James Construction Group, LLC and Primoris Services Corporation v. Westlake Chemical Corporation

Supreme Court of Texas

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No. 20-0079

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James Construction Group, LLC and

Primoris Services Corporation,

Petitioners,

v.

Westlake Chemical Corporation,

Respondent

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On Petition for Review from the

Court of Appeals for the Fourteenth District of Texas

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Argued October 26, 2021

JUSTICE LEHRMANN delivered the opinion of the Court, in which

Justice Young joined in full, in which Chief Justice Hecht, Justice

Devine, Justice Busby, and Justice Bland joined as to Parts I and II(D),

and in which Justice Boyd, Justice Blacklock, and Justice Huddle joined

as to Parts I, II(A), II(B), II(C), and II(E).

CHIEF JUSTICE HECHT filed an opinion dissenting in part, in which

Justice Devine, Justice Busby, and Justice Bland joined.

JUSTICE BOYD filed an opinion dissenting in part, in which Justice

Blacklock and Justice Huddle joined.

This case arises out of a construction contract dispute and

involves competing claims of breach stemming from the owner’s

replacement of a contractor for safety violations and the owner’s claimed

entitlement to excess costs incurred in having to change contractors.

The jury found that both the owner and the contractor breached the

contract in various respects and awarded damages and attorney’s fees

to both. The principal issues raised in this Court are: (1) whether the

owner’s entitlement to recover contract damages associated with a

termination of the contractor for default hinged on strict (or only

substantial) compliance with the written-notice conditions precedent to

such recovery; (2) if substantial compliance with the notice conditions

was sufficient, whether legally sufficient evidence supports the jury’s

finding of compliance despite the fact that at least two of the required

notices were not given in writing; and (3) whether a contractual

provision barring recovery of consequential damages merely waived

liability for such damages or constituted a covenant not to sue, such that

asserting a claim to recover consequential damages amounted to a

breach of the contract.

The court of appeals held, among other things, that strict

compliance was not required, that legally sufficient evidence supported

the jury’s substantial-compliance findings, and that the contractual

provision governing consequential damages was a liability waiver, not a

covenant not to sue. Accordingly, the court of appeals affirmed the

portion of the trial court’s judgment awarding damages and attorney’s

fees to the owner but reversed as to the contractor.

2

We agree with the court of appeals that, as a general matter

under Texas law, a party’s substantial compliance with contractual

notice conditions is sufficient to satisfy those conditions. However, when

a contract mandates written notice, a writing is a necessary part of

complying with that condition, substantially or otherwise. A contrary

holding would allow parties to elude the bargain they freely made and

would open the door to a host of factual disputes about whether proper

contractual notice was given—the very kinds of disputes that the

writing requirement is intended to foreclose.

Because the owner failed to provide the requisite written notices

to be entitled to recover expenses associated with a termination for

default, and because we disagree with the owner’s alternative argument

that it was independently entitled to recover those same expenses under

a different contractual provision, the judgment awarding them to the

owner cannot stand. However, the portion of the judgment awarding

the owner damages for the contractor’s breach of an indemnity provision

in the contract was properly upheld. Further, we agree with the court

of appeals that the contract did not contain a covenant not to sue for

consequential damages and thus hold that the portion of the judgment

awarding damages to the contractor was properly reversed.

Accordingly, we affirm the court of appeals’ judgment in part, reverse it

in part, and remand the case to the trial court for further proceedings

consistent with this opinion.

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I. Background

A. Facts and Pertinent Contractual Provisions

In May 2012, Westlake Chemical Corporation, on behalf of its

subsidiary Westlake Vinyls Company, L.P., 1 hired James Construction

Group, LLC, as a general contractor to perform civil and mechanical

construction work on Westlake Vinyls’ chlor-alkali plant in Geismar,

Louisiana. Primoris Services Corporation, James’s parent company,

guaranteed the contract.

The contract itself did not obligate Westlake Chemical to assign

James any work. Rather, under Section 1.2, if Westlake wanted James

to “perform certain services and/or provide equipment, materials,

supplies or other products,” and James “agree[d] to perform and/or

provide such Work,” then Westlake would issue a work order for James

to execute. 2 The contract confirmed that “[u]nless and until a Work

Order has been executed by the Parties,” Westlake was not obligated “to

retain [James] for any Work” and James was not obligated “to accept

any request for any Work.” Further, Westlake was entitled to “retain

other contractors to perform comparable work” as it saw fit. 3

1 Unless necessary for clarity or context, we refer to Westlake Chemical

and Westlake Vinyls collectively as Westlake.

2 James had five days after issuance to either return the executed work

order or advise Westlake as to any issues James had with the order and

negotiate in good faith with Westlake to resolve those issues.

3 Relatedly, James “acknowledge[d]” under Section 15.7 that Westlake

“may have the need or desire to enter into other contracts related to the Work

or the Project” and “agree[d] to cooperate and coordinate with all other

contractors of [Westlake] or its Affiliates.”

4

James was contractually “responsible for the safety and health of

its employees and Subcontractors” and “for the adequacy, stability and

safety of all operations, construction temporary facilities, construction

equipment and the construction site and methods necessary for the

performance of the Work.” At the same time, the contract gave Westlake

certain rights to “intervene” if it had safety concerns. Specifically,

Section 17.2 authorized Westlake “to intervene in any appropriate way”

if in its reasonable opinion James was, among other things, “performing

its duties under th[e] Contract in an unsafe way or manner” that

Westlake “believe[d] may cause injury or damage to persons or

property.” In such cases, Westlake had the “right to require [James] to

immediately take remedial action,” and James would be “solely

accountable for all costs associated with such intervention and remedial

action” regardless of who incurred the costs.

Section 21 of the contract governed termination. Under

Section 21.2, either party could cancel the contract with sixty days’

written notice. Section 21.5 further authorized Westlake, “at any time,”

to terminate the contract “for [Westlake’s] convenience and without

cause.” James was required to take certain actions upon receipt of

written notice of Westlake’s termination for convenience and was

“entitled to receive payment for Work executed, and reasonable actual

costs incurred by reason of such termination.”

Finally, Section 21.3 authorized Westlake to terminate James for

“[d]efault” if Westlake determined “in its reasonable opinion” that

5

James, among other things, had “serious safety violations.” 4 To

terminate under Section 21.3, Westlake was required to give James

three notices: (1) notice that Westlake had determined there were

serious safety violations, triggering a seventy-two-hour window for

James to “begin to remedy” the violations; (2) notice that Westlake was

“not reasonably satisfied with the pace and the quality of the

remediation effort”; and (3) notice that Westlake had elected to

terminate the contract or a portion of the work. Per Section 9.1, all

notices given pursuant to the contract were required to be in writing.

Upon termination of the contract under Section 21.3, Westlake had the

“right to take possession of the Work or the portion thereof terminated”

and to complete that work, with James being responsible for “[a]ny extra

costs in excess of the Contract Price incurred by [Westlake].”

Following the contract’s execution, James performed both civil

and mechanical work on the project on a cost-reimbursable basis in

accordance with work orders issued by Westlake. The record shows that

James had several safety incidents between May 2012 and April 2013—

when Westlake transferred all remaining mechanical work to another

contractor—including multiple “OSHA-recordable” injuries and “near

misses.” Though the parties dispute the precise nature, severity, and

cause of many of the safety incidents, it is undisputed that James was

4 Other grounds authorizing termination for default were: James was

“willfully or in bad faith violating” the contract; James was failing to perform

the work “with promptness and diligence”; James filed for bankruptcy; and

James “fail[ed] to perform any material obligation under” the contract.

6

cited for a serious safety violation that occurred on December 28, 2012,

when James employee Gregory Price suffered a fatal injury on the job. 5

Immediately following the incident, the parties began discussing

James’s safety record. In an internal Westlake email to project manager

Abram Kuo and others, Westlake Vice President Andrew Kenner began

inquiring about James’s Total Recordable Incident Rate and proposed a

safety review with James to “show us how” James would prevent further

such incidents, saying that “[t]his was completely preventable.” Kuo

forwarded that email to other Westlake employees and copied James’s

project site manager Rusty DeBarge, adding “see Andrew’s comment”

and stating that “[w]e have to develop preventive safety mind set [sic]

with some extraordinary measure[s] on job safety.” Kuo further noted

in the email that he would be at the project office on January 2, 2013,

for a safety meeting that James’s management had “been asked to

attend.” Kenner testified that the meeting’s focus was on improving

safety performance “to make sure we didn’t have another serious

incident.”

After the meeting, Westlake internally discussed the possibility

of moving a portion of the mechanical work to another contractor “so

that James could have a better chance to manage their scope and keep

their project safe.” The next day, January 3, Kuo contacted Turner

Industries Group, LLC, about potentially taking over some of that work.

