Texas Construction Contracts Guide & FAQs

Need contract help? Put a team of legal experts in your corner.

Learn more
Texas Construction Contracts

Texas Construction Contracts Overview

Texas Construction Contracts Overview


  • Private Jobs
  • Public Jobs
  • Top Links

A construction contract outlines each party’s obligations, rights, and remedies on a project. But although the language in specific contract clauses is typically negotiable, Texas has certain rules that govern what the agreement must include — and what is prohibited.

Keep in mind that, while Texas’ rules for construction contract terms are written into state law, the courts determine how strictly those laws should be interpreted — and those interpretations can change.

On this page, you’ll find resources, legal information, and answers to frequently asked questions about Texas’ construction contract and payment terms requirements.

Texas construction contract provisions

While Texas generally allows construction parties to set the terms of their agreement, there are some laws that regulate specific types of contract provisions. Any contract clause that contradicts the law is invalid and unenforceable.

“No lien” clauses

Texas’ mechanics lien laws strictly prohibit no-lien clauses, i.e. the ability to waive the right to file a mechanics lien by contract as against public policy.

Contingent payment clauses

There are two types of contingent payment clauses: pay-if-paid and pay-when-paid; both of which are enforceable under Texas law.

Pay-if-paid clauses will only be enforceable if clearly, expressly, and unequivocally shifts the risk of nonpayment. Even if the clause meets these requirements, there are certain types of contracts and circumstances in which an otherwise valid pay-if-paid clause will be unenforceable. Pay-if-paid clauses are unenforceable in contracts solely for design services, civil engineering projects, and residential projects of 4 units or fewer. Additionally, Texas courts will not enforce such clauses if contractual obligations aren’t met, notice objecting the enforceability is provided, or as a defense to invalidate a lien, to name a few.

Lastly, pay-when-paid clauses are also enforceable, but will only affect the timing of payment. The obligation to pay still remains, regardless if the owner fails to pay.

Payment timing clauses

Texas’ prompt payment laws on both public and private projects are strictly enforced. The deadlines and timing of payments on any project covered under the Texas prompt pay laws cannot be modified by an agreement between the parties.

Retainage clauses

On private projects, Texas owners must withhold 10% as retainage. This cannot be altered or modified by contract. However, on Texas public works projects, retainage is mostly unregulated, so the terms of the contract will govern the amount of retainage that can be withheld.

Texas home improvement construction contract requirements

Texas contracts for the improvement of residential properties have a few required disclosures and notices that must be included. This includes a Residential Disclosure Statement outlining the homeowner’s rights in case of a dispute, a list of any subcontractors and suppliers the contractor intends to use on the project, and a disclosure concerning construction defects and the notice and opportunity to repair.

Construction Contracts FAQs in Texas

Construction contracts and payment terms are highly regulated in Texas. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with construction contracts and payment terms on Texas jobs.

Texas Construction Contracts FAQs

Can you waive lien rights by contract in Texas?

No, contractors cannot waiver lien rights by contract in Texas. The law strictly prohibits these so-called “no-lien clauses” or other such contract provisions under Tex. Prop. Code §53.286:

Notwithstanding any other law and except as provided by Section 53.282, any contract, agreement, or understanding purporting to waive the right to file or enforce any lien or claim created under this chapter is void as against public policy.

How does Texas treat pay-if-paid and pay-when-paid clauses?

Pay-if-paid clauses

Pay-if-paid clauses in Texas are generally enforceable if the clause clearly, unequivocally, and expressly shifts the risk of nonpayment. –Gulf Construction v. Self

However, there are certain types of contracts and exceptions to the enforceability of such provisions.

Pay-if-paid clauses are unenforceable in contracts solely for: (1) design services, (2) civil engineering projects, & (3) improvements to detached single-family residences, duplexes, triplexes, or quadruplexes.

Additionally, Texas will not enforce a pay-if-paid clause under the following circumstances:

• Certain contractual obligations are not met.

• The contingent payee provides notice objecting to the enforceability.

• The contingent payor is in a sham relationship with the obligor.

• The enforcement would be unconscionable.

• Used as a defense to invalidate mechanics lien rights.

Pay-when-paid clauses

Pay-when paid clauses are enforceable in Texas as well. However, these clauses only act as a timing mechanism, the underlying obligation to pay still exists, despite the owner’s failure to pay a general contractor.

Are no-damages-for-delays clauses enforceable in Texas?

Yes, no-damages-for-delay clauses are generally enforceable in Texas. However, there are 5 common law exceptions to the ability to use the clause as a defense for nonpayment; these include if the delay:

• Was not intended or contemplated by the parties to be within the purview of the provision;

• Resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision

• Has extended for such an unreasonable length of time, that the party delayed would have been justified in abandoning the contract

• Not specifically enumerated delays to which the clause applies

• Based upon active interference or other wrongful conduct, including “arbitrary and capricious acts” and “wilfully and unreasoning actions,” without due consideration and in disregard of the rights of the other parties.

