March 01, 2013

Court reviews an agreement between contractors and subcontractors regarding the allocation of damages in a claim against the owner of a construction project


A subcontractor on a large project in Texas sued the general contractor claiming the general contractor breached an agreement the parties made regarding claims both had against the owner of the Texas project. The parties agreed the subcontractor would be entitled to a pro rata share of the settlement or judgment amount if the subcontractor’s claims were not itemized.

The settlement agreement between the general contractor and the owner did not include an itemization of the subcontractor’s claims. The subcontractor had been given a prepayment of its claim against the owner in the amount of $300,000, and applying this to the subcontractor’s pro rata share, the general contractor determined the subcontractor was not entitled to anything more.

The trial court deducted the $300,000 from the subcontractor’s claim and awarded the subcontractor its pro rata share of the difference. Both the subcontractor and general contractor appealed, the subcontractor claiming it was not awarded enough and the general contractor claiming the subcontractor was awarded too much.

We reverse the trial court’s award and hold the $300,000 the subcontractor received as a prepayment was more than it was entitled to pursuant to the terms of the parties’ agreement. Accordingly, the contractor did not breach its agreement, and the subcontractor was not entitled to any damages.

Opinion available at: