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 … it has taken from 1990 to 2007 to get this accomplished," says Lee. "We are really tickled that it has gone to the governor to sign."

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 a signature.

CLICK HERE to read the proposed bill in its entirety.