By Ritter H.B. No. 2271
76R7532 PAM-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to contingent payment clauses in certain construction
1-3 contracts.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter A, Chapter 53, Property Code, is
1-6 amended by adding Section 53.004 to read as follows:
1-7 Sec. 53.004. CONTINGENT PAYMENT CLAUSE. (a) In this
1-8 section, "contingent payment clause" means a provision in a written
1-9 agreement that makes payment for a subcontractor's work contingent
1-10 on the original contractor's receipt of payment from the owner.
1-11 (b) A contingent payment clause is valid and enforceable
1-12 only if:
1-13 (1) the clause is conspicuously stated in a written
1-14 agreement signed by the subcontractor; and
1-15 (2) payment is wrongfully withheld from the original
1-16 contractor by the owner.
1-17 (c) A surety furnishing a bond under Subchapter I may assert
1-18 the surety's principal's defense to payment under a valid,
1-19 enforceable contingent payment clause.
1-20 (d) If a subcontractor's claim against the original
1-21 contractor and the contractor's surety is unenforceable because of
1-22 a valid, enforceable contingent payment clause, the bond furnished
1-23 under Subchapter I does not relieve the owner and the owner's
1-24 property from liability for the subcontractor's claim if the
2-1 subcontractor has perfected a lien under Subchapter C. A person
2-2 may discharge the subcontractor's claim against the owner and the
2-3 owner's property by filing a bond under Subchapter H.
2-4 (e) If a subcontractor's claim against the original
2-5 contractor is unenforceable because of a valid, enforceable
2-6 contingent payment clause and no bond is furnished under Subchapter
2-7 I, the subcontractor may perfect a lien by complying with
2-8 Subchapter C.
2-9 SECTION 2. Subchapter C, Chapter 53, Property Code, is
2-10 amended by adding Section 53.059 to read as follows:
2-11 Sec. 53.059. DERIVATIVE CLAIMANT: NOTICE OF CONTINGENT
2-12 PAYMENT CLAUSE. (a) In this section, "contingent payment clause"
2-13 has the meaning assigned by Section 53.004.
2-14 (b) A claimant whose claim against the original contractor
2-15 and the contractor's surety is unenforceable because of a valid and
2-16 enforceable contingent payment clause may file and give notice
2-17 under this section.
2-18 (c) The notice authorized under this section is not required
2-19 to perfect a lien, but if a claimant fails to provide the notice,
2-20 the filing of a valid bond under Subchapter H discharges the
2-21 claimant's mechanic's lien or affidavit claiming a mechanic's lien.
2-22 (d) Subject to Subsection (e), the claimant must file notice
2-23 with the county clerk of the county in which the property is
2-24 located not later than the 15th day of the second month after the
2-25 date of the initial delivery of materials or the performance of
2-26 labor by the claimant, whichever first occurs after a valid bond is
2-27 recorded under Section 53.203.
3-1 (e) If the claimant has completed the delivery of materials
3-2 and the performance of labor before the recording of the bond, the
3-3 claimant is not required to file and serve notice under this
3-4 section.
3-5 (f) The notice must be signed and acknowledged by the
3-6 claimant or another person on the claimant's behalf and must
3-7 contain substantially:
3-8 (1) the name and last known address of the owner or
3-9 reputed owner;
3-10 (2) a description of the property for which the
3-11 claimant is furnishing materials or labor that is legally
3-12 sufficient for identification;
3-13 (3) the claimant's name, mailing address, and, if
3-14 different, physical address;
3-15 (4) the name and last known address of the original
3-16 contractor; and
3-17 (5) a statement that the claimant has entered into an
3-18 agreement that contains a contingent payment clause and if the
3-19 owner wrongfully withholds payment from the original contractor for
3-20 work furnished by the subcontractor, the claimant may assert a
3-21 claim against the owner and the owner's property that is not
3-22 discharged by the recorded payment bond.
