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.