Volume 37, Issue 9, September 2002

Legal

Texas Subcontractors and Contractors Agree on Contingent Payment Compromise Bill

Thanks to the efforts of several members of the Texas Construction Association (TCA), and the Texas Glass Association, contractor/subcontractor payment issues may soon see improvements in the state. Fifteen Texas contractors, subcontractors, two lawyers and a facilitator from North Carolina joined together to create a “compromise bill” that would “allow both groups to cease their positional bargaining and seek solutions that would be in their common best interests.”

According to a statement issued by Raymond Risk, president and chief executive officer of the TCA, and Steve Nelson, president of SureTec Information Inc. and chairperson of the Texas Building Branch, AGC legislative committee, the group has approved a draft bill addressing payment concerns and issues. The bill’s guiding principles are:

·        A general contractor may [or may not] shift the risk of owner insolvency;

·        A general contractor may not enforce the clause when the reason for non-payment by an owner is related to the general contractor’s default or mismanagement, or is the fault of another subcontractor;

·        A general contractor may not enforce the clause if the relationship between the owner and the general contractor is a sham;

·        At or about the time a subcontractor would be entitled to cease work under the Texas Prompt Pay Act as a result of non-payment, it may advise the general contractor that further work will not be subject to the contingent payment clause; and

·        A general contractor may not enforce a contingent payment clause when to do so would be inconsiderable.

According to the statement, the bill’s last point “defied precise definition.” Negotiating teams therefore agreed that some uncertainty might be preferable. “By leaving the area somewhat indeterminate, settlement and cooperation would be encouraged out of necessity.”

The bill is currently being submitted, and Texas legislature will convene in January of 2003.

Texas Drafts of the bill and other explanatory material can be found on the TCA’s website at www.texcon.org.

 

 


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