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Two Construction Workers Discussing at construction site

Co-author: Trenton Patterson

It has been months since you have been paid and the general contractor or the owner continues to demand that you perform extra work, perform in changed conditions or work on a compressed timeline with no promise of payment in sight.  At this point you have a decision to make.  Do you continue to perform work and submit claims for the extra work and changed conditions? Or do you suspend work or terminate the contract?
Continue Reading To Perform or Not Perform, That is the Question

The general prohibition against waiving lien rights under Chapter 53 of the Texas Property Code has been written about extensively, and is well known through the industry.  However, the Construction Trust Fund Act (Ch. 162 of the Texas Property Code) does not contain any such prohibition.  From the Act itself, it is not clear whether construction trust fund rights can be waived or not.  Less than two years ago, the Texas Fourteenth Court of Appeals considered this issue, among several others, in Mesa Southern CWS Acquisition, LP v. Deep Energy Exploration Partners, LLC.  In that case, the Court considered the following provision:…
Continue Reading Can the Trust Fund Act be Waived?

Close-up Of Yellow Hard Hat Over Rolled Up American Banknote On White Background

Co-author: Tim Fandrey

In these unprecedented times, every bit of revenue is critical to the continued operation of nearly every business operating within the construction industry. Fortunately, there are a myriad of remedies to aide collection efforts. Perhaps the most commonly discussed remedy is the mechanic’s lien provided by Chapter 53 of the Texas Property Code Chapter.
Continue Reading Mechanic’s Liens For Design Professionals: A Powerful Payment Collection Tool

Co-author: Trevor Lawhorn
Published in Build Houston Magazine

When non-payment occurs, suppliers and service providers often first seek relief by suing for breach of contract. Unfortunately, many companies are undercapitalized or otherwise “judgment proof.”  A personal guaranty might mitigate this risk by providing an additional target, but guarantees are often difficult to obtain.  Even if one is signed, the guarantors may lack assets, perhaps deliberately so.  Judgement proof debtors and guarantors are especially frustrating when the case involves misappropriations of construction project funds or wrongful transfers of assets.  Texas law provides at least two statutory tort claims in these circumstances: the Texas Uniform Fraudulent Transfer Act (TUFTA) and the Texas Construction Trust Funds Act (the Trust Fund Statute).
Continue Reading Establishing Personal Liability Without a Guaranty

Co-authors: Russell Jumper and Tim Fandrey
Published in Cleaning & Restoration Magazine

Just as the Texas coast assessed the magnitude of Hurricane Harvey’s damage, Hurricane Irma was taking shape in the Atlantic. Fewer than two weeks later, Irma would crash into the Florida Keys. Estimates put Harvey and Irma’s combined impact in excess of $275 billion. No small part of that amount will be required for cleaning and restoration services. Before Irma made landfall, even as Harvey hovered over the Houston area, restoration professionals from around the country arrived along the Texas coast to kick-start Texas’ recovery. For the people who lost their homes, possessions, and even family or friends, the focus turned to recovery. For some of the restoration professionals who helped, and continue to help, a second storm is forming: owner and insurer payment disputes. Like boarding up windows and setting out sandbags, there are some steps cleaning and restoration professionals can take in an effort to minimize the damage from the approaching payment dispute storm.
Continue Reading The Storm After the Storm

Most commercial construction contracts contain a “No Damage For Delay” Clause and most contractors mistakenly believe they are Kings X for any potential claims related to delay caused by an owner or original contractor. While nearly every commercial construction contract contains the same or similar provisions, it is important to keep in mind they all have different authors, which means typically no two clauses are ever drafted the same.

This is particularly important when it comes to “No Damage For Delay” Clauses as the actual breadth of the language and scope will set the tone for their enforcement or circumvention. There are several common law exceptions to “No Damage for Delay” clauses recognized in Texas, which may be neutralized or ignored by the particular language of a “No Damage for Delay” Clause.
Continue Reading How to Circumvent “No Damages for Delay” Clauses

Get the project information up front

You should ask your customer for the owner’s name and address, the location of the project, a copy of the payment bond (if any), and the general contractor’s name and address (if you are a second tier subcontractor or supplier).  Having this information at the outset will help you quickly send out bond and lien notices if the new customer falls behind on making payments.
Continue Reading 7 Ways to Manage the Credit Risk of a New Customer

A suit on an unpaid account against your customer will likely entitle you to the principal balance plus interest and attorney fees.  But a suit on an unpaid account is only as good as your customer’s ability to satisfy the judgment.  A claim on an account against an entity provides very little leverage.  The principals…