TBLS - CONSTRUCTION LAW > Prompt Payment > Flashcards

Prompt Payment Flashcards

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1
Q

What is the definition of ‘Contractor’ according to TX PROPERTY § 28.001?

A

A person who contracts with an owner to improve real property or perform construction services for an owner.

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2
Q

Define ‘Improve’ as per TX PROPERTY § 28.001.

A

To build, construct, effect, erect, alter, repair, or demolish any improvement on real property; excavate, clear, grade, fill, or landscape real property; construct a driveway or roadway; furnish any material for the purpose of taking any action described; or perform any labor on or in connection with an improvement.

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3
Q

What does ‘Improvement’ include according to TX PROPERTY § 28.001?

A

All or any part of a building, structure, erection, alteration, demolition, or excavation on real property, including clearing, grading, filling, landscaping, constructing a driveway or roadway, or furnishing trees or shrubbery.

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4
Q

Who is considered an ‘Owner’ under TX PROPERTY § 28.001?

A

A person or entity, other than a governmental entity, with an interest in real property that is improved, for whom an improvement is made, and who ordered the improvement to be made.

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5
Q

What does ‘Real property’ encompass as defined in TX PROPERTY § 28.001?

A

Lands, leaseholds, tenements, hereditaments, and improvements placed on the real property.

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6
Q

Define ‘Subcontractor’ according to TX PROPERTY § 28.001.

A

A person who contracts to furnish labor or material to, or has performed labor or supplied materials for, a contractor or another subcontractor in connection with a contract to improve real property.

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7
Q

What is the payment obligation of an owner upon receiving a written payment request from a contractor as per TX PROPERTY § 28.002?

A

The owner shall pay the amount to the contractor, less any amount withheld as authorized by statute, not later than the 35th day after the date the owner receives the request.

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8
Q

How soon must a contractor pay each of its subcontractors after receiving payment from an owner according to TX PROPERTY § 28.002?

A

Not later than the seventh day after the date the contractor receives the owner’s payment.

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9
Q

What should a subcontractor do upon receiving payment from a contractor as per TX PROPERTY § 28.002?

A

Pay each of its subcontractors the portion of the payment attributable to work properly performed or materials suitably stored, not later than the seventh day after receiving the contractor’s payment.

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10
Q

What constitutes a ‘good faith dispute’ under TX PROPERTY § 28.003?

A

A dispute regarding whether the work was performed in a proper manner or concerning the amount owed for a payment requested or required.

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11
Q

In a good faith dispute for detached single-family residences, what percentage can be withheld from the payment owed according to TX PROPERTY § 28.003?

A

Not more than 110 percent of the difference between the amount claimed due and the amount claimed by the obligor.

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12
Q

What is the interest rate on an unpaid amount under TX PROPERTY § 28.004?

A

1 ½ percent each month.

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13
Q

When does interest on an unpaid amount stop accruing according to TX PROPERTY § 28.004?

A

On the date of delivery, the date of mailing (if payment is mailed and delivery occurs within three days), or the date a judgment is entered.

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14
Q

What can a person do to enforce their rights under TX PROPERTY § 28.005?

A

Bring an action to enforce the person’s rights under this chapter.

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15
Q

What may a court award in an action brought under TX PROPERTY § 28.005?

A

Costs and reasonable attorney’s fees as the court determines equitable and just.

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16
Q

What happens to an attempted waiver of a provision of this chapter according to TX PROPERTY § 28.006?

A

It is void, except as provided by Subsection (b).

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17
Q

Under what condition can a written contract allow payment before the 61st day after the payment request under TX PROPERTY § 28.006?

A

For improvements to or construction of a single-family residence.

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18
Q

What is the maximum interest rate on unpaid amounts under a contract allowing later payments according to Section 28.002(a)?

A

1 ½ percent each month

This applies if the contract allows payment later than the date otherwise required under Section 28.002(a).

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19
Q

What may not be interpreted to void a contractor’s or subcontractor’s entitlement to payment?

