Category Archives: AIA Contracts

No Signature, No Problem: Texas Court Holds Contractual Subrogation Waiver Still Enforceable

This entry was posted by Gus Sara on March 29, 2023.

In Chubb Lloyds Inc. Co. of Tex. v. Buster & Cogdell Builders, LLC, No. 01-21-00503-CV, 2023 Tex. App. LEXIS 676, the Court of Appeals of Texas, First District (Court of Appeals) considered whether the lower court properly dismissed the plaintiff’s subrogation case by enforcing a subrogation waiver in a construction contract which was not fully executed. The contract was signed by only one of the two subrogors and was not signed by the defendant general contractor. The Court of Appeals affirmed the trial court’s decision, holding that despite the lack of signatures, the evidence established mutual assent to the contractual terms by all parties.

The plaintiff’s subrogors, Jeffrey and Mary Meyer (collectively, the Meyers), retained defendant Buster & Codgell Builders (BCB) to expand their residence. BCB drafted a contract using the American Institute of Architects (AIA) standard form contract for residential construction. The AIA contract included, by reference, a subrogation waiver that applied to BCB and its subcontractors. Prior to beginning the work, BCB emailed Jeffrey Meyer a version of the contract that only had one signature block for both Jeffrey and Mary Meyer. Minutes later, BCB sent a second version of the contract which had a signature line for each of the Meyers. However, Jeffrey Meyer signed the first version of the contract and emailed it back to BCB. In the subject line of his email, Mr. Meyers asked that BCB countersign and return the contract. BCB did not sign and return the contract.

The contract required a nonrefundable deposit “upon execution” of the contract, After Mr. Meyer emailed the signed contract, Ms. Meyer issued a check to BCB for the deposit. BCB subsequently began the work. While BCB was performing the work, Ms. Meyer and BCB exchanged several emails regarding the project. Ms. Meyer also approved a change order for certain carpentry work.

BCB subcontracted defendant Newco Welding, Inc. (Newco) to perform some welding work. After most of the expansion project was completed, a fire occurred at the residence because of Newco’s welding. As their property casualty insurance carrier, the plaintiff paid the Meyers nearly $4 million for the damage. The plaintiff then sued BCB and Newco to recover the money paid to the Meyers. The defendants filed motions for summary judgment, asserting that the subrogation waiver in the contract barred the plaintiff’s subrogation claim. The plaintiff argued that the contract was not valid because neither Ms. Meyer nor BCB executed the contract. The lower court found that the subrogation waiver was enforceable and dismissed the plaintiff’s case.

The Court of Appeals acknowledged that under Texas law, contracts require mutual assent, which is also referred to as a “meeting of the minds.” The court explained that mutual assent exists “when the parties agree to the same thing, in the same sense, and at the same time.” The court noted that signatures are often evidence of mutual assent but are not required to establish mutual assent. Parties can also manifest mutual assent through communications and conduct, such as making payments or beginning the performance of the contract.

The court held that Mr. Meyer’s signing and emailing of the first version of the contract constituted a rejection of the second version and a counteroffer, which BCB accepted when they began performing the work. Ms. Meyer signed the checks to BCB and sent several emails to BCB regarding the work, which established her mutual assent.

The court distinguished this case from other cases where the signature was deemed required. Unlike those cases, the contract at issue did not have a provision requiring a signature before the contract was binding on the parties. The Court of Appeals found sufficient evidence to establish mutual assent and affirmed the lower court’s ruling that the subrogation waiver was enforceable, thereby barring the subrogation claim.

The Buster & Cogdell Builders case establishes that, in Texas, a signature may not be required to enforce a construction contract. If the parties establish their mutual assent through conduct, then an unsigned contract may be deemed enforceable. Subrogation professionals looking to overcome subrogation waivers in unsigned contracts should check for provisions in the contract that require signatures before determining whether a contract is binding. Without such a provision, the lack of signatures may not be sufficient to invalidate the contract.

This entry was posted in AIA Contracts, Contracts, Subrogation, Texas, Waiver of Subrogation and tagged AIA Contract, Contracts, Contracts - Formation, Subrogation, Texas, Waiver of Subrogation.

