Texas Voids Out-of-State Forum and Choice of Law Clauses in Construction Contracts

By Ramy P. Elmasri

The Texas Legislature recently amended key statutes governing construction contracts for projects located in Texas, significantly limiting the enforceability of out-of-state forum selection and choice-of-law provisions. Effective September 1, 2025, the amendments to Texas Civil Practice & Remedies Code § 15.020 and Texas Business & Commerce Code § 272.001 now provide that contractual provisions requiring disputes to be litigated or arbitrated outside of Texas, or governed by another state’s law, are void as against public policy for construction projects performed in Texas.

Under the revised statutory framework, disputes arising from Texas construction projects must generally be brought in the Texas county where the project is located, regardless of contractual language selecting another state’s venue or governing law. The parties may only agree to a different venue after a dispute arises, meaning pre-dispute contractual provisions selecting an out-of-state forum will not be enforceable.

This amendment represents a significant shift from the prior law. Previously, these provisions were considered merely “voidable” and courts sometimes enforced them under principles favoring freedom of contract. In several decisions, including federal and Texas appellate cases, courts upheld out-of-state venue clauses where parties were found to have waived statutory protections. The new amendments appear designed to eliminate that ambiguity by declaring such provisions void as a matter of public policy, rather than merely voidable.

For insurers, contractors, and construction industry participants involved in Texas projects, the changes have meaningful litigation and risk management implications. Contracting parties that historically centralized litigation in their home jurisdictions will likely face localized litigation in Texas courts, particularly in the county where the work occurred. This may impact defense strategy, claim valuation, venue considerations, and the administration of large multi-state construction programs.

There are still several open questions. Courts have not yet interpreted the amendments, and it remains unclear whether the Federal Arbitration Act could preempt aspects of the statute in contracts containing arbitration provisions, an issue previously addressed by federal courts under the earlier statutory scheme. Until courts provide further guidance, parties negotiating construction contracts involving Texas projects should carefully review venue and governing law provisions and consider how these statutory changes may affect dispute resolution strategies.

Key Takeaways

• Out-of-state forum and choice-of-law clauses in Texas construction contracts are now void as against public policy.
• Disputes must generally be filed in the Texas county where the project is located.
• Parties can only agree to a different venue after a dispute arises.
• The law applies to contracts entered into or renewed on or after September 1, 2025.
• Potential interaction with the Federal Arbitration Act remains an unresolved issue.