5 Price was on a ladder leaning against a large truck when another

James employee flagged the truck forward without checking to make sure no

one was on the ladder. Price fell and sustained a fatal head injury. OSHA

later cited James for the incident as a serious violation.

7

For James’s part, on January 9, a week after the meeting,

DeBarge sent an email to several Westlake employees summarizing

James’s pre-accident safety procedures and listing several additional

post-accident procedures that James had implemented or was planning

to implement. On January 18, he sent Kuo another email stating that

he was aware of talk that Westlake was considering “changes in the

execution of the project going forward.” DeBarge asked Kuo to consider

the email an “appeal” of that consideration and emphasized James’s

safety improvements and ability to successfully manage and coordinate

future work. He advocated for James receiving as much potential work

as possible, but he admitted that the addition of certain offsite work

would “be a challenge to our group” because it would require an

“attention level” that had “the potential to affect our efforts within the

plant boundaries,” such that he did “not see a negative effect on the

project if those scopes of work were given to another contractor.”

Kuo responded to DeBarge’s email the same day, agreeing that

“we have done many good things and set up very good programs” on the

project, including with respect to safety, and stating that “a lot of credit[]

has to go to [James] and its demonstrated willingness to work on [the]

project.” He confirmed the “decision to introduce possible [sic] another

contractor” for the purpose of “ensuring Westlake/[James] will be

successful” on the project and stated that Westlake “[n]ever intended to

wipe out what [James] has been doing well for the project thus far

especially the areas mentioned by” DeBarge’s email. He further stated

that he saw it “necessary” to “separat[e] out independent jobs such as

EDC [ethylene dichloride] and pipelines” to address DeBarge’s admitted

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concern that they “ha[d] the potential to affect [James’s] efforts within

the plant boundaries.” About two weeks later, on January 30, Westlake

Vinyls and Turner executed a formal contract very similar to the one

between Westlake Chemical and James, and Westlake began allocating

offsite EDC and pipeline work to Turner. There is no dispute that the

contract between Westlake and James authorized Westlake to contract

with Turner to perform that work regardless of Westlake’s satisfaction

with James’s performance.

Kuo testified that James’s safety performance improved in

January but deteriorated again in February. Westlake’s site manager,

Scott Campbell, testified that starting in January, James had brief

periods without incident followed by regression into old patterns.

Internal Westlake emails—which were not sent to James—stressed

James’s unacceptable Total Recordable Incident Rate and Westlake’s

dissatisfaction with James’s safety improvements, while internal James

emails reflect concerns about Westlake’s “unrealistic expectations and

misperceptions regarding their own impact on our performance.” In any

event, James removed DeBarge as site manager in late February at

Westlake’s request and replaced him with Mark Lammon.

On March 6, Kenner informed Kuo in an internal Westlake email

that “I think we need to let James Construction know that we are

considering removing them from the job and putting them on notice.”

However, nothing in the record reflects that Westlake communicated as

much to James at that time. In a March 22 internal Westlake email,

Kenner communicated that James’s Total Recordable Incident Rate for

the entire project was “2.2+”—higher than the industry standard—but

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he also noted a recent safety audit reflecting that “James has stepped

up their safety monitoring and performance.” Kuo responded, again

internally, that since December 2012, Westlake had “seen a trend in

poor performance of [James’s] safety record as well as its productivity in

general coupled with indications of quality issue[s] on piping (excellent

in civil and structural and equipment setting).” Kuo further stated that

Westlake had assigned more mechanical work to Turner “to spread the

job out so that [James] can be more focus[ed] on addressing all the issues

mentioned,” that lightening James’s load had allowed it to focus on those

issues, that James’s new site manager “has made differences as even

our corporate people have noticed,” and that Turner should be set up “as

a strong back up if [James] continues the poor performance after the

scope splitting so that project [sic] will not be in danger of delay.”

According to Westlake, additional incidents after that internal

March 22 discussion as well as scheduling delays led Campbell to

recommend on April 2 that Westlake remove “the remaining mechanical

work” from James and assign it to Turner. Kuo agreed. On April 11,

James and Westlake representatives had an in-person meeting.

According to Campbell’s description of the meeting, he informed James:

[W]e have tried to get y’all to improve your safety, we’ve

done everything we can do, y’all brought another project

manager in here, you are falling back into the same

pattern. We want you to – I think I said, you have five days

to get your remaining piping and mechanical people off the

job.

10

James VP Conrad Bourg testified by deposition that the meeting was

“very brief,” and that Westlake told James at the meeting that “they

were reassigning our work to Turner.”

It is undisputed that Westlake sent no written notice of

termination before or after the April 11 meeting. The record also

contains no other written communication from Westlake to James

memorializing the actions taken at that meeting. Nevertheless, James

ceased mechanical work and confirmed via email on May 8 that at

Westlake’s direction, James “has discontinued mechanical work on the

Chlor-Alkali project and . . . completed the demobilization of the

mechanical forces.” Westlake allocated the remaining mechanical work

to Turner and ultimately paid James in full for the mechanical work it

had already completed. James also retained and completed the civil

work on the project and was paid for that work. Turner completed all

remaining mechanical work on October 31, 2013.

B. Procedural History

In December 2014, Westlake sued James and guarantor Primoris

for breach of contract, seeking damages in the form of costs associated

with transferring work from James to Turner. 6 Initially, Westlake

alleged that James was responsible for those costs under Section 21.3 of

the contract following its termination for default. Westlake

subsequently amended its petition to allege that James was responsible

6 Westlake sued other contractors as well, and James asserted claims

against various third-party defendants. Those claims have all been dismissed

or severed and are not at issue here.

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for the costs under both Section 21.3—the provision governing

termination for default—and Section 17.2—the provision governing

Westlake’s right to intervene if it determined James was performing

unsafely. Westlake also claimed that James breached its duty to

indemnify Westlake under Section 19.1 of the contract for the costs

Westlake incurred in defending itself in a wrongful-death suit brought

by Price’s family. 7

James denied that Westlake had terminated the contract for

default but alternatively counterclaimed for breach of contract, alleging

that Westlake breached Section 21.3 by improperly terminating James

without the required notices. James also alleged that Westlake

breached Section 26 by making claims for consequential damages that

the contract expressly prohibited.

James also moved for partial summary judgment, arguing that a

significant portion of the damages Westlake sought qualified as

consequential damages barred by Section 26 of the contract, entitled

“Waiver of Consequential Damages.” The trial court granted James’s

motion “only as to Westlake’s chlorine costs”—that is, the trial court

found as a matter of law that those costs constituted consequential

damages that were barred by the contract—and denied the motion as to

Westlake’s other alleged damages. The case proceeded to a jury trial on

7 Section 19.1 required James to indemnify Westlake against all claims

and liabilities, as well as defense costs, arising out of or related to James’s

performance of the work, but only to the extent of James’s “negligence, strict

liability or other legal fault.” (Capitalization removed).

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Westlake’s contract claims under Sections 17.2, 19.1, and 21.3 and on

James’s counterclaims under Sections 21.3 and 26.

The jury found that James failed to comply with Section 17.2 (the

intervention provision), that the failure was not excused, and that

Westlake was entitled to $1,054,251.81 in damages in the form of the

costs associated with its intervention. 8 As to Westlake’s claim under

Section 21.3, the charge asked the jury three predicate questions—3A,

3B, and 3C—to determine whether Westlake provided the three

requisite notices under that provision. Questions 3A and 3B each asked

the jury (1) whether Westlake “provided written notice in strict

compliance with this notice provision,” (2) whether Westlake “notified

James in ‘substantial compliance’ with this notice provision,” and

(3) whether “[s]trict compliance with this notice provision would have

been ‘futile.’” Question 3C, regarding the third required notice, asked

only whether Westlake substantially complied with the provision. To

answer “yes” to the substantial-compliance questions, the jury had to

find that “James received actual notice from Westlake,” the “form of

actual notice to James did not severely impair the purpose of this notice

provision,” and the form “caused no harm to James.”

The jury answered “no” to the portions of 3A and 3B asking

whether Westlake provided written notice in strict compliance with the

first two notice provisions and whether strict compliance would have

been futile, but it found that Westlake substantially complied with all

three notice provisions. The jury went on to find that James failed to

8 Westlake had asked the jury to award it $8.5 million.

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comply with Section 21.3, 9 that the breach was not excused, and that

Westlake was entitled to damages in the same amount that the jury had

awarded for James’s breach of Section 17.2. The jury also found that

James failed to comply with Section 19.1, that the breach was not

excused, and that Westlake was entitled to recover damages comprising

its costs and reasonable attorney’s fees incurred in defending the Price

litigation.