Waive Your Claim Goodbye: Louisiana Court Holds That AIA Subrogation Waiver Did Not Violate Anti-Indemnification Statute and Applied to Subcontractors

This entry was posted by Gus Sara on May 9, 2022.

In 2700 Bohn Motor, LLC v. F.H. Myers Constr. Corp., No. 2021-CA-0671, 2022 La. App. LEXIS 651 (Bohn Motor), the Court of Appeals of Louisiana for the Fourth Circuit (Court of Appeals) considered whether a subrogation waiver in an AIA construction contract was enforceable and, if so, whether the waiver also protected subcontractors that were not signatories to the contract. The lower court granted the defendants’ motion for summary judgment based on the subrogation waiver in the construction contract. The plaintiffs appealed the decision, arguing that the subrogation waiver violated Louisiana’s anti-indemnification statute. The plaintiffs also argued that even if enforceable, the subrogation waiver did not apply to the defendant subcontractors since they were not parties to the contract. The Court of Appeals ultimately held that the subrogation waiver did not violate the anti-indemnification statute because the waiver did not shift liability, which the statute was intended to prevent. In addition, the Court of Appeals found that the contract sufficiently satisfied the required elements for the defendant subcontractors to qualify as third-party beneficiaries of the contract.

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This entry was posted in AIA Contracts, Contracts, Indemnification, Louisana, Waiver of Subrogation and tagged AIA Contracts, Anti-Indemnity Statutes, Construction Contracts, Contracts, Indemnification, Louisiana, Subrogation, Waiver of Subrogation.

Mississippi Supreme Court Applies AIA Subrogation Waiver to Non-Work Property Damage

This entry was posted by Gus Sara on April 17, 2020.

In Liberty Mutual Fire Ins. Co. v. Fowlkes Plumbing., L.L.C., No. 2019-FC-10285-SCT, 2020 Miss. LEXIS 44, the Supreme Court of Mississippi considered whether the subrogation waiver in the General Conditions of the Construction Contract, American Institute of Architects (AIA) form A201-2007, applied to claims for damages to property unrelated to the construction work. Siding with the majority of jurisdictions that have addressed this issue, the court interpreted the AIA subrogation waiver to apply to any property damage, whether or not related to the construction work (i.e. the Work), if the property insurance covering the non-Work property also insured the construction work. Continue reading →

This entry was posted in AIA Contracts, Construction Defects, Contracts, Mississippi, Subrogation, Waiver of Subrogation and tagged AIA Contract, Construction Defects, Contract, Mississippi, Subrogation, Waiver of Subrogation.

Courts Favor Arbitration in Two Recent Construction Dispute Cases

This entry was posted by Jason Plaza on October 23, 2018.

Recent court decisions have signaled the courts’ proclivity to prefer arbitration over full-fledged litigation when provisions in construction contracts are called into question. While the courts recognize a party’s constitutional right to a jury trial, the courts also lean strongly towards resolving disputes via arbitration as a matter of public policy, especially if a construction contract carves out arbitration as an alternative to litigation. Continue reading →

This entry was posted in AIA Contracts, Arbitration, Construction Defects, Maryland, North Carolina and tagged AIA Contract, Arbitration, Maryland, North Carolina.

Indiana’s Supreme Court, In a Matter of First Impression, Finds That an AIA Waiver of Subrogation Clause Extends the Waiver to Damage to Non-Work Property

This entry was posted by William L. Doerler on August 6, 2015.

In Board of Commissioners of County of Jefferson v. Teton Corp., 30 N.E.3d 711 (Ind. 2015), Jefferson County hired Teton Corporation to perform renovation work on the Jefferson County courthouse. Teton hired subcontractors to perform the roofing work.

Jefferson County’s contract with Teton incorporated American Institute of Architects (“AIA”) General Conditions form A201-1987. The AIA contract required Jefferson County to obtain property insurance and included a waiver of subrogation clause that stated, in pertinent part: “The Owner and Contractor waive all rights . . . for damage caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work.” (Emphasis added). Instead of procuring a separate builder’s risk policy for the renovation work, Jefferson County relied on its existing “all risk” property insurance policy to cover the entire courthouse, including the renovation work.

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This entry was posted in AIA Contracts, Indiana, Litigation, Waiver of Subrogation and tagged AIA Contract, Indiana, Subrogation, Waiver of Subrogation.