## Facts

- A project owner (TA) hired a general contractor (Solar) under a written contract to build a truck stop in San Antonio, Texas, with monthly progress payments and a final payment upon completion.
- The contract’s final-payment process required: (1) substantial completion and notice, (2) owner inspection and a punch list, (3) completion of punch-list work, and (4) submission of a final application for payment accompanied by a lien-release affidavit.
- After substantial completion, TA issued a punch list; Solar disputed some items TA insisted were required before final payment.
- During the dispute, subcontractors and Solar filed liens against the property.
- TA terminated the contract and refused to make the final payment.
- Solar submitted a final application for payment without the lien-release affidavit; TA refused to pay, asserting the affidavit was a condition precedent to final payment.
- Solar sued for breach of contract seeking the unpaid balance; TA counterclaimed for delay damages and defective work and sought attorney’s fees and costs.
- A jury awarded Solar $400,000 in actual damages, offset by $8,000 for defects and omissions; the trial court entered judgment for Solar consistent with the verdict.
- On rehearing, the court of appeals reversed and rendered a take-nothing judgment for TA, holding the lien-release affidavit requirement was a condition precedent not satisfied by Solar.

## Issues

1. Whether the contract’s lien-release affidavit requirement for final payment was a condition precedent to Solar’s recovery on its breach-of-contract claim.
2. If not a condition precedent, whether Solar’s failure to provide the affidavit nonetheless barred recovery of the unpaid contract balance.

## Decision

- The Texas Supreme Court reversed the court of appeals and reinstated the trial court’s judgment for Solar.
- The Court held the lien-release affidavit provision was a covenant, not a condition precedent to recovery.
- Solar’s failure to submit the affidavit did not forfeit its right to recover the contract balance (subject to offsets found at trial).

## Legal Principles

- Conditions precedent are not favored and require clear, unequivocal language showing the parties’ intent to make performance an absolute prerequisite to liability (often signaled by terms such as “if,” “provided that,” or “on condition that”).
- When contractual language is reasonably susceptible to more than one construction, courts prefer an interpretation that avoids forfeiture.
- In construction contracts, a lien-release requirement tied to payment is generally treated as a promise enforceable by damages or other remedies unless the contract unmistakably makes it a condition precedent.
- Contract interpretation should avoid granting one party a windfall (e.g., receiving substantially completed work without paying the remaining contract price) absent unmistakably conditional wording.
- Lien-related contract provisions should be read consistently with Texas lien statutes’ dual aims of protecting owners from double payment while preserving contractors’ and subcontractors’ payment and lien rights.

## Conclusion

The Texas Supreme Court concluded that the contract did not clearly make Solar’s delivery of a lien-release affidavit a condition precedent to payment; treating the clause as a covenant avoided forfeiture and prevented TA from withholding the entire remaining contract balance based solely on the missing affidavit.


Solar Applications Eng’g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104 (Tex. 2010)