Because the jury found that Westlake substantially complied

with Section 21.3’s notice provisions and James failed to comply with

Section 21.3, the jury was instructed not to answer the questions

regarding James’s counterclaim for Westlake’s breach of that section or

the question of which party “failed to comply with a material obligation

9 The jury was instructed that James failed to comply with Section 21.3

if:

• Westlake Chemical discovered or determined in its

reasonable opinion that James had serious safety

violations[;] and

• Westlake Chemical was not reasonably satisfied with the

pace and the quality of the remediation effort; and

• Westlake Chemical terminated the Construction Contract or

a portion of the Work, and took possession of the Work or the

portion thereof terminated and purchased and/or hired

materials, tools, supervision, labor, and equipment for the

completion of the Work; and

• James has not paid Westlake Chemical for some or all of the

extra costs in excess of the Contract Price incurred by

Westlake Chemical in regards to taking possession of the

Work or the portion thereof terminated and purchasing

and/or hiring materials, tools, supervision, labor, and

equipment for the completion of the Work.

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of the Construction Contract [not including Sections 19.1 and 26] first.”

As to James’s counterclaim for breach of Section 26, the jury found that

Westlake failed to comply with that provision, that the breach was not

excused, and that James was entitled to $1,270,962.89 in damages

consisting of attorney’s fees James had incurred in defending against

both chlorine costs and any other consequential damages, plus

additional damages for appellate attorney’s fees.

The trial court rendered judgment, largely on the jury’s verdict,

that: (1) Westlake recover from James and Primoris, jointly and

severally, $1,157,019.50 in contract damages, plus court costs and

prejudgment interest; (2) Westlake recover from Primoris $2,923,600.50

in attorney’s fees (plus conditional appellate attorney’s fees); (3) James

recover from Westlake $1,270,962.89 in contract damages (plus

conditional appellate attorney’s fees); and (4) James take nothing on its

Section 21.3 counterclaim. The court also ordered post-judgment

interest on the various damage awards. All parties appealed.

The court of appeals affirmed the judgment as to the award of

damages and attorney’s fees to Westlake and reversed as to the award

to James on its counterclaim. 594 S.W.3d 722 (Tex. App.—Houston

[14th Dist.] 2019). On Westlake’s claims, the court unanimously held

that the doctrine of substantial compliance applied to Section 21.3’s

notice requirements and that the evidence was legally sufficient to

support both the jury’s findings that Westlake substantially complied

and the damages award. Id. at 746, 748–50. Because it upheld the

award under Section 21.3, the court of appeals did not reach James’s

challenge to the jury’s finding that Westlake was entitled to the same

15

damages under Section 17.2. The court further affirmed the judgment

as to James’s liability for failure to comply with the contract’s indemnity

provision. Id. at 754. As to Westlake’s attorney’s fees, the court held in

pertinent part that Westlake was not required to segregate its fees and

that the fees were not excessive. Id. at 766. On James’s counterclaim,

a divided court held that Westlake did not breach the contract by

seeking consequential damages because Section 26 was a liability

waiver rather than a covenant not to sue; the court thus rendered a take-

nothing judgment on James’s counterclaim. Id. at 764–66. The dissent

opined that Section 26 contained a covenant not to sue and would have

affirmed the trial court’s judgment on that claim. Id. at 767 (Frost, C.J.,

dissenting).

James petitioned for review of the court of appeals’ judgment,

asserting that the court erred in several respects. On Westlake’s claims,

James argues that the court of appeals erred in concluding that

Westlake could satisfy Section 21.3’s notice requirements by

“substantially complying” with them, that Westlake did not comply with

those conditions and thus may not recover damages for James’s

purported breach of Section 21.3, 10 and that the jury’s findings

10 James also argues that no evidence supports the jury’s liability

finding on this claim, which hinged in part on a finding that Westlake

Chemical incurred extra costs as a result of James’s breach, because it was

undisputed that Westlake Vinyls, not Westlake Chemical, had incurred the

pertinent costs. The court of appeals held that because the jury found that

“Westlake Chemical enter[ed] into the Construction Contract in its own name,

to obtain construction services by James, on behalf and for the benefit of

Westlake Vinyls, and with authority to act on behalf of Westlake Vinyls,”

Westlake Chemical had the right—as Westlake Vinyls’ agent—to recover

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regarding Section 17.2, which the court of appeals did not address, do

not provide an independent basis to affirm its judgment. James also

argues that Westlake’s “prior material breach” of Section 21.3’s notice

requirements excused its obligation to indemnify Westlake for defense

costs incurred in the Price litigation. As to James’s breach-of-contract

counterclaim under Section 26, James contends that Section 26 did not

merely waive its liability for consequential damages but also contained

a covenant not to sue, which Westlake breached by seeking such

damages in this suit. Accordingly, James argues that the court of

appeals erred in reversing the judgment in James’s favor on that claim.

Finally, James seeks reversal with respect to the award of Westlake’s

attorney’s fees, asserting that Westlake failed to segregate recoverable

and unrecoverable fees and that the fee award is excessive. 11

damages suffered solely by Westlake Vinyls. Id. at 737–39. James argues that

the jury was not instructed as to the effect of its agency findings on the liability

question and thus could not have found James liable based on the charge as

submitted. Because we hold that Westlake may not recover under Section 21.3

for other reasons, we need not reach this issue.

11 Westlake complained in the court of appeals that the trial court’s

judgment found only Primoris liable for Westlake’s attorney’s fees and argued

that it was also entitled to recover those fees from James under Texas Civil

Practice and Remedies Code Section 38.001. 594 S.W.3d at 766. The court of

appeals affirmed that portion of the judgment, holding that Chapter 38 does

not permit recovery of attorney’s fees from a limited liability company. Id.

Westlake cross-petitioned this Court for review of that portion of the court of

appeals’ judgment but subsequently filed a motion to dismiss the petition,

which we granted.

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II. Analysis

Because this case involves the parties’ contractual rights and

obligations, we begin by highlighting applicable general legal principles

governing contract interpretation. Texas has a strong public policy

favoring freedom of contract. Chalker Energy Partners III, LLC v. Le

Norman Operating LLC, 595 S.W.3d 668, 672–73 (Tex. 2020). “When a

contract’s meaning is disputed, our primary objective is to ascertain and

give effect to the parties’ intent as expressed in the instrument.” URI,

Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018). We construe

the language of an unambiguous contract according to its plain meaning,

attempting to give effect to all provisions. See id. at 763–64; J.M.

Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). Texas courts

regularly enforce unambiguous contract language agreed to by

sophisticated parties in arms-length transactions. See Chalker Energy,

595 S.W.3d at 673. To that end, we do not protect parties “from the

consequences of their own oversights and failures in nonobservance of

obligations assumed.” Dorroh-Kelly Mercantile Co. v. Orient Ins. Co.,

135 S.W. 1165, 1167 (Tex. 1911).

A. Compliance with Written-Notice Conditions Precedent

James first argues that Westlake failed to comply with express

contractual conditions precedent to its right to recover costs associated

with terminating James for default under Section 21.3. “A condition

precedent is an event that must happen or be performed before a right

can accrue to enforce an obligation.” Solar Applications Eng’g, Inc. v.

T.A. Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010) (citation omitted);

see also CDI Eng’g Grp., Inc. v. Admin. Exch., Inc., 222 S.W.3d 544, 548

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(Tex. App.—Houston [14th Dist.] 2007, pet. denied) (“If the condition is

not fulfilled, the contract or obligation attached to the condition cannot

be enforced.”). The conditions precedent to which James refers are the

written notices mandated by Section 21.3, which states in pertinent

part:

Right of Company to Terminate for Contractor Default. If

Company [i.e., Westlake] discovers or determines in its

reasonable opinion that . . . Contractor [i.e., James] has

serious safety violations . . . then [1] Company may so

notify Contractor. Upon receipt of any such notice,

Contractor shall begin to remedy the breach or defect cited

within seventy-two (72) hours. If at any time, Company is

not reasonably satisfied with the pace and the quality of

the remediation effort, [2] Company will so notify

Contractor and Company may thereafter, at its sole

discretion, elect to either terminate this Contract or a

portion of the Work by [3] providing notice to that effect.

After providing such notice, Company shall have the

unrestricted right to take possession of the Work or the

portion thereof terminated and to purchase and/or hire

materials, tools, supervision, labor, and equipment for the

completion of the Work or of the unremedied condition, as

Company elects. Any extra costs in excess of the Contract

Price incurred by Company in this regard shall be at the

expense of Contractor. This right is in addition to any

other remedies Company may have hereunder.

