In January 2023, plaintiff RetailMax Inc. (a 45-location retail chain headquartered in Austin, Texas) contracted with defendant NovaTech Solutions LLC (a mid-size software firm in Dallas) to build and deliver a custom CRM platform within 6 months for $800,000. The Master Services Agreement (MSA) included a liquidated damages clause: $4,000/day for late delivery, capped at 60% of total contract value ($480,000). NovaTech delivered in month 10 — 4 months late. During development, 28 change requests were submitted across 19 emails. NovaTech argues RetailMax's frequent scope changes — including adding a mobile app module and Salesforce integration not in the original SOW — caused the delay. RetailMax argues all changes were minor refinements, NovaTech never invoked the contract's formal Change Order process, and NovaTech's own staffing failures are documented in internal Slack messages. RetailMax seeks $480,000 in liquidated damages plus $85,000 in consequential damages (extra legacy system maintenance and a lost enterprise client). NovaTech counter-claims the liquidated damages clause is an unenforceable penalty under Texas law and seeks $120,000 in unpaid final milestone payments.
Master Services Agreement (MSA) and Statement of Work (SOW)
Section 7.2 (Change Orders): "Any request that materially affects project scope, timeline, or budget shall be documented via a written Change Order signed by both parties. Absent a signed Change Order, the original timeline and deliverables remain binding." Section 9.4 (Liquidated Damages): "$4,000 per calendar day of delay beyond the Delivery Date, not to exceed 60% of total contract value." Section 14.3 (Limitation of Liability): "Neither party shall be liable for indirect, incidental, or consequential damages." Plaintiff argues consequential damages waiver does not apply because NovaTech's breach was willful. Defense argues the plain language bars all consequential claims regardless of intent.
Change request email chain (19 emails, annotated timeline)
Emails 1–7 (Jan–Feb): Standard requirement clarifications, both parties acknowledged. Emails 8–12 (March): RetailMax requested Salesforce integration (NovaTech internally estimated 480 additional hours but responded "we can handle this" without flagging timeline risk). Emails 13–17 (April–May): RetailMax requested a customer-facing mobile app (not in original SOW); NovaTech replied "confirmed, adding to sprint backlog" with no mention of schedule impact or Change Order. Emails 18–19 (June): RetailMax asked for delivery status; NovaTech responded "on track, working through final integrations" — no delay notice or Change Order submitted. Key dispute: Salesforce integration and mobile app may constitute material scope changes, but NovaTech never invoked Section 7.2.
Independent technical audit report (court-appointed expert)
Prepared by Deloitte Digital, commissioned by the Travis County District Court. Findings: Of 28 change requests, 6 qualify as "material scope changes" under the MSA definition (Salesforce integration, mobile app, real-time inventory API, custom analytics dashboard, SSO implementation, multi-language support). Reasonable schedule extension for these 6 changes: approximately 5 weeks (35 days). The remaining 22 requests are routine refinements with negligible schedule impact. The audit also identified that NovaTech chose an incompatible API architecture for the Salesforce module, requiring a full rebuild — approximately 320 hours of rework attributable solely to NovaTech's technical error, not to RetailMax's requirements.
NovaTech internal Slack messages and Jira logs (discovery production)
Jira project tracking: 9,800 total hours logged (vs. 5,500 hours estimated in SOW). NovaTech's #crm-project Slack channel contains multiple messages from project lead Marcus Chen: "We are bleeding resources — Jake and Priya got pulled to the FinServ project" (March 14); "Timeline is blown, need 3 more devs minimum" (April 2); "CEO says no new hires this quarter, we just have to grind" (April 8). None of these concerns were communicated to RetailMax. Marcus Chen's direct Slack to VP of Engineering (May 1): "RetailMax doesn't know how behind we are. Should we tell them?" Response: "Not yet — let's see if we can close the gap." Plaintiff argues these messages prove NovaTech knew it was in breach and concealed it.
RetailMax consequential damages documentation
Loss 1: $52,000 in additional IT contractor costs for maintaining legacy CRM during the 4-month delay (invoices from Accenture attached). Loss 2: $33,000 — RetailMax lost a $200K/year enterprise client (Pinnacle Brands) whose onboarding required the new CRM; Pinnacle's termination letter explicitly cites "inability to integrate with your systems" as the reason. NovaTech disputes: (1) legacy maintenance is a normal operating cost unrelated to the delay; (2) Pinnacle's departure may have multiple causes; (3) Section 14.3 bars consequential damages regardless. RetailMax responds: Section 14.3 is unenforceable as to willful breach under Texas precedent (Sharyland Water Supply v. City of Alton).
Marcus Chen (NovaTech Project Lead, defense witness)
Led the CRM project from kickoff to delivery; 5 years at NovaTech; directly managed the development team
RetailMax kept adding scope — the Salesforce integration alone was 480 hours we didn't budget for, and the mobile app was completely new. We said yes because we wanted to keep the client happy, but every "yes" pushed the timeline. I flagged internally that we were understaffed, but the company didn't give me more resources. I never filed a formal Change Order because I thought we could still deliver on time. By the time I realized we couldn't, it felt too late to bring it up.
Sarah Okafor (RetailMax VP of Technology, plaintiff's witness)
Responsible for all technology vendor relationships at RetailMax; managed the CRM project from the client side
Every change we requested was a normal refinement — this is standard in agile development. NovaTech always responded "confirmed, no problem." They never once mentioned a schedule risk. If they believed our requests constituted material scope changes, Section 7.2 required them to submit a Change Order. They didn't — not once in 10 months. Their internal staffing problems were completely invisible to us until we got the Slack discovery. That concealment cost us a major client.
Dr. Rachel Torres (independent software project expert, court-appointed)
Partner at Deloitte Digital; authored the court-commissioned technical audit; 18 years of software project evaluation experience; has testified as an expert in 22 breach-of-contract cases
Our audit identified 6 material scope changes that would reasonably justify a 5-week extension. However, NovaTech's own architectural error on the Salesforce integration — choosing an incompatible API framework — caused approximately 320 hours of rework that is entirely NovaTech's responsibility. The remaining delay of approximately 7 weeks beyond the justified extension is attributable to NovaTech's resource allocation decisions, not to RetailMax's requirements. I want to emphasize: our schedule impact analysis is retrospective and carries inherent uncertainty of plus or minus one week.
Software Development Contract Breach — Austin, TX
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