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Challenging a pay-if-paid clause in Texas

TexasConstruction ContractPay When Paid

I recently signed onto a project, and my subcontract has a pay-if-paid clause. Is there any way to object or challenge the clause if payment becomes an issue? Any suggestions on how to protect my company if the GC never gets paid?

2 replies

Jun 16, 2021

Hello,

The lien statutes do not care about what kind of contract has been signed.

If you have not been paid within 30 days after each time you complete a stage, or at the end of each month, you, as a subcontractor, need to be sending Notices of Intent to Lien to the GC and to the Property Owner. If you are not paid shortly after, lien the property.

Why? Because a lien can be released at any given moment as soon as you are paid. Releasing a lien is just one form and a few minutes of legwork. But if you do not send those notices and you do not perfect your lien, if something goes sideways between you and the GC or the GC and the Owner, you have a likelihood of not being paid and not having protected your interest. No matter what the GC or Property Owner says, go through the lien process every time you have not been paid when you've asked.

E. Aaron Cartwright III
214.799.0776
Aaron@EACLawyer.com

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Jun 16, 2021

Under Texas law, a contract is the private law between the parties (as long as the contract does not violate public policy and is not otherwise unenforceable). So, if you signed a contract providing for a proper pay-if-paid provision, you will have to watch out for non-payment. Typically, if non-payment is an issue, your contract may have a provision that permits you to suspend performance or to demobilize from the project.

Retain a construction attorney to evaluate your legal situation and to provide advice. Not all supposed pay-if-paid provisions comply with Texas law.

Good luck.

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