The parties do not dispute that Section 21.3 contemplated the

provision of three separate notices to James: (1) notice that Westlake

had determined in its reasonable opinion that James had serious safety

violations, triggering a seventy-two-hour window for James to begin to

remedy the violations; (2) notice that Westlake was not reasonably

satisfied with the pace and quality of the remediation efforts; and

(3) notice that Westlake had elected to terminate the contract or a

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portion of the work. Nor do they dispute that all notices under the

contract, including those mandated by Section 21.3, were required to be

in writing. Moreover, the parties agree that the notices constituted

express conditions precedent to Westlake’s right to enforce James’s

obligation to pay Westlake’s excess costs incurred in transferring the

work. 12

James argues that strict compliance with express conditions

precedent is required and that the jury’s failure to find strict compliance

as to the first two notices, along with Westlake’s undisputed failure to

strictly comply with the third, forecloses Westlake’s right to recover.

Alternatively, James argues that legally insufficient evidence supports

the jury’s findings that Westlake substantially complied with the three

notice conditions. Westlake responds that under well-established Texas

law, substantial compliance with a contract’s notice requirements is

sufficient to satisfy them. Westlake further argues that the evidence

supports the jury’s findings that Westlake substantially complied.

We hold that substantial compliance is the appropriate standard

when evaluating whether a party complied with a contractual notice

condition. 13 However, we also hold that substantial compliance with a

condition precedent requiring written notice may not be achieved

12 Other than the intervention provision (Section 17.2), discussed below,

this is the sole provision on which Westlake relies to recover its costs incurred

in changing contractors.

13 We do not address whether substantial compliance is the appropriate

standard for satisfying conditions precedent that do not involve notice.

20

without a writing in some form. 14 Here, Westlake provided no writing

at all with respect to at least two of Section 21.3’s required written

notices and thus failed to substantially comply with the provision’s

conditions as a matter of law.

1. Substantial Compliance and Written Notice

This Court has not had occasion to address whether some form of

a “substantial-compliance doctrine” applies to contractual notice

provisions like the one at issue here. In a somewhat analogous context,

we have applied a “notice–prejudice rule” in insurance disputes in which

timely notice of a claim is a condition to a policy’s coverage. See Prodigy

Commc’ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374,

375 (Tex. 2009). Under that rule, which flows from the more general

principle that “an immaterial breach does not deprive the insurer of the

benefit of the bargain,” “an insured’s failure to timely notify its insurer

of a claim or suit does not defeat coverage if the insurer was not

prejudiced by the delay.” PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630,

631–32, 636 (Tex. 2008). We applied the rule in Prodigy, in which the

insured failed to give notice “as soon as practicable” after the covered

incident, as the policy required, but did give notice within the policy’s

outer boundary of ninety days. 288 S.W.3d at 376–77. We held that the

14 Texas recognizes a distinct doctrine of “substantial performance,”

which allows a contractor that “has substantially performed a building

contract . . . to recover the full contract price less the cost of remedying those

defects that are remediable.” Vance v. My Apartment Steak House of San

Antonio, Inc., 677 S.W.2d 480, 481 (Tex. 1984). Our decision today does not

address the application of that doctrine when the contractor fails to comply

strictly with an express condition precedent requiring written notice.

21

insured’s failure to meet the “as soon as practicable” requirement did

not defeat coverage absent prejudice to the insurer, concluding that the

requirement was not a “material part of the bargained-for exchange.”

Id. at 378, 382. In PAJ, we noted that requiring strict compliance with

such provisions would have “draconian consequences for even de

minimis deviations from the duties the policy places.” 243 S.W.3d at

636.

The courts of appeals have more broadly applied the “doctrine of

substantial compliance” to excuse “exactitude in the performance of

contractual duties . . . where any deviations or deficiencies do not

seriously impair the purpose underlying the contractual provision.” In

re G.D.H., 366 S.W.3d 766, 771 (Tex. App.—Amarillo 2012, no pet.); see

also, e.g., Burtch v. Burtch, 972 S.W.2d 882, 889 (Tex. App.—Austin

1998, no pet.). In G.D.H., for example, which involved an agreed

custody-modification order, the parents agreed that if one of them

intended to travel internationally with their child, that parent would

give written notice to the other containing various details of the trip,

and the other parent would then execute any necessary consent forms.

366 S.W.3d at 768. In reviewing an enforcement order rendered after

the father refused to execute a consent form, the Amarillo Court of

Appeals rejected the father’s argument that his duty to execute had not

been “triggered” because the mother’s notice did not contain “each

detail” required by the notice clause. Id. at 770–71. The court explained

that although the notice was deficient in some respects, it contained “the

bulk of the requisite information” such that “it would be unreasonable

22

to conclude that the trial court erred in holding [the mother]

substantially complied with her duty.” Id. at 771.

The Dallas Court of Appeals has similarly applied the

substantial-compliance doctrine to notice requirements. In Barbier v.

Barry, the court examined the effectiveness of a party’s written notice of

cancellation of a contract that, though undisputedly received by the

other party, was not sent by registered mail as the contract required.

345 S.W.2d 557, 562 (Tex. App.—Dallas 1961, no writ). The court held

that “the failure to send [the notice] by registered mail did not destroy

its effectiveness as notice” and that the cancelling party substantially

complied with the contract. Id. Similarly, in Texas Utilities Electric Co.

v. Aetna Casualty & Surety Co., the court of appeals held that Aetna

substantially complied with a surety bond’s cancellation requirements

by sending the requisite written termination notice to Texas Utilities’

office in Mesquite, where an authorized agent of Texas Utilities actually

received the notice, despite the bond’s provision that notice be sent to

the company’s office in Allen. 786 S.W.2d 792, 793 (Tex. App.—Dallas

1990, writ denied); see also S. Tex. Elec. Co-op v. Dresser–Rand Co., 575

F.3d 504, 507 (5th Cir. 2009) (citing Barbier and Texas Utilities to hold

that under well-established Texas law, “the doctrine of substantial

compliance [applies] to contractual notice provisions”).

We agree with the doctrine described and applied in these cases

as a general principle of Texas law: a party’s minor deviations from a

contractual notice condition that do not severely impair the purpose

underlying that condition and cause no prejudice do not and should not

deprive that party of the benefit of its bargain. PAJ, 243 S.W.3d at 636;

23

see also J.M. Davidson, 128 S.W.3d at 229 (“[T]he primary concern of

the court is to ascertain the true intentions of the parties as expressed

in the instrument.”). Moreover, the doctrine serves the important

purpose of preventing parties from engaging in bad-faith “gotcha” tactics

to avoid their own contractual obligations based on a technicality.

James cites various treatises and other secondary sources to support its

contention that strict compliance with express conditions precedent is

required, particularly in the construction context, but references no

Texas law to that effect. Further, James dismisses our opinions in

P.A.J. and Prodigy as limited to the insurance context, where unique

policy concerns are presented. However, the reasoning in those cases

and the purposes served by applying the substantial-compliance

doctrine are not limited to a particular category or type of contract.

That said, while Texas law generally recognizes substantial

compliance as a proper standard by which to evaluate satisfaction of

contractual notice conditions, 15 we have found no Texas cases holding

that a party’s provision of oral notice complies, substantially or

otherwise, with a requirement of written notice. Indeed, both our own

precedent and that of the courts of appeals hold the opposite, and the

15 Our holding regarding substantial compliance with contractual notice

conditions should not be read to undermine well-established, black-letter legal

principles regarding breach of covenants. Specifically, a party is subject to

liability for a breach of contract that causes damages regardless of whether the

breach was material. Bartush-Schnitzius Foods Co. v. Cimco Refrigeration,

Inc., 518 S.W.3d 432, 436 (Tex. 2017) (explaining that while only a material

breach excuses the other party from further performance, a nonmaterial

breach that causes damages still gives rise to a cause of action for breach of

contract).

24

results in those cases did not depend on whether the failure to provide

written notice prejudiced the other party. We held over sixty years ago

in Shaller v. Commercial Standard Insurance Co. that oral notice of an

insurance policy’s cancellation was insufficient in the face of a written-

cancellation requirement, barring waiver of that requirement. 309

S.W.2d 59, 61, 64–66 (Tex. 1958). In arguing that it had effectively

cancelled the policy, the insurer in Shaller relied on Austin Fire

Insurance Co. v. Polemanakos, 207 S.W. 922 (Tex. Comm’n App. 1919,

judgm’t adopted), in which the court had held that oral notice of

cancellation was sufficient. Shaller, 309 S.W.2d at 65. But we

distinguished Polemanakos on several grounds, most notably including

that the policy at issue in that case, unlike in Shaller, “had no provision

for a written notice of cancellation.” Id.

The courts of appeals have similarly held, in a variety of contexts

including construction contracts, that oral notice does not satisfy a

contract’s written-notice requirement. For example, in Emerald Forest

Utility District v. Simonsen Construction Co., Emerald hired Simonsen

to construct a sewer line that failed shortly after construction. 679

S.W.2d 51, 52 (Tex. App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.).