Zachry Constr. Corp. v. Port of Houston Auth. of Harris County

Can you contract around Texas’ prompt payment terms?

No, the timing of payments under both the Texas private and public prompt payment laws may not be modified by contract.

On private projects, payments from the property owner must be made within 35 days after receipt of the invoice. Once payment is received, all other payments must be made down the payment chain within 7 days.

• See: Do contract terms between a GC and Sub on a private job trump Texas prompt payment statutes?

On public projects, payments to the prime contractor must be made within 30 days of either the receipt of goods or services or the receipt of an invoice; whichever is later. Once payment is received, all other payments must be made down the payment chain within 10 days.

Can you contract around Texas’ retainage requirements?

It depends on the type of project.

On private projects in Texas, the owner must retain 10% of the total contract price or the reasonable value of the work if there is no contract price. This cannot be modified by the agreement between the parties.

As for public projects, there is no specific limit on the amount of retainage that can be withheld in Texas. Therefore, the amount withheld will be governed by the terms of the contract. Note, that if more than 5% is being withheld as retainage, the funds must be deposited in an interest-bearing account.

• For more information, see: Texas Retainage Overview & FAQs

Does Texas have any specific requirements for construction contracts?

Generally speaking, there are no specific requirements for construction contracts in Texas. However, if the contract is for the improvement of residential property, there are some requirements aimed to protect homeowners.

This includes the Texas Residential Disclosure Statement, a list of subs and suppliers, and a notice regarding defects and the notice and opportunity to cure.

• For a full breakdown of these requirements, see: Hired By a Texas Homeowner? Don’t Forget the Residential Disclosure Statement

How long do I have to bring a breach of contract claim for nonpayment in Texas?

Under Texas law, the statute of limitations (deadline) to initiate a lawsuit under a breach of contract claim for nonpayment is 4 years from the date the breach occurred, regardless if the contract is oral/implied or written/express. –Tex. Civ. Prac. & Rem. Code §16.004

Need More Help with Texas Construction Contracts? We're Here.

Ask an expert for free

Check out our payment experts
Construction attorneys: Courtney Stricklen, Christopher Ng, Andrea Goldman, and Peter Ryan

Recent Questions About Texas Construction Contracts

How do I resolve this payment issue?

How do I collect payment if the customer wrote paid in full on the check. I haven't cashed it yet as she still owes me...

Can you in layman's terms define what makes a surety bond common law versus statutory.

I am a junior college student working on a presentation looking for a simple explanation that anyone could understand, possibly with some examples. As well...

What is the best course of action?

I have a situation where I hired a company to build a pool, deck, outdoor kitchen, spa and fire pit. It has been 10 months...

How to file a lien in Texas

Need to file a Texas mechanics lien? File your mechanics lien with Levelset, the lien experts quickly and easily. Or you can follow the 3 steps below to file a lien yourself with Levelset's free information.
File with the Mechanics Lien Experts
We’re the Mechanics Lien experts. With us it’s fast, easy, affordable, and done right!
File Now

Want to Learn More about How Texas Contractors Pay?
Green Scaping Co
Rating 5.0
C
Payment Score
75 / 100
View
Zachry Group
Rating 5.0
C
Payment Score
56 / 100
View
Patriot Commercial Construction
Rating 5.0
C
Payment Score
75 / 100
View
Bell County Glass Company Inc.
Rating 5.0
C
Payment Score
75 / 100
View
See other Lists of Contractors and How to Best Work With Them

Free Texas Construction Contract Templates

Download customizable Texas construction contract templates for different project types, prepared by construction attorneys and payment experts, available to you for free.

Equipment Rental Agreement Template

This customizable equipment rental agreement template is for equipment rental companies who want to ensure payment on their construction projects. This simple, straightforward rental agreement...

Get Form Now

Time and Material Contract Template

If you are supplying time or materials to any construction project, it’s essential to get everything in writing. This five page contract template is simple...

Get Form Now

Roofer Contract Template

Who says a construction contract for roofers has to be a long, complicated document? Certainly not us! This simplified yet thorough roofer contract template should...

Get Form Now

Drywall Contract Template

Just like every other member of the construction industry, drywall contractors can have problems communicating with other contractors and subs, as well as recovering payment...

Get Form Now

Construction Contract Template

Construction agreements do not have to be long, complicated documents. This simple construction contract template is a total of 3 pages! Using a simple contract like...

Get Form Now

Subcontractor Agreement Template

Who says your subcontractor agreement has to be a long, complicated document? Certainly not us! Our subcontractor agreement template is simple to use, easy to...

Get Form Now

Material Supply Agreement Template

Who says your material supply agreement has to be a long, complicated document? Certainly not us! This simplified Material Supply Agreement should more than do...

Get Form Now

Helpings Thousands of Texas Contractors with Construction Contracts and Payment Terms