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78R6023 KCR-F

By:  Corte                                                        H.B. No. 2397



A BILL TO BE ENTITLED

AN ACT

relating to a vendor's or subcontractor's remedy for nonpayment of 
certain contracts.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subchapter B, Chapter 2251, Government Code, is 
amended by adding Sections 2251.031 and 2251.032 to read as 
follows:
	Sec. 2251.031.  VENDOR REMEDY FOR NONPAYMENT OF CONTRACT.  
(a)  A vendor may suspend performance required under a contract with 
a governmental entity if:
		(1)  the governmental entity does not pay the vendor an 
undisputed amount within the time limits provided by Section 
2251.021; and
		(2)  the vendor gives the governmental entity written 
notice:        
			(A)  informing the governmental entity that 
payment has not been received; and
			(B)  stating the intent of the vendor to suspend 
performance for nonpayment.
	(b)  The vendor may not suspend performance under this 
section before the 10th day after the date the vendor gives notice 
under Subsection (a).
	(c)  A vendor who suspends performance under this section is 
not:     
		(1)  required to supply further labor, services, or 
materials until the vendor is paid the amount provided for under 
this chapter, plus costs for demobilization and remobilization; or
		(2)  responsible for damages resulting from suspending 
work if the governmental entity with which the vendor has the 
contract has not notified the vendor in writing before performance 
is suspended that payment has been made or that a good faith dispute 
for payment exists.
	(d)  A notification under Subsection (c)(2) that a good faith 
dispute for payment exists must specify the reasons for nonpayment.  
If a reason specified is that labor, services, or materials 
provided by the vendor or a subcontractor are not provided in 
compliance with the contract, the vendor or subcontractor is 
entitled to a reasonable opportunity to:
		(1)  cure the noncompliance; or                                        
		(2)  offer a reasonable amount to compensate for listed 
items for which noncompliance cannot be promptly cured.
	(e)  The rights and remedies provided by this section are in 
addition to rights and remedies provided by this chapter or other 
law.
	(f)  A person may not waive any rights or remedies granted by 
this section, by contract, or by any other means.  Any purported 
waiver of this section is void.
	Sec. 2251.032.  SUBCONTRACTOR REMEDY FOR VENDOR'S 
NONPAYMENT OF CONTRACT.  (a)  A subcontractor of a vendor under a 
contract with a governmental entity may suspend performance 
required under the contract with the vendor if:
		(1)  the vendor does not pay the subcontractor an 
undisputed amount within the time provided under the contract 
between the vendor and subcontractor; and
		(2)  the subcontractor gives the vendor written notice:                
			(A)  informing the vendor that payment has not 
been received; and   
			(B)  stating the intent of the subcontractor to 
suspend performance for nonpayment.
	(b)  The subcontractor may not suspend performance under 
this section before the 10th day after the date the subcontractor 
gives notice under Subsection (a).
	(c)  A subcontractor who suspends performance under this 
section is not:
		(1)  required to supply further labor, services, or 
materials until the subcontractor is paid the amount provided for 
under the contract, plus costs for demobilization and 
remobilization; or
		(2)  responsible for damages resulting from suspending 
work if the vendor has not notified the subcontractor in writing 
before performance is suspended that payment has been made or that a 
good faith dispute for payment exists.
	(d)  A notification under Subsection (c)(2) that a good faith 
dispute for payment exists must specify the reasons for nonpayment.  
If a reason specified is that labor, services, or materials 
provided by the subcontractor are not provided in compliance with 
the contract, the subcontractor is entitled to a reasonable 
opportunity to:
		(1)  cure the noncompliance; or                                        
		(2)  offer a reasonable amount to compensate for listed 
items for which noncompliance cannot be promptly cured.
	(e)  The rights and remedies provided by this section are in 
addition to rights and remedies provided by this chapter or other 
law.
	(f)  A person may not waive any rights or remedies granted by 
this section by contract or by any other means.  Any purported 
waiver of this section is void.
	SECTION 2.  (a)  This Act takes effect September 1, 2003.                      
	(b)  This Act applies only to a contract executed on or after 
September 1, 2003. A contract executed before September 1, 2003, is 
governed by the law as it existed on the date the contract is 
executed, and the former law is continued in effect for that 
purpose.