Simonsen asserted that wet sand conditions caused the line failure and

that it could not be held liable because it had notified Emerald of the

problem and requested that the design be modified, but Emerald

refused. Id. at 54. The Houston Fourteenth Court of Appeals

acknowledged that had Simonsen given such notice in writing, it would

have been relieved of liability under the contract. Id. But it was

undisputed that Simonsen did not give written notice as the contract

25

required, and the court held that Simonsen had failed to comply with a

condition precedent and so was not relieved of liability. Id. The Dallas

Court of Appeals similarly held that a lessee could not show it had met

conditions precedent to recovering for breach of contract where the

contract mandated written notice of an alleged breach and all notices

provided were oral. Cheung-Loon, LLC v. Cergon, Inc., 392 S.W.3d 738,

744–45 (Tex. App.—Dallas 2012, no pet.). Finally, in Tennessee Gas

Pipeline Co. v. Technip USA Corp., the Houston First Court of Appeals

addressed a construction contract’s requirement that the owner, as a

condition precedent to recovery for breach of warranty, provide written

notice of any work it deemed defective and additional written notice,

upon the contractor’s failure to cure the defect, that the owner would

repair the defect at the contractor’s expense. No. 01-06-00535-CV, 2008

WL 3876141, at *18 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008, pet.

denied). The court held that the contractor’s “actual notice of defects”

was insufficient in the face of a requirement that the notice be in

writing. Id. at *20.

The courts’ unfailing refusal to deem oral notice compliant with a

contractual condition requiring written notice, like the doctrine of

substantial compliance as a general matter, is consistent with our

repeated affirmation that “[a]bsent compelling reasons, courts must

respect and enforce the terms of a contract the parties have freely and

voluntarily entered.” Shields Ltd. P’ship v. Bradberry, 526 S.W.3d 471,

481 (Tex. 2017) (quoting Phila. Indem. Ins. Co. v. White, 490 S.W.3d 468,

471 (Tex. 2016)). The bargained-for requirement of written notice

necessarily serves a purpose beyond actual notice; otherwise, its

26

inclusion is useless. See Shaller, 309 S.W.2d at 66; Emerald Forest, 679

S.W.2d at 54 (holding that actual notice does not overcome the absence

of written notice). For one thing, a writing eliminates after-the-fact

disputes about exactly what notice was given. Parties may still disagree

about whether a writing is sufficient, but unlike with an alleged oral

conversation, they cannot disagree about what has actually been said.

For another, in the context of large-scale contracts like the one at issue

here, involving millions of dollars and significant consequences in the

face of termination under certain circumstances—such as responsibility

for excess costs incurred in completing the project—a party should not

have to guess whether those consequences are being triggered in the

absence of a writing when one is required.

We long ago highlighted the significance of a statutory written-

notice requirement in Berry v. McAdams, in which we examined the

mechanic’s lien statute’s requirement of written notice to the property

owner as a prerequisite to a materialman’s enforcing such a lien. 55

S.W. 1112, 1114 (Tex. 1900). We explained that “[t]he policy of the law

is to relieve the owner from demands upon the ground of actual

knowledge and constructive notice, because he could rarely defend

himself from such claims.” Id. Accordingly, we rejected the

materialman’s argument that written notice was not required when the

owner had actual knowledge of the claim, explaining that “[w]ritten

notice is certain and definite information upon which the owner must

act.” Id.; see also Moore v. Brenham Ready Mix, Inc., 463 S.W.3d 109,

114–16 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (holding that

actual notice of a lien claim did not qualify as substantial compliance

27

with the mechanic’s lien statute’s requirement of “timely written

notice”). Westlake summarily dismisses such precedent as “inapposite

cases involving what constitutes substantial compliance in the context

of statutory requirements for perfecting a lien.” But while the context

is different, our recognition of the significance of a writing requirement

is not so limited. As such, Texas law has addressed the specific issue

presented here: whether in the face of a contractual written-notice

requirement, oral notice can suffice.

CHIEF JUSTICE HECHT’S dissent, however, suggests that guidance

from the Fifth Circuit is necessary, glossing over this Court’s strong

language on written notice in Shaller. Post at ___. The fact that Shaller

involved cancellation of an insurance policy and discussed the timing of

the notice as well as its form does not diminish its central holding: where

the provision at issue requires written notice, unless “a notice in writing

[is] waived . . . an oral notice, insufficient in law when given, [can]not

mature into an effective cancellation of the [policy].” 309 S.W.2d at 66.

In other words, absent waiver, oral notice does not satisfy a written-

notice requirement as a matter of law. Id.

Moreover, even if state law had not definitively addressed the

issue, the Fifth Circuit has not either. While we wholeheartedly agree

that the Fifth Circuit offers useful (and appreciated) guidance on

matters of state law that Texas jurisprudence has not yet addressed,

federal law does not fill in the purported gap here. Notwithstanding the

dissent’s assertion that the Fifth Circuit answered the question

presented here in South Texas Electric, it simply did not.

28

To begin with, we do not disagree with South Texas Electric. On

the contrary, we agree with the Fifth Circuit’s conclusion that Texas law

recognizes the doctrine of substantial compliance with respect to

written-notice conditions, as we have articulated above. S. Tex. Elec.

Co., 575 F.3d at 507. However, we part ways with the dissent’s reading

of South Texas Electric as it relates to whether substantial compliance

is possible when no writing has been provided. In that case, Texas

Electric hired Dresser to install a steam turbine, which Dresser

warranted to repair if there were defects. Id. at 506. The warranty

required Dresser to repair defects after receiving written notice from

Texas Electric and allowed Texas Electric to remedy the defects itself if

it provided Dresser ten days’ written notice. Id. The turbine

experienced problems “immediately following its installation.” Id.

Texas Electric notified Dresser of the issues “early on,” but over the

course of the next two years Dresser failed to make repairs. Id. During

that time, Texas Electric hired a third party to conduct tests, of which

Dresser was “aware” and agreed to cover the costs. Id. Texas Electric

subsequently hired another third party to repair the turbine “without

providing Dresser further written notice.” Id. (emphasis added). The

opinion’s description of the background facts reveals that writings were

involved. See id. (stating that Texas Electric “wrote” to Dresser about

the tests and that the repair work was done without “further written

notice”). As such, the court’s focus was not on the lack of a writing, and

the opinion does not offer definitive guidance thereon.

Therefore, we hold that, barring waiver, when a contract requires

written notice as a condition precedent to the right to enforce an

29

obligation under the contract, substantial compliance with that

requirement may not be achieved in the absence of a writing. With the

proper standard enumerated, we turn to the evidence of the contractual

notice required and provided in this case.

2. Application to Westlake’s Notices

Westlake was required to give James three notices in order to

terminate James for default under Section 21.3 and recover excess costs

associated with the termination: (1) notice that Westlake had

determined in its reasonable opinion that James had serious safety

violations; (2) notice that Westlake was not reasonably satisfied with the

pace and quality of James’s remediation effort (which James was

required to undertake within seventy-two hours of the first notice); and

(3) notice that Westlake had elected to terminate the contract or a

portion of the work. Each of those notices was expressly required to be

in writing. At best, only the first one was. 16

As noted, on December 28, 2012, following the Price incident,

Westlake’s project manager (Kuo) forwarded an email from Westlake VP

Kenner to other Westlake employees and cc’d DeBarge, James’s site

manager. Kenner’s email stated that the incident was “completely

preventable” and discussed having a safety review with James—which

subsequently occurred on January 2—to “show us how” it would prevent

16With respect to the first two notices, the jury failed to find that

Westlake gave written notice in strict compliance with the contract. This could

mean the jury concluded there was no writing at all, or it could mean the

contents of the writing were deemed insufficient to amount to strict

compliance.

30

such incidents from happening again. Kuo added, “We have to develop

preventive safety mind set [sic] with some extraordinary measure[s] on

job safety.” As James notes, the email did not mention Section 21.3,

default, “serious safety violations,” the commencement of a seventy-two-

hour window for James to begin remediation efforts, or a warning about

termination for default if those efforts were deemed insufficient.

Westlake points to no other written communications relevant to the first

notice requirement.

While Section 21.3 does not require the use of specific words,

certainly the notice needed to communicate sufficient information to

enable James to reasonably conclude that the section was at play and

that the seventy-two-hour clock was ticking. Given the seriousness of

the incident, Westlake understandably raised concerns about safety

measures and the need to focus on preventing future incidents and

injuries. But expressing safety concerns does not necessarily equate to

triggering Section 21.3. At trial, when Kenner was asked when the

seventy-two-hour period for James to begin remediation under that

section began, he testified:

A. Again, this is the one – we’ve acknowledged

we don’t have as many written notices here. You’ve got

several notices. We’ve got – you have to go through your

e-mail chain. So there’s a notice on a couple e-mails where

James personnel are included in the e-mail. So, clearly,

you can say a 72-hour period started at that time. But

we’re not using the word “notice,” and we’re not using the

word “default.” We are talking about serious safety

violations.

