The Texas Legislature amended statutes impacting construction contracts for projects located in Texas to declare any forum selection clause or choice of law provision “void as against public policy,” and mandate venue for any litigation or arbitration shall be in the Texas county in which the work is performed. The parties may stipulate to a different venue only after the dispute arises.
Forum selection clauses and choice of law provisions are common in construction contracts. Frequently, general contractors based in other jurisdictions require subcontractors to sign contracts designating the contractor’s preferred venue for any dispute. These contracts may also select the law of another state to govern the contract.
Many jurisdictions disfavor these clauses, and Texas has enacted two statutes addressing forum selection and choice of law provisions in construction contracts.
First, Section 15.020 of the Texas Civil Practice & Remedies Code permits contracting parties to select a particular county as venue for disputes involving “major transactions,” defined as written transactions involving consideration with an aggregate value equal to or greater than one million. The statute previously provided that venue provisions in construction contracts were “voidable” at the election of the party performing the work. Tex. Civ. Prac. & Rem. Code § 15.020 (d) (2).
Second, in 2007, the Texas Legislature enacted a statute specifically addressing forum selection and choice of law provisions in construction contracts and deeming such clauses “voidable” at the option of the contractor performing the work. Tex. Bus. & Com. Code § 272.001.
At least two Texas courts interpreted the previous version of this statute and held that the strong public policy favoring freedom of contract negated the contractor’s statutory ability in Section 272.001 to assert that the venue provision was “voidable.” See generally, America-Fab, LLC v. Vanguard Energy Partners, LLC, 646 F.Supp.3d 795, 805-06 (holding that “’Texas’s strong public policy favoring freedom of contract’ requires courts to ‘respect and enforce the terms of a contract the parties have freely and voluntarily entered’” and enforcing contractual venue clause in New Jersey instead of Texas); In re MVP Terminalling, LLC, 2022 WL 3592303, Tex.App.-Houston [14th Dist.] 2022 (not designated for publication) (holding parties may contractually waive rights to challenge forum selection clauses pursuant to Section 272.001).
These courts determined that contractors and subcontractors could still waive their ability to declare the choice of law or forum selection provisions as “voidable” by agreeing to a different state’s venue and/or law. “Weighed against the freedom of contract, the Texas Supreme Court has stated that ‘absent a Texas statute requiring suit to be brought in Texas, the existence of Texas statutory law in an area did not establish such Texas public policy as would negate a contractual forum-selection provision.’” America-Fab, LLC v. Vanguard Energy Partners, LLC, 646 F.Supp.3d 795, 805-06 (citing In re Lyon Fin. Servs. Inc., 257 S.W.3d 228, 234 (Tex. 2008) (emphasis original).
The United States District Court for the Southern District of Texas also interpreted the previous version of Section 272.001 and held that the Federal Arbitration Act preempted the statute for contracts containing an arbitration clause. See Glob. Indus. Contractors, LLC v. Red Eagle Pipeline, LLC, 617 F. Supp. 3d 633, 637-38 (S.D. Tex. 2022).
In re MVP Terminalling, LLC, 2022 WL 3592303 at *6-7, Tex.App.-Houston [14th Dist.] 2022 (not designated for publication) (internal citations omitted).
Section 15.020 of the Texas Civil Practice & Remedies Code and Section 272.001 of the Texas Business & Commerce Code now provide that any forum selection clause in a construction contract requiring venue for litigation or arbitration in another state or subjecting the contract to the law of another state is “void as against public policy.” Section 272.001 also now includes the following additional statutory prohibition for construction contracts:
(c) To the extent that a venue provision in a contract is void under Subsection (b), unless the parties stipulate to another venue after the dispute arises, an action arising out of the contract shall be brought only in this state in the county in which the property that is the subject of the litigation is located.
Tex. Bus. & Com. Code § 272.001 (emphasis added).
These amendments took effect on September 1, 2025, and only apply to contracts entered into or renewed on or after that date. Texas courts have not yet interpreted these recent statutory amendments, nor has a court determined whether the Federal Arbitration Act preempts these statutory prohibitions. Contractors performing work in Texas should be aware of this critical new framework when negotiating contracts for work performed in Texas.
