Menu
Home>Levelset Community>Legal Help>Is there anything in the laws that state that our customer must be paid by the owner of the job before they pay us?

Is there anything in the laws that state that our customer must be paid by the owner of the job before they pay us?

TexasConstruction ContractPay When Paid

We have a customer that is in the construction business and requires us to comply with the Texas lien/ mechanics lien laws. Is there anything in the laws that state that our customer must be paid by the owner of the job before they pay us? Does our customer have to be paid before they pay us?

2 replies

Sep 6, 2019
There is no specific provision in Texas mechanics lien law that requires payment to a direct contractor prior to payment to other parties. However, such a provision is allowable in construction contracts for projects in Texas. Both Pay When Paid and Pay If Paid clauses can be valid and enforceable in Texas provided that proper language is used. Generally, Texas allows pay when paid clauses to be enforceable with respect to time and manner of payment, but not payment itself. Sheldon L. Pollack Corp. v. Falcon Industries, Inc., 794 S.W.2d 380, 383 (Tex. App. Corpus Christi 1990). So, this means that a pay when paid clause (or an insufficient pay if paid clause) can set a general timetable for payment, but does not meant that payment can be withheld indefinitely. However, if the clause at issue specifically sets forth an unequivocal and express agreement that the clause is understood to create a "condition precedent" to payment, it can be a complete bar to payment prior to payment being received from above (and even completely bar payment if payment from the owner is never made). These are contractual provisions, however, not mandates direct from Texas statutory law. So a careful examination of the contract is needed to see what may apply.
0 people found this helpful
Helpful
Mar 10, 2020
I wanted to follow-up and confirm you’ve been paid on this project matter. If I can further assist your company with any unpaid invoices, please feel free to call or email. My firm can collect for you even when lien rights have expired or were never pursued. Mike Ross Miller, Ross & Goldman mross@mrgpartners.com (512)275-6412 Direct https://www.mrgpartners.com/levelset
0 people found this helpful
Helpful