A

This chapter

It ensures that the rights to payment for properly performed work or suitably stored materials remain intact.

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20
Q

What is the new payment deadline if the owner has not received loan proceeds?

A

Fifth day after the date the owner receives loan proceeds

This applies if the owner has timely and properly requested disbursement of proceeds.

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21
Q

When can a contractor or subcontractor suspend work due to nonpayment?

A

10th day after giving written notice to the owner and lender

This notice must inform them of nonpayment and intent to suspend performance.

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22
Q

What must be included in a notification of a good faith dispute for payment?

A

A list of specific reasons for nonpayment

If labor, services, or materials provided by a subcontractor are not compliant, the subcontractor has the right to cure the issues.

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23
Q

True or False: The rights and remedies provided by Section 28.009 are the only remedies available to contractors.

A

False

The rights and remedies are in addition to those provided by this chapter or other law.

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24
Q

Under what circumstances can a contractor or subcontractor elect not to proceed with additional work?

A

If they have not received a written, fully executed change order and the additional work exceeds 10 percent of the original contract amount

This protects contractors from undertaking extra work without proper authorization.

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25
What types of agreements does Chapter 28 not apply to?
Agreements related to mineral development and oilfield services ## Footnote This includes exploration, production, or development of oil, natural gas, and other minerals.
26
Fill in the blank: The date of payment required of the owner pursuant to Section 28.002(a) changes to the fifth day after the owner receives _______.
loan proceeds ## Footnote This is contingent upon the owner having obtained a loan intended for the contract.
27
What is the definition of 'well or mine services' as per Section 28.010?
Includes drilling, deepening, repairing, testing, and other services related to oil, gas, or mineral production ## Footnote This definition encompasses a broad range of activities related to mineral extraction.
28
What must the owner or lender provide to contractors and subcontractors regarding the loan?
A written copy of the notice regarding loan proceeds ## Footnote This must be done within 10 days after construction commences and when specific conditions are met.
29
What does 'distribution date' refer to in the context of payment?
The date the comptroller makes the warrant available or initiates the transfer, depending on payment law restrictions ## Footnote This includes mailing to the payee or the requesting state agency.
30
Define 'goods' as stated in the Texas Government Code.
'Goods' includes supplies, materials, or equipment.
31
What is a 'governmental entity'?
A state agency or political subdivision of the state.
32
What constitutes a 'payment'?
Money owed to a vendor.
33
What is meant by 'payment law'?
Laws such as Section 57.48 or 57.482, Education Code; Section 231.007, Family Code; Section 403.055 or 2107.008; or any similar statute.
34
What does 'political subdivision' include?
* A county * A municipality * A public school district * A special-purpose district or authority.
35
What does 'service' encompass?
Includes gas and water utility service.
36
Define 'state agency'.
An agency in the executive branch created by the constitution or statute, including legislative agencies and judicial entities.
37
What is a 'subcontractor'?
A person who contracts with a vendor to work for a governmental entity, excluding state agencies.
38
What is a 'vendor'?
A person supplying goods or services to a governmental entity, does not include a state agency except for Texas Correctional Industries.
39
True or False: A payment made by a governmental entity is subject to the rules of § 2251.002 when there is a bona fide dispute.
False.
40
What are the conditions under which § 2251.002 does not apply?
* Bona fide dispute about goods or services * Federal contract terms prevent timely payment * Invoice not mailed per purchase order instructions.
41
What is the time frame for a payment to be overdue by a governmental entity under a contract executed on or after September 1, 1987?
31 days after receiving goods, completing service, or receiving an invoice.
42
Fill in the blank: A payment under a contract executed on or after September 1, 1993, by a political subdivision that meets infrequently is overdue on the _______.
46th day after the relevant event.
43
What does § 2251.003 mandate regarding the comptroller?
