The Texas Supreme Court recently granted review in a pipeline construction case involving the enforceability of a contract provision assigning “all risks” to a particular party. In El Paso Field Services, L.P. v. MasTec North America, Inc., et al., El Paso hired MasTec and signed a $3.6 million lump sum pipeline replacement contract.
The contract identified 280 foreign crossings to the pipeline. However, during construction, 514 foreign crossings were encountered. A jury found that El Paso breached the due diligence provision of the contract and awarded $4.7 million to MasTec. The trial court granted a judgment notwithstanding the verdict in El Paso’s favor on the grounds that the contract specifically allocated the risk of unidentified crossings to MasTec. The Court of appeals reversed and ordered the trial court to enter judgment in favor of MasTec based on its finding that the contract’s “all risk” provision did not preclude recovery due to El Paso’s alleged breach of the contract’s due diligence representation/provision. In doing so the Court found that no single provision of a contract, like the all risks provision at issue, is entitled to such a controlling effect.
The Texas Supreme Court will most likely focus on the ability of a party to contractually assign all risks, known and unknown, as well as the impact of a clause stating that such an “all risks” provision is enforceable notwithstanding any other representations or duties under a contract.
This case will impact the use and interpretation of “all risks” language in contracts in Texas and is something that should be accounted for in new contracts that involve Texas work or law.
Oral argument is set for January 11, 2012.
Porter Hedges Construction Practice
Porter Hedges represents contractors, subcontractors and suppliers, sureties, design professionals, construction managers and owners in resolving complex construction disputes. Our lawyers have extensive federal, state and administrative litigation and arbitration experience. We have the resources to meet the needs of large national and multi-national corporations as well as those of small to mid-sized companies and individuals, from pre-litigation negotiation through appeal.
If you have questions regarding this alert or require assistance related to the issues described, please contact Clay Steely (713.226.6669; firstname.lastname@example.org), Denise Nestel (713.226.6612; email@example.com), or any of our construction practice attorneys.