Here at Cotney Law, we’ve seen all manner of construction litigation. From payment disputes to defect claims, we’ve represented professionals from every corner of the construction industry. So often the outcome of these disputes hinges on what is stated in the construction contract, but rarely are legal proceedings influenced by a simple grammatical error. Below, one of our Houston construction attorneys discusses a bizarre case in which an omitted apostrophe nearly tipped the scales in a construction legal dispute.
Subcontractors vs. Subcontractor’s
In the case of Regency Midland Construction, Inc. v. Legendary Structures Inc., the general contractor, Regency, hired a subcontractor, Legendary, to perform work on a new apartment building. Legendary failed to complete construction on the project, and another subcontractor was soon brought on to complete the task. Because Legendary failed to uphold their responsibilities as stated in the contract, Regency refused to pay a withheld “retention” amount equal to 10 percent of the subcontractor’s contract amount.
This was the cause of the dispute. The subcontractor either refused or was unable to perform work. Therefore, they are not entitled to any withheld payment, right? Take a look at the following contract language: “Ten percent (10%) of Subcontractor’s contract amount shall be withheld and will be released 35 days after completion of subcontractors work.” Legendary argued that the word “subcontractors” must refer to all subcontractors because it does not contain an apostrophe. By this interpretation, Legendary is entitled to the withheld amount because another subcontractor completed the work.
Regency countered with the argument that the purpose of the retention clause was to ensure that Legendary, in particular, completed work, and the court agreed. Although a missing apostrophe wasn’t enough to sway the court’s decision, it highlights the importance of accurate contract drafting and reviewing.
Texas Retainage Laws
While the above dispute took place in California, Houston contractors must contend with similar retainage laws. Under Texas law, the amount of retainage that can be withheld from a contractor is 10 percent. Generally, retainage must be paid within 30 days of work being completed. This should all be reflected in your construction contracts. As we’ve said time and time again, your contracts are the most important tool for preventing disputes and subsequent litigation. If you’d like to have your contracts reviewed to ensure that they are free of any and all errors, consult the team of Houston construction attorneys from Cotney Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.