The comptroller must establish procedures and adopt rules to administer this chapter.
44
What is the status of a purported waiver of rights under this chapter?
Void.
45
What is the time frame for payment by a vendor as outlined in § 2251.022?
The specific timeframe is not provided in the excerpt.
46
What is the time frame for a vendor to pay a subcontractor after receiving payment from a governmental entity?
Not later than the 10th day after receiving the payment. ## Footnote The appropriate share becomes overdue on the 11th day after the vendor receives the payment.
47
What is the consequence if a vendor fails to pay a subcontractor within the stipulated time frame?
The appropriate share is considered overdue on the 11th day. ## Footnote This applies as per TX GOVT § 2251.022.
48
What is the time frame for a subcontractor to pay a supplier after receiving payment from a vendor?
Not later than the 10th day after receiving the payment. ## Footnote The appropriate share becomes overdue on the 11th day after the subcontractor receives the payment.
49
How is a payment considered mailed according to TX GOVT § 2251.024?
A payment is considered to be mailed on the date the payment is postmarked.
50
When does interest on an overdue payment begin to accrue?
On the date the payment becomes overdue.
51
What is the formula for calculating the interest rate on overdue payments?
One percent plus the prime rate published in the Wall Street Journal on the first day of July of the preceding fiscal year.
52
When does interest on an overdue payment stop accruing?
On the date the governmental entity or vendor mails or electronically transmits the payment.
53
What is the liability of a state agency regarding interest on overdue payments?
A state agency is liable for any interest that accrues on an overdue payment and must pay it from available funds at the same time as the principal.
54
What happens if the total amount of interest on an overdue payment is equal to or less than $5?
No interest accrues or may be paid under this section.
55
What is required of a political subdivision regarding interest on overdue payments?
A political subdivision must compute and pay the interest at the time payment is made on the principal.
56
What must a vendor or subcontractor do regarding interest on overdue payments?
They must pay interest as a payment becomes overdue.
57
What does § 2251.029 state about partial payments?
The unpaid balance of a partial payment made within the period accrues interest unless the balance is in dispute.
58
What is the purpose of Section 2251.025?
Accrues interest unless the balance is in dispute.
59
What should a governmental entity do regarding a disputed balance according to Section 2251.042?
Notify the vendor of an error or disputed amount within 21 days.
60
What happens if a dispute is resolved in favor of the vendor?
The vendor is entitled to receive interest on the unpaid balance.
61
What must a governmental entity do if a dispute is resolved in its favor?
The vendor must submit a corrected invoice to be paid per Section 2251.021.
62
What is the maximum amount a governmental entity may withhold from payments for disputes?
No more than 110 percent of the disputed amount.
63
In a formal action to collect an invoice payment, who pays the attorney fees?
The opposing party shall pay the reasonable attorney fees of the prevailing party.
64
What can a vendor do if not paid an undisputed amount within the time limits?
Suspend performance required under the contract.
65
What notice must a vendor give before suspending performance?
Written notice informing the governmental entity of nonpayment and intent to suspend.
66
When can a vendor suspend performance for nonpayment?
Not before the 10th day after giving notice.
67
What costs can a vendor claim if they suspend performance?
Costs for demobilization and remobilization.
68
What must a notification of a bona fide dispute include?
A list of specific reasons for nonpayment.
69
What rights does a subcontractor have if the vendor is not paid?
Suspend performance required under the contract.
70
What must a subcontractor do before suspending performance?
Give written notice to the vendor.
71
What happens if a governmental entity does not pay the vendor?
The subcontractor may suspend performance.
72
What is required for a vendor not to proceed with additional work?
A written, fully executed change order must not be received.
73
What percentage of the original contract amount triggers the right to not proceed with additional work?
Exceeds 10 percent of the original contract amount.
74
What is the definition of 'public work contract' in this context?
As assigned by Section 2253.001.
75
What is the effective date of the amendments made in Acts 2001?
June 15, 2001.
76
What section allows for the accrual of interest on unpaid balances?
Section 2251.021.
77
What must a vendor do to claim a prompt payment discