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.
3-6 COMMITTEE AMENDMENT NO. 1
3-7 Amend S.B. 662 in SECTION 1, Sec. 35.521(a) by adding the
3-8 following between "satisfactorily completed to the original
3-9 contractor," and "and accordingly":
3-10 "and the original contractor has invoiced the owner for the
3-11 work performed by the subcontractor,"
3-12 Rhodes