Texas Court Holds Oral Change Order Agreement Unenforceable For Want Of Consideration

S.M. Wilson & Company v. Urban Concrete Contractors
2007 Tex. App. LEXIS 3747, No. 04-06-00227-CV (Tex. Ct. App., May 16, 2007)

A Texas Court of Appeals held that an oral change order agreement to pay for work which was, in fact, within the scope of the original contract was unenforceable for lack of consideration.

S.M. Wilson & Company (“Wilson”) entered into a contract with the Target Corporation to construct a Target Store in Austin, Texas (the “Project”). Wilson then solicited bids from subcontractors for various aspects of the Project. Urban Concrete Contractors, Ltd. (“Urban”) submitted a bid to Wilson to perform concrete work on the Project. During the pre-bid process, Wilson sent a proposed contract including Work Package 03300, which identified the scope of concrete work that Urban would be responsible for. Work Package 03300 referred to two sets of plans describing the concrete work to be performed which were not included in the package but were available to Urban for review at no charge prior to bidding.

Urban reviewed one set of plans containing the building plans, but did not review the other set of plans containing the site plans. Urban believed that the construction plans included all concrete work to be performed on the Project. Relying on only the plans and specifications it had reviewed, Urban submitted a bid for the Project and was awarded the subcontract. The subcontract defined the work as Work Package 03300 which was attached to the subcontract as an exhibit.

After the work began, Urban became aware for the first time that it was expected to perform the site work for the Project. Urban informed Wilson that it was unaware that Urban was required to perform the site work in question. According to Urban, a representative of Wilson orally promised to pay a change order for the site work. When Urban submitted the change order for $115,350.35, however, Wilson refused to pay.

Urban filed suit for breach of contract, quantum meruit, violations of the Texas Trust Funds Statute and Texas Prompt Payment Act. A jury found that that an oral contract was formed and that Urban was owed $54,016.50 for completing the disputed work plus interest, attorney’s fees and costs.

Wilson appealed the verdict, asserting that there was no evidence of consideration to support the oral contract. The Appeals Court reversed the trial court’s holding. The Court found that Urban’s oral contract with Wilson to perform the site work was merely an agreement to perform what Urban was already bound to do under the original subcontract. For its part, Urban argued that it was not aware that it was required to perform the site work at issue. The Court, however, found that the subcontract clearly required that Urban perform the site work. Accordingly, the Court found that Urban’s promise to fulfill its pre-existing obligation could not constitute consideration for the oral agreement in question.

Click here to view full opinion as PDF (provided with the permission of LexisNexis).

This entry was posted in Breach of Contract, Payment dispute, Subcontract and tagged , , , . Bookmark the permalink.