act, and Criminal Implications
Abandonment may rise to criminal or civil fraud if accompanied by intentional misapplication of payments—for example, taking draws with no intent to perform or pay subs. Texas’s trust fund statutes (e.g., Chapter 162, Texas Property Code) impose fiduciary obligations on contractors, and breach can expose violators to personal liability and even felony prosecution.
Practical Steps for Owners
Owners faced with contractor abandonment under Texas law should promptly:
Carefully review the written contract for notice and cure requirements;
Document all abandonment conduct and correspondence;
Send statutory abandonment notice to subs and suppliers;
Mitigate damages by securing the project and hiring another contractor;
Preserve all financial records and evidence for claims or litigation.
Timely action and thorough legal compliance preserve owner rights and maximize recovery, while reducing the risk of contested liens or ongoing project losses. If the owner has a construction loan, this process might be more complicated — but ultimately, both owners and lenders should be aligned on taking appropriate actions for replacing a contractor who has abandoned a project. Consulting an attorney skilled in Texas construction law is recommended to protect all available remedies.