Q. And you’re saying there’s no – so you can’t

testify to this jury when that 72-hour period began, can

you, sitting here today, can you?

31

A. No. We met with them multiple, multiple

times.

Q. You met with them? The 72 hours called for

in the notice provision, you can’t tell this jury when that

clock started to run?

A. It was, you know – Rusty [DeBarge]’s office

from our people was, like, past the men’s room, three offices

down on the left. So they were going down and talking –

[Attorney]: Objection. Nonresponsive.

A. No, I cannot testify.

If Westlake could not determine from the various communications

when the seventy-two-hour period under Section 21.3 began, we fail to

see how James could reasonably be expected to do so. Thus, although

Kuo’s email characterized the incident as “preventable” and stressed the

need to develop additional safety procedures, we find it questionable

whether the email qualified as the requisite first notice under

Section 21.3.

Even if it did, see City of Keller v. Wilson, 168 S.W.3d 802, 827

(Tex. 2005) (evidence is legally sufficient if it “would enable reasonable

and fair-minded people to reach the verdict under review”), two more

written notices were required and were not provided. As to the second

notice—that Westlake was not reasonably satisfied with the pace and

quality of James’s remediation effort—Westlake points to the

January 18, 2013 email from Kuo to DeBarge, which was a response to

DeBarge’s email addressing rumors that Westlake was considering

assigning offsite EDC and pipeline work to another contractor. Kuo’s

email stated:

32

Dear Rusty:

Thanks for the email.

I agree[] that in this project we have done many good things

and set up very good programs from safety,

cost/productivity control measures to all procedural

systems for a well executed project; and a lot of credit[] has

to go to [James] and its demonstrated willingness to work

on Westlake CA [chlor-alkali] project.

I also agree[] that we all would like to be judged by our

intentions and efforts; we are in fact judged by the results.

And the results / final judgment has yet to come which only

due [sic] when we have completed and started up the

project safely and successfully without any more serious

safety incident[s].

The intent of the decision to introduce possible [sic] another

contractor to take care of EDC and Pipeline jobs is to help

ensur[e] Westlake / [James] will be successful in the CA

project. Never intended to wipe out what [James] has been

doing well for the project thus far especially the areas

mentioned by your E mail below.

We all make mistakes and we all need to learn from it and

our responsibilities as leader[s] includes take [sic]

proactive action(s) deem[ed] necessary preventing [sic]

re-occurrence; besides what we have implemented of safety

enhancements after the incident, separating out

independent jobs such as EDC and pipelines is what I see

necessary so that we can avoid, as you have said it, “This

attention level does have the potential to affect our efforts

within the plant boundaries. For this reason, I [DeBarge]

do not see a negative effect on the project if those scopes of

work were given to another contractor.”

I trust that you understand where I am coming from and

will have your continued supports [sic] and commitment as

an individual and as a company working together with

Westlake, CDI, and other potential contractors as a team

for a safe and successful project.

33

In this email, Kuo praised James’s progress on safety, stated that

the “final judgment” on safety “has yet to come,” and explained why

Westlake had decided to give EDC and pipeline work to another

contractor—which it was undisputedly entitled to do under Section 1.2

of the contract. 17 As with the first notice, this email did not mention

Section 21.3, default, or termination. Nor did it say more generally that

Westlake was not reasonably satisfied with the pace and quality of

James’s remediation effort. If anything, it seemed to express Kuo’s

opinion that the two companies were both doing what was necessary to

ensure a “safe and successful project.”

That conclusion is consistent with Kuo’s trial testimony that

James’s safety performance temporarily improved in January 2013. It

is also consistent with evidence showing that in February, Westlake

assigned James $10,000,000 in additional mechanical, civil, and

installation work on the project. An internal Westlake document from

the “CA Project Team” requesting management approval for the

additional work stated that “[b]ased on James’s performance, improved

safety programs, quality of work completed, and meeting current

construction schedule, the CA Team recommends continuing to issue

work order [sic] based on the T&M [Time & Materials] base rate to

James Construction for Phase IV of the chlor-alkali project.” Based on

the substance of Kuo’s January 18 email and Westlake’s subsequent

17 Westlake has never alleged that excess costs associated with its

assignment of mechanical work to Turner before April 11 are recoverable as

damages under Section 21.3. Nor has James ever alleged that Westlake

breached the contract by giving Turner such work.

34

actions, the email provides no indication that Westlake was dissatisfied

with James’s efforts, let alone that the circumstances had progressed to

the point that Westlake had determined it had the right to terminate

James for default and recover any excess costs incurred in completing

the project.

To be sure, internal Westlake communications reflect Westlake’s

renewed concern with James’s safety record, with Kenner going so far

as to say on March 6, well after the January 18 email on which Westlake

now relies, that “I think we need to let James Construction know that

we are considering removing them from the job and putting them on

notice.” But again, Westlake fails to cite evidence showing that it

followed through on that plan, and the email reflects Westlake’s opinion

that James was not “on notice” at that time. Indeed, on March 22,

Kenner identified a recent safety audit indicating that “James has

stepped up their safety monitoring and performance.” In light of all this

evidence, the January 18 email cannot qualify as the second required

notice under Section 21.3, and Westlake identifies no other writing that

can.

Finally, it is undisputed that Westlake did not provide the third

requisite written notice: that it had elected to terminate the contract or

a portion of the work for James’s default. 18 Internal Westlake emails

18 On March 21, Westlake informed James via email that some

additional mechanical work would be transferred to Turner as of April 15.

However, the email further stated that the plan was to focus James’s efforts

on a specific area “in an effort to meet our current end date” and that the

transfer of work “is not an indication of your efforts to date. A noticeable

35

indicate that on April 2, following an onsite incident the previous day

that resulted in a broken finger, Westlake made the decision to transfer

the remaining mechanical work to Turner because James had failed “to

improve their safety performance” and was “continuing to fall further

behind in their schedule.” On April 11, Westlake and James had a

meeting at which, according to Campbell, he told James’s representative

that James was “falling back into the same pattern” with respect to

safety and instructed him “to get your remaining piping and mechanical

people off the job.” Campbell and Kuo both testified at trial that safety

was the primary reason for transferring the remaining mechanical work

to Turner. Westlake sent no letter, email, or other writing to James

memorializing the actions taken at the meeting.

As Westlake points out, there is no dispute that James ceased all

mechanical work after the April 11 meeting. 19 Westlake thus contends

that the lack of a written termination notice is immaterial because

James’s actions demonstrate it knew that it had in fact been terminated.

However, as explained, actual notice is not a substitute for written

notice. 20 Moreover, the contract allowed Westlake to assign work to

change in your staff, field supervision, and craftsman is clearly vi[si]ble.”

Moreover, Westlake has never alleged that this email constituted either a

default notice or a termination notice. And again, Westlake has never alleged

that James is responsible for costs associated with work assigned to Turner

before the April 11 meeting.

19 As noted, Westlake did not transfer any of the civil work that had

been assigned to James, and James completed that scope of work.

20 Westlake presented evidence that James VP Conrad Bourg lost his

temper at the meeting and complained that Westlake was penalizing James

36

other contractors as it saw fit, and the contract could also be terminated

for any number of reasons. Only termination for default under

Section 21.3, however, triggered James’s obligation to pay “[a]ny extra

costs in excess of the Contract Price incurred by [Westlake]” in

completing the work. Again, James was entitled to the requisite written

notice that would give rise to that obligation, but no such notice was

given. 21

CHIEF JUSTICE HECHT’S dissent focuses on two writings to support

the conclusion that Westlake provided the requisite notice: (1) the

December 28 email in which Westlake expressed safety concerns; and

(2) the January 18 exchange between DeBarge and Kuo. Neither

supports the dissent’s position.

As discussed above, while the December 28 email expresses a

belief that there were safety problems, it did not mention Section 21.3,

default, the commencement of a seventy-two-hour window for James to

begin remediation efforts, or a warning about termination for default if

those efforts were deemed insufficient. But assuming that email

satisfies the first notice requirement, no writings satisfy the second or

third. Contrary to the dissent’s description, not only does the

even though “[e]very contractor has fatalities.” Such comments are certainly

distasteful and hurtful, but they do not demonstrate that Westlake provided

the requisite notice of termination for default under Section 21.3.

James cites DeBarge’s testimony that James would have reacted

21

differently had it known that Westlake considered James to be in default or

indicated that it would terminate the contract for that reason. The jury

appears to have rejected this testimony given its finding that James was not

prejudiced by the form of notice. Regardless, as explained, when written notice

is required, lack of prejudice does not override the absence of a writing.

