Texas House Bill 3289, a proposed bill that could impact the Texas Property Code and construction contracts, is scheduled for public hearing on April 15, 2025 in Austin, Texas.
Galloway Johnson Tompkins Burr & Smith attorney Shannon Walla, with decades of experience and a strong background in the construction industry, is actively monitoring the proposed bill and its potential to become law that could impact business operations in Texas. Shannon and the Galloway construction law team are staying on top of the latest legislative maneuverings and its effects to contractors, developers, and those with an interest in construction law.
The argument that there is an issue with Project A so funding from Project B can be withheld as a “good faith dispute” may soon be no more in Texas. Often prime and subcontracts contain clauses stating that the paying obligor may withhold funds on THIS project due to a dispute on a DIFFERENT project. Savvy contractors should always try and strike such a provision, but as the law stands today, such practice is allowed if stated in the contract.
Texas House Bill 3289 was introduced in February 2025 by District 4 Representative Keith Bell. It seeks to prohibit such practices. HB 3289 seeks to add the following language to Chapter 28 of the Texas Property Code:
(c) For purpose of this section, a good faith dispute does not include a dispute relating to a contract, work order, contractual arrangement, or any other agreement between the parties that is not related to the contract for construction under which payment is requested or required.
An identical sister bill, Senate Bill 1614, was introduced in the Texas Senate at the same time.
Construction contract law can be legally complex and ever-evolving. Galloway attorneys in our Houston office, their colleagues in the Firm’s Dallas office, and those across Galloway’s service area in seven states across the Gulf South and Midwest provide responsive and high-quality representation on the jobsite and in the courtroom. With decades of proven success in construction, Galloway goes way above and way beyond for corporations and businesses building in Texas.
As potential legislation is discussed, construction professionals should keep this matter on their radar. Shannon and the Galloway team will continue to stay up to date if the bill becomes law and if that law becomes argued in the courts.
Be on the lookout for more information about this hearing as Galloway will keep you abreast of the outcome and its potential ramifications on Texas corporations.
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