In anticipation of the upcoming 2025 Texas Legislative Session, bills are starting to be filed.  Just because a bill is pre-filed does not mean that it might ultimately be passed or even considered.  According to the Texas Construction Association, the following are some of the areas on which bills will be filed.

Securing Reserved Funds/Retainage.   Increase security for reserved funds by amending the Construction Trust Fund Act to statutorily classify reserved funds as trust funds.

Documents Incorporated by Reference into Construction Contract.  Amend the Business & Commerce Code to require the disclosure of documents incorporated by reference in a construction contract.  The foundations of contract law require a “meeting of the minds” for a contract to be valid.  To achieve this, all parties must know what is in the contract, including those items incorporated by reference. This bill will impact very standard incorporation by references on many Standard Form AIA Contracts and General Conditions as well as subcontract agreements which incorporate the terms of the Prime Contract between the Owner and General Contractor.

Cross-Default/Offset Clauses.  Amend the private Prompt Pay Act and the Construction Trust Fund Act to clarify that each construction contract stands on its own.  Contract clauses that allow the withholding of funds due to a dispute on a separate contract are contrary to Texas law and public policy.

Out of State Venue/Laws.  Reverse the 14th Court of Appeals ruling in M-I, L.L.C. v. California Resources Corporation, allowing for waiver of the statute classifying out of state law and venue contract clauses as voidable upon signing a contract with such a clause or incorporating by reference another contract with such a clause.  In that case there was a lawsuit filed in California and the Lease Operator was sued in California and attempted to join the Drilling Contractor, which was a Texas corporation and had venue selection clause which required any lawsuit with the Lease Operator to be filed in Texas. The Lease Operator sued the Texas Company in California, the Texas Company then filed a declaratory judgment in action in Texas to seek to require any lawsuit with the Lease Operator be filed in Texas in accordance with the terms of the Master Service Agreement. Both the trial court and the Court of Appeals refused to enforce the venue requirement in the Master Service Agreement because it did not create personal jurisdiction on the part of the Lease Operator.  Interestingly,  another bill was also filed  (H.B. No. 1139) which would provide that any provision in a construction contract for an improvement to real property cannot require a lawsuit be filed in another State as being against public policy.  A lawsuit can only be brought in the county in which the defendant resides; where the cause of action accrued or where the property is located.

Lien Law Clean Up.  Amend Property Code, Section 53.003(e) to apply to all deadlines, those that are statutorily defined and those that are calculated by counting days.

In addition, some other bills which have been pre-filed are:

S.B. 324 which the right for a public taxing agency to recover the cost to enforce implementation of an E-verify to verify employment status of the employees of any contractor and subcontractor.

H.B. 1069 which provides that it does not create an employer – employee relationship if a contractor performs a criminal background check or drug test on a worker.

H.B. 480 which would require each contractor and subcontractor to provide workers compensation coverage for their employees.

The attorneys in our Austin and Dallas offices are available to answer any questions you may have. Please contact us at info@gstexlaw.com.

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