3-23 (g) A claimant who files notice under this section must send
3-24 a copy of the notice by registered or certified mail not later than
3-25 the fifth day after the date the notice is filed with the county
3-26 clerk to:
3-27 (1) the owner or reputed owner at the owner's last
4-1 known address; and
4-2 (2) the original contractor at the original
4-3 contractor's last known address.
4-4 SECTION 3. Section 53.157, Property Code, is amended to read
4-5 as follows:
4-6 Sec. 53.157. DISCHARGE OF LIEN. A mechanic's lien or
4-7 affidavit claiming a mechanic's lien filed under Section 53.052 may
4-8 be discharged of record by:
4-9 (1) recording a lien release signed by the claimant
4-10 under Section 53.152;
4-11 (2) failing to institute suit to foreclose the lien in
4-12 the county in which the property is located within the period
4-13 prescribed by Section 53.158, 53.175, or 53.208;
4-14 (3) recording the original or certified copy of a
4-15 final judgment or decree of a court of competent jurisdiction
4-16 providing for the discharge;
4-17 (4) filing the bond and notice in compliance with
4-18 Subchapter H, except as provided by Sections 53.004 and 53.059;
4-19 (5) filing the bond in compliance with Subchapter I;
4-20 or
4-21 (6) recording a certified copy of the order removing
4-22 the lien under Section 53.160 and a certificate from the clerk of
4-23 the court that states that no bond or deposit as described by
4-24 Section 53.161 was filed by the claimant within 30 days after the
4-25 date the order was entered.
4-26 SECTION 4. Section 53.201(b), Property Code, is amended to
4-27 read as follows:
5-1 (b) Except as provided by Sections 53.004 and 53.059, if
5-2 [If] a valid bond is filed, a claimant may not file suit against
5-3 the owner or the owner's property and the owner is relieved of
5-4 obligations under Subchapter D or E.
5-5 SECTION 5. Subchapter B, Chapter 2253, Government Code, is
5-6 amended by adding Section 2253.028 to read as follows:
5-7 Sec. 2253.028. CONTINGENT PAYMENT CLAUSE. (a) In this
5-8 section, "contingent payment clause" means a provision in a written
5-9 agreement that makes payment for a subcontractor's work contingent
5-10 on the prime contractor's receipt of payment from the governmental
5-11 entity.
5-12 (b) A contingent payment clause is valid and enforceable
5-13 only if:
5-14 (1) the clause is conspicuously stated in a written
5-15 agreement signed by the subcontractor; and
5-16 (2) payment is wrongfully withheld from the prime
5-17 contractor by the governmental entity.
5-18 (c) A surety furnishing a bond under this subchapter may
5-19 assert the surety's principal's defense to payment under a valid,
5-20 enforceable contingent payment clause.
5-21 (d) If a subcontractor's claim against the prime contractor
5-22 and the contractor's surety is unenforceable because of a valid,
5-23 enforceable contingent payment clause and the subcontractor
5-24 provides the governmental entity with the notice required under
5-25 Subchapter C, the governmental entity is subject to the same
5-26 liability as the prime contractor's surety would be if the claim
5-27 had been perfected.
6-1 SECTION 6. (a) This Act takes effect September 1, 1999.
6-2 (b) The changes in law made by this Act apply only to an
6-3 agreement containing a contingent payment clause, as that term is
6-4 defined by Section 53.004, Property Code, and Section 2253.028,
6-5 Government Code, as added by this Act, that is entered into on or
6-6 after September 1, 1999. An agreement containing a contingent
6-7 payment clause, as that term is defined by Section 53.004, Property
6-8 Code, and Section 2253.028, Government Code, as added by this Act,
6-9 that was entered into before September 1, 1999, is governed by the
6-10 law as it existed on the date the agreement was entered into, and
6-11 the former law is continued in effect for that purpose.
6-12 SECTION 7. The importance of this legislation and the
6-13 crowded condition of the calendars in both houses create an
6-14 emergency and an imperative public necessity that the
6-15 constitutional rule requiring bills to be read on three several
6-16 days in each house be suspended, and this rule is hereby suspended.