The Texas Court of Appeals recently ruled in a case involving a contract dispute between Blackmon Mooring of Austin, LLC and St. Edward’s University, Inc. The court reversed a lower court's decision that had dismissed Blackmon Mooring's claim for breach of contract. This ruling allows Blackmon Mooring to pursue its claim for unpaid work related to the reconstruction of a dormitory at the university.
This case began when a large chilled-water pipe burst in November 2018, flooding the Pavilions dormitory on St. Edward’s University’s campus. The university hired Blackmon Mooring to mitigate the damage and rebuild the affected areas. They entered into a Reconstruction Contract on February 1, 2019, which outlined the payment structure and responsibilities of both parties.
The Reconstruction Contract specified that Blackmon Mooring would be paid on a cost-plus basis, meaning there was no guaranteed maximum price for the work. An estimated budgetary price of just over $4 million was included in the contract, but it was stated that this amount could be exceeded with proper notice to the university and its insurer, Federal Insurance Company.
As the reconstruction work progressed, Blackmon Mooring notified St. Edward’s University and Federal Insurance that it would exceed the estimated budget. However, they did not specify how much the costs would increase. Neither party objected to this notification, and St. Edward’s University emphasized the importance of completing the work quickly.
After the work was completed, Blackmon Mooring invoiced St. Edward’s University for a total of $8,866,842.45. While the university and its insurer paid over $5 million, they refused to pay the remaining balance, arguing that the estimated budget constituted a not-to-exceed amount that required a written modification to the contract for any excess costs.
Blackmon Mooring subsequently filed a lawsuit in May 2020, claiming breach of contract. The university sought a summary judgment, asserting that the estimated budget was a binding cap on the costs. The trial court agreed with St. Edward’s University and dismissed Blackmon Mooring's claim.
On appeal, the Texas Court of Appeals examined the Reconstruction Contract and the arguments from both parties. The court concluded that the contract clearly required St. Edward’s University to pay Blackmon Mooring on a cost-plus basis without a guaranteed maximum price. The court stated, “the estimated budget is an estimate that can be exceeded with notice.”
The court also noted that the trial court had improperly relied on inadmissible parol evidence, which refers to external evidence that cannot be used to contradict the written terms of a contract. The court emphasized that the Reconstruction Contract was a fully integrated agreement and that any modifications needed to be in writing.
As a result, the Texas Court of Appeals reversed the trial court's summary judgment and remanded the case for further proceedings. This means that Blackmon Mooring can continue to pursue its claim for the unpaid balance owed by St. Edward’s University.
This ruling is significant as it clarifies the interpretation of cost-plus contracts and the conditions under which estimated budgets can be exceeded. It reinforces the idea that parties must adhere to the written terms of their contracts and cannot rely on prior negotiations or communications to alter those terms.
Moving forward, this case may impact how similar contracts are structured and interpreted in Texas, particularly in the construction industry. Contractors and clients alike will need to be clear about payment structures and the implications of estimated budgets in their agreements.
As for what’s next, it remains to be seen whether St. Edward’s University will appeal the ruling or if there are any related cases pending. The court's decision has opened the door for Blackmon Mooring to seek the compensation it claims is owed, and both parties will likely prepare for further legal proceedings.