37

January 18 email from Kuo express no dissatisfaction with James’s

safety efforts; it commends James on its progress in that regard.

Finally, the absence of a third written notice is uncontroverted. That is,

Westlake undisputedly never provided James with written notice that

James was actually terminated from the project for default. The

dissent’s suggestion that James’s writing—its email to Westlake after

the April meeting acknowledging that James had discontinued its

mechanical work on the project—can satisfy Westlake’s obligation to

provide notice to James turns the notice provision on its head. While

this communication may serve as some evidence that James had actual

notice of its termination, it does nothing to satisfy Westlake’s obligation

under Section 21.3. Moreover, it is doubtful that the email even

reflected actual notice of termination. Since Westlake had discretion to

allocate work to other contractors without terminating the contract,

James’s acknowledgment that it had discontinued mechanical work does

not equate to an acknowledgment that it had been terminated for

default.

In sum, because the contract required Westlake to give three

written notices as conditions precedent to the right to enforce James’s

obligations under Section 21.3, and because at least two of those notices

were not given, James had no obligation to pay Westlake’s excess costs,

and the jury’s award of breach-of-contract damages under that provision

cannot stand. In so holding, we give effect, as we must, to the

contractual language the parties chose.

38

B. Intervention Under Section 17.2

Westlake argues that even if it is not entitled to the $1,054,251.81

in contract damages the jury found for James’s failure to comply with

Section 21.3, the trial court’s judgment awarding Westlake those

damages may nevertheless be upheld because the jury independently

awarded the same amount for James’s failure to comply with

Section 17.2, which contains no “notice” requirement. That section,

entitled “Intervention,” states:

Company [Westlake] shall at any time during the

execution of the Work by Contractor [James] have the right

to intervene in any appropriate way, if in the reasonable

opinion of Company, . . . (c) Contractor is performing its

duties under this Contract in an unsafe way or manner in

which [sic] Company believes may cause injury or damage

to persons or property. In such cases Company shall have

the right to require Contractor to immediately take

remedial action to the satisfaction of Company. Contractor

shall be solely accountable for all costs associated with

such intervention and remedial action, whether incurred

by Contractor, Company or any third party.

Westlake contends that pursuant to this provision’s authorization

“to intervene in any appropriate way,” it “intervened by trying to get

James to improve its safety performance and then, when James’s safety

did not improve, informing James that Westlake would be transitioning

the remainder of James’s mechanical work to Turner.” James responds

that Section 17.2 allows Westlake to require James to take remedial

action and bear the associated cost, but it does not provide a mechanism

to terminate any portion of the work and shift the cost of hiring

replacement contractors to James. If it did, James contends, then

Section 21.3 does nothing. We agree with James.

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Section 17.2 broadly allows Westlake to intervene “in any

appropriate way,” but it goes on to focus on Westlake’s authority to

require James to take remedial action and bear the cost, and it implies

that those costs will be incurred “during the execution of the Work,” not

later. Even if Westlake is authorized to intervene in other ways,

Section 17.2 does not purport to encompass terminating the contract or

any portion of the Work. To the contrary, the contract details very

specifically how work is to be terminated, and construing the

intervention clause as Westlake does improperly reads those provisions

away entirely. See J.M. Davidson, 128 S.W.3d at 235 (“Contracts are to

be read as a whole, and an interpretation that gives effect to every part

of the agreement is favored so that no provision is rendered meaningless

or as surplusage.”). As discussed above, Section 21.3 allows Westlake to

terminate James for default for “serious safety violations” and to recover

the costs associated with hiring another contractor to complete the work,

but only after satisfying specific notice requirements and giving James

an opportunity to engage in remediation efforts. If Section 17.2

authorizes recovery of those same costs, but without the required notice

and opportunity to cure, then as James argues, there would be no reason

to invoke Section 21.3 at all because “intervening” would be far easier.

In other words, Section 17.2 would swallow Section 21.3 entirely.

In sum, we do not interpret Section 17.2 as allowing an end-run

around the more stringent requirements to terminate for default and

recover costs under Section 21.3. Accordingly, the jury’s award of

damages for James’s failure to comply with Section 17.2 cannot stand

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and thus does not serve as an independent basis for upholding a portion

of the court of appeals’ judgment.

C. Indemnity Provision

Although most of the contract damages awarded to Westlake—

$1,054,251.81—do not survive the above analysis, Westlake was also

awarded $102,767.69 in damages for James’s failure to comply with

Section 19.1, the indemnity provision. As noted, those damages consist

of litigation costs Westlake incurred in defending the Price litigation.

James argues that Westlake’s improper termination of James for default

under Section 21.3 constituted a prior material breach of the contract

that excused James’s continued performance, including satisfying its

obligations under the indemnity provision. The court of appeals rejected

this argument, as do we.

As James itself argues, the notice provisions in Section 21.3 were

conditions precedent, not covenants. A covenant “is an agreement to act

or refrain from acting in a certain way.” Solar Applications, 327 S.W.3d

at 108. A breached covenant gives rise to a cause of action for damages,

and a material breach excuses the other party from performance.

Bartush-Schnitzius Foods Co. v. Cimco Refrigeration, Inc., 518 S.W.3d

432, 436 (Tex. 2017) (“It is a fundamental principle of contract law that

when one party to a contract commits a material breach of that contract,

the other party is discharged or excused from further performance.”

(citation omitted)). By contrast, a “condition precedent is an event that

must happen or be performed before a right can accrue to enforce an

obligation,” and “if an express condition is not satisfied, then the party

whose performance is conditioned is excused from any obligation to

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perform.” Solar Applications, 327 S.W.3d at 108. The contract gave

Westlake the right to terminate the contract for any reason it chose and,

even in the absence of termination, to assign work to any contractor it

chose. But James’s obligation to pay Westlake the excess costs it

incurred in doing so was conditioned on Westlake’s satisfying

Section 21.3’s written-notice requirements. Because Westlake failed to

do so, as discussed above, it may not enforce James’s obligation to pay

those costs.

However, this did not excuse James from complying with other

provisions of the contract. That is, Westlake’s failure to provide the

requisite notice did not constitute a material (or nonmaterial) breach of

the contract that “affect[ed] the enforceability of the remaining

provisions.” Id. Again, as James itself argues, Westlake had authority

to reassign the work without terminating James at all, let alone for

default. And James’s primary position is that it was not terminated but

simply removed from the mechanical work. Indeed, after purportedly

being “wrongfully terminated,” James was paid for its mechanical work

and continued to perform civil work under the same contract. While we

do not disagree with the general principle that wrongful termination of

a contract can constitute a material breach, see, e.g., STR Constructors,

Ltd. v. Newman Tile, Inc., 395 S.W.3d 383, 388 (Tex. App.—El Paso

2013, no pet.) (holding sufficient evidence supported the jury’s finding

that STR materially breached by terminating the contract without

proper cause), that principle does not apply here because noncompliance

with a condition precedent simply precludes the noncomplying party

from enforcing its conditional right. Westlake’s actions foreclose its

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entitlement to recover under Section 21.3, but they do not amount to a

material breach of the contract excusing James from all further

performance. 22 We therefore hold that the court of appeals properly

affirmed the portion of the trial court’s judgment awarding Westlake

damages for James’s failure to comply with Section 19.1.

D. Section 26: Waiver of Consequential Damages

The parties agree that under Section 26 of the contract, neither

party is liable for consequential damages. The issue presented is

whether Section 26 also contains a covenant not to sue for such damages,

such that it may provide the basis for a breach-of-contract claim. Taking

the position that it does and that Westlake “made claims against James

for consequential damages as expressly prohibited by Section 26,” James

counterclaimed for breach of contract. As noted, the jury found that

Westlake failed to comply with Section 26 and awarded James damages

for its “reasonable and necessary attorney’s fees” incurred “in defending

against any consequential damages.” The court of appeals reversed the

trial court’s judgment on that portion of the verdict, holding that

Section 26 only waived liability for consequential damages and did not

give rise to a contractual obligation not to sue for such damages. 594

S.W.3d at 766.

Section 26 provides:

WAIVER OF CONSEQUENTIAL DAMAGES

Neither [Westlake] nor [James] shall be liable to the other

for any consequential, incidental, indirect or punitive

22 For the same reason, we reject James’s assertion that it is entitled to

judgment as a matter of law on its Section 21.3 counterclaim.

