Texas Contingency Pay Bill Goes to Governor
Wednesday, May 23rd marked a very big day for the Texas Construction
Association. That was the day House Bill 734, 'relating to contingent
payment clauses in certain construction contracts,' was passed on
to Texas Gov. Rick Perry.
The bill, which is nearly nine pages, provides detailed circumstances
in which a contingent payment clause may or may not be enforced
when working with subcontractors. Boiled down to its essence, the
strength of the bill lies in the following clause prohibiting a
contractor to withhold payment from a subcontractor based on the
initial contractor not receiving payment:
"A contingent payor or its surety may not enforce a contingent
payment clause to the extent that the obligor's nonpayment to the
contingent payor is the result of the contractual obligations of
the contingent payor not being met, unless the nonpayment is the
result of the contingent payee's failure to meet the contingent
payee's contractual requirements."
The rest of the proposed bill details circumstances under which
a contingent payment clause may be enforced or disputed, and the
steps necessary to take those actions.
According to Virginia Lee, executive director of the Texas Glass
Association, the progress of the bill realizes the founding principle
of the association.
"This was the reason we founded the association
has taken from 1990 to 2007 to get this accomplished," says
Lee. "We are really tickled that it has gone to the governor
According to Texas Law, upon receipt of a bill the governor has
ten days to either sign it, veto it, or allow it to become law without
HERE to read the proposed bill in its entirety.