By:  Harris                                            S.B. No. 662
                                 A BILL TO BE ENTITLED
                                        AN ACT
    1-1  relating to certain agreements for the payment of subcontractors.
    1-2        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-3        SECTION 1.  Subchapter D, Chapter 35, Business & Commerce
    1-4  Code, is amended by adding Section 35.521 to read as follows:
    1-5        Sec. 35.521.  AGREEMENT FOR PAYMENT OF CONSTRUCTION
    1-6  SUBCONTRACTOR.  (a)  If a contract or other agreement between an
    1-7  original contractor and a subcontractor contains a provision by
    1-8  which payment from an original contractor to a subcontractor is
    1-9  conditioned on receipt of payment from another person, including an
   1-10  owner for whom an improvement is being made, and the owner has not
   1-11  made payment to the original contractor by the 35th day following
   1-12  the date of the subcontractor's invoice that is satisfactorily
   1-13  completed to the original contractor, and accordingly the original
   1-14  contractor has not made payment of such invoice to the
   1-15  subcontractor, then:
   1-16              (1)  the subcontractor can immediately cease providing
   1-17  labor, services, or materials required under its contract with the
   1-18  original contractor, without penalty, liability for damages, or any
   1-19  other remedy; and
   1-20              (2)  the subcontractor has a cause of action against
   1-21  the owner for all of the unpaid payments as if it had contracted
   1-22  directly with the owner.  The owner shall not be liable to the
   1-23  original contractor for any payments made to the subcontractor
   1-24  under this subsection.
    2-1        (b)  The rights and remedies granted to the subcontractor in
    2-2  this section are in addition to, not in lieu of, any other rights
    2-3  and remedies otherwise available by law.
    2-4        (c)  In an action brought by the subcontractor under
    2-5  Subsection (a)(2), the owner has an affirmative defense of offset
    2-6  for any damages of the owner for any labor, services, or materials
    2-7  furnished by the subcontractor that do not comply with the
    2-8  requirements of the original contract.
    2-9        (d)  In this section:
   2-10              (1)  "Original contractor" means a person who contracts
   2-11  with an owner to improve the owner's real property.  It includes a
   2-12  person who performs construction, construction management services,
   2-13  remodeling, repairs, or improvements to the property.
   2-14              (2)  "Owner" means a person who has an interest in real
   2-15  property.
   2-16              (3)  "Subcontractor" means a person who contracts to
   2-17  furnish labor or material to an original contractor or another
   2-18  subcontractor in connection with a contract to improve real
   2-19  property.
   2-20        (e)  Subsection (a) does not apply:
   2-21              (1)  to contracts undertaken by the Texas Department of
   2-22  Transportation; or
   2-23              (2)  to a contract or agreement for the construction of
   2-24  a one-family to four-family dwelling.
   2-25        SECTION 2.  This Act applies only to a contract or other
   2-26  agreement entered into on or after the effective date of this Act.
   2-27        SECTION 3.  This Act takes effect September 1, 1995.
    3-1        SECTION 4.  The importance of this legislation and the
    3-2  crowded condition of the calendars in both houses create an
    3-3  emergency and an imperative public necessity that the
    3-4  constitutional rule requiring bills to be read on three several
    3-5  days in each house be suspended, and this rule is hereby suspended.