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damages . . . arising under this Contract or as a result of,

relating to or in connection with the Work and no claim

shall be made by either [Westlake] or [James] against the

other for such damages REGARDLESS OF WHETHER

SUCH CLAIM IS BASED OR CLAIMED TO BE BASED

ON NEGLIGENCE OR STRICT LIABILITY

(INCLUDING SOLE, JOINT, ACTIVE, PASSIVE,

CONCURRENT NEGLIGENCE OR GROSS

NEGLIGENCE) OR ANY OTHER THEORY OF LEGAL

LIABILITY, AND INCLUDING PRE-EXISTING

CONDITIONS BUT EXCLUDING GROSS NEGLIGENCE

AND WILLFUL MISCONDUCT.

James argues that Section 26 constitutes a clear covenant not to sue

because it plainly states, in an independent clause, that “no claim shall

be made” for consequential damages. Westlake responds that the

provision clearly functions solely as a waiver of consequential damages

that prevents a party from recovering them, not a covenant not to sue

that prohibits a party from seeking certain damages merely because a

court may ultimately conclude that they are consequential. We agree

with Westlake.

First, we have held that “headings and titles provide context and

can inform the meaning of the sections they label,” and that “[g]enerally,

courts should construe contractual provisions in a manner that is

consistent with the labels the parties have given them.” RSUI Indem.

Co. v. The Lynd Co., 466 S.W.3d 113, 121 (Tex. 2015). The title of

Section 26 is simply “Waiver of Consequential Damages,” not “Waiver of

Consequential Damages and Covenant Not to Sue” or words to that

effect.

Second, while “no claim shall be made” is contained in an

independent clause from “[n]either [party] shall be liable,” it is followed

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by language clarifying its scope: “no claim shall be made . . . for such

damages regardless of whether such claim is based or claimed to be

based on negligence . . . or any other theory of legal liability . . .

excluding gross negligence and willful misconduct.” (Capitalization

removed). Thus, the parties have relinquished a claim to any

consequential damages to which they might be entitled in the event of a

lawsuit, which the paragraph explicitly contemplates; they have not

relinquished the right to bring a suit in the first place. We therefore

disagree with James’s contention that limiting Section 26 to a waiver

renders any of its language superfluous. Indeed, if anything, construing

the second clause as a covenant not to sue for consequential damages—

such that it prevents a claim for consequential damages in the first

place—renders the language waiving liability for such damages

superfluous.

Third, the nature of the purported covenant not to sue informs

our discussion. See Dillon Gage Inc. of Dall. v. Certain Underwriters at

Lloyds Subscribing to Policy No. EE1701590, 636 S.W.3d 640, 643 (Tex.

2021) (“We determine the parties’ intent through the terms of the

[contract], giving words and phrases their ordinary meaning, informed

by context.”). As Westlake notes, none of the cases James cites involve

covenants not to sue for consequential damages, and we have been

unable to locate any. Rather, such covenants typically foreclose a party

from bringing suit at all 23 or, more commonly, from asserting causes of

23 Palestine Contractors, Inc. v. Perkins, 386 S.W.2d 764, 765 n.1 (Tex.

1964) (“[W]e, the undersigned, do hereby covenant and agree not to sue, make

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action arising from or related to specific incidents—often incidents that

were the subject of a prior, settled lawsuit. 24 When those types of

covenants are at issue, whether a party has brought a prohibited suit or

claim is fairly discernible from the outset of the litigation. That is not

the case with an agreement not to sue for consequential damages given

that legitimate disputes often arise, as they did in this case, regarding

whether contractual damages sought are properly classified as “direct”

or “consequential.” See, e.g., San Antonio River Auth. v. Austin Bridge

& Road, L.P., 601 S.W.3d 616, 630–31 (Tex. 2020); Dallas/Fort Worth

Int’l Airport Bd. v. Vizant Techs., LLC, 576 S.W.3d 362, 373–74 (Tex.

2019). Indeed, the line between direct and consequential damages often

is not a bright one. 25 Thus, a party seeking damages that it believes in

claim, or institute any action or proceeding directly or indirectly against [the

other parties] to recover damages of any kind or character.”).

24 Robertson v. Trammell, 83 S.W. 258, 260 (Tex. App. 1914, writ ref’d)

(“[Plaintiff] hereby agrees and covenants never to make the matters and things

set out and the circumstances described in plaintiff’s petition herein, the basis

of a suit against said defendant in any court, and never to bring or to maintain

an action because thereof against said defendant.”); Pape Equip. Co. v. I.C.S.,

Inc., 737 S.W.2d 397, 400–01 (Tex. App.—Houston [14th Dist.] 1987, writ ref’d

n.r.e.) (“[Dow] agrees and covenants not to sue, claim or make claims or

institute any action or proceeding directly or indirectly against I.C.S.,

Inc. . . . to recover damages of any kind or character, . . . received in or

resulting from . . . [a specific] accident . . . .”); Leong v. Wright, 478 S.W.2d 839,

840 (Tex. App.—Houston [14th Dist.] 1972, writ ref’d n.r.e.) (describing the

covenant at issue as an agreement not to “institute any action or proceeding”

against the other party “for any damages which may have resulted to the

plaintiffs from the incident made the basis of the suit”).

25 We recently reiterated that direct damages “‘are the necessary and

usual result of,’ and ‘flow naturally and necessarily from’” a contractual breach,

while “consequential damages ‘result naturally, but not necessarily,’ from the

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good faith, but ultimately incorrectly, are direct rather than

consequential will not know whether it is in breach by asserting a claim

until the nature of the claim has been determined on the back end of the

suit. 26

That appears to be exactly what happened here. Westlake alleged

that James breached various sections of the contract and sought to

recover its “actual damages.” The parties litigated whether a portion of

the costs Westlake sought qualified as (recoverable) direct damages or

(unrecoverable) consequential damages, and James obtained favorable

rulings as to some of those costs. If Section 26 contains a covenant not

to sue, the consequence of Westlake’s taking an erroneous, but by no

accounts frivolous, position on the nature of its claimed damages is that

it has breached the contract by even making the argument. While

parties are free to agree to that consequence, however unusual or

impractical, we do not read Section 26’s plain language to reflect that

intent here.

Because Section 26 waives liability for consequential damages

but is not a covenant that Westlake breached by seeking damages that

were determined to qualify as consequential, the court of appeals

defendant’s breach, and are not ‘the usual result of the wrong.’” Vizant Techs.,

576 S.W.3d at 373 (quoting Arthur Andersen & Co. v. Perry Equip. Corp., 945

S.W.2d 812, 816 (Tex. 1997)) (emphasis removed). This distinction is not

always so easily applied in practice.

26 Of course, if consequential damages are barred and a party seeks to

recover them in bad faith or by making groundless and frivolous arguments, it

is subject to sanction like any other party who asserts a frivolous claim. See

TEX. CIV. PRAC. & REM. CODE §§ 10.001–.002; TEX. R. CIV. P. 10.

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properly rendered judgment that James take nothing on its

counterclaim. 27

E. Attorney’s Fees

What remains of the trial court’s judgment is an award to

Westlake of (1) $102,767.69 in damages for James’s failure to comply

with the contract’s indemnity provision and (2) $2,923,600.50 in

attorney’s fees, plus conditional appellate fees. As Westlake is a

prevailing party and was awarded damages on a breach-of-contract

claim, it is entitled to recover its reasonable attorney’s fees under Civil

Practice and Remedies Code Section 38.001. Mustang Pipeline Co. v.

Driver Pipeline Co., 134 S.W.3d 195, 201 (Tex. 2004). However, in light

of the significantly reduced damages award and the fact that the jury’s

award of attorney’s fees was based in part on the “results obtained,” the

part of the trial court’s judgment awarding Westlake its attorney’s fees

cannot stand, and the court of appeals erred in affirming it. Barker v.

Eckman, 213 S.W.3d 306, 314 (Tex. 2006) (reversing an award of

attorney’s fees and remanding for further proceedings because of the

significant appellate adjustment to the amount of damages awarded).

Accordingly, we reverse the court of appeals’ judgment as to Westlake’s

attorney’s fees and remand to the trial court for further proceedings.

27 Westlake argues that several independent grounds exist to uphold

this portion of the court of appeals’ judgment, but we need not address those

arguments.

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III. Conclusion

We hold that Westlake did not comply with the written-notice

procedure under Section 21.3 of the contract and thus failed to satisfy

conditions precedent to its right to recover damages for James’s failure

to comply with that provision. We further hold that Westlake may not

recover those same damages under Section 17.2. However, Westlake is

entitled to recover damages for James’s breach of Section 19.1 because

Westlake’s failure to satisfy Section 21.3’s notice requirements did not

constitute a prior material breach. Finally, we hold that Westlake did

not breach Section 26 by making a claim for consequential damages

because that provision waives liability for such damages but does not

contain a covenant not to sue. We affirm the judgment of the court of

appeals in part, reverse it in part, and remand the case to the trial court

for further proceedings on Westlake’s attorney’s fees.

Debra H. Lehrmann

Justice

OPINION DELIVERED: May 20, 2022

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