Construction / 1 min read
Post-Contractual Objection Against Pay-If-Paid Provisions
The "post-contractual" objection against pay-if-paid provisions provided under the Texas Business & Commerce Code remains surprisingly underutilized when payment issues arise. This objection, if used correctly, can be a powerful tool to address non-payment and, at a minimum, would be worth Texas-based subcontractors considering alongside other non-payment remedies on construction projects, such as mechanic's liens and the remedies provided in the Texas Prompt Payment Acts.
Under § 56.052, a general contractor (contingent payor) cannot enforce a pay-if-paid clause for work performed or materials delivered after receiving written notice from a subcontractor objecting to the clause's enforceability. This transforms future work from contingent payment to an obligation for direct payment, regardless of whether the owner pays the general contractor. However, specific timing requirements and triggering events only allow the subcontractor to send the objection notice after 45 days have passed since submitting a written payment request that substantially complies with the contract's requirements for progress payment requests or invoices.
At that point, the general contractor has a narrow window to provide a defense and invalidate the notice. The general contractor can only avoid the notice's effect by establishing both:
- The project's owner has a legitimate dispute resulting from the subcontractor's failure to meet contractual requirements; and
- The general contractor provides written notice to the subcontractor within the earlier of:
- 5 days before the subcontractor's notice becomes effective, or
- 5 days after receiving the subcontractor's notice
This compressed timeframe creates significant pressure on general contractors to respond and document legitimate performance problems quickly.