Yes, in some situations. If a construction project is delayed, a property owner may seek compensation for income lost because of the delay, such as missed rent, hotel bookings or other business revenue. Contractors should understand that responsibility for those losses often depends on the construction contract, the cause of delay and the circumstances surrounding the dispute.
Why do owners seek lost profits?
Not every construction delay ends with a lawsuit, but delays can have financial consequences. A postponed hotel opening may mean empty rooms. A retail center that opens late may lose rental income from tenants. In some cases, owners can seek those losses from the contractor, in addition to the direct cost of completing or repairing the project.
Can every delay lead to a lost profits claim?
No. Texas courts generally treat lost profits as consequential damages rather than direct damages. To recover those damages, an owner typically must show the claimed losses were reasonably foreseeable when the parties entered into the contract, and support the claim with reliable evidence.
As a result, contractors are not automatically responsible for lost profits, and the construction contract often plays a major role in determining whether those damages may be recovered.
How can contractors reduce this risk?
Before signing a construction contract, contractors should review provisions that address financial liability, including:
- Clauses discussing consequential damages and delay-related claims
- Whether the contract addresses lost rental income, business revenue or other indirect losses
- Waivers or limits on certain types of damages
- Notice requirements for delay-related claims
- Contract terms that create uncertainty about financial responsibility
Carefully reviewing these provisions before signing can help contractors identify potential risks early and reduce surprises if a delay leads to a dispute over lost profits.
What should contractors remember?
A project delay does not automatically make a contractor responsible for a property owner’s lost profits. The contract, the reason for the delay and the evidence supporting the claim all influence whether those damages may be recoverable under Texas law.
Knowing those issues before a dispute arises can help contractors better manage risk. When a dispute involves significant financial claims or complex contract provisions, experienced legal guidance can help contractors evaluate their potential exposure and determine the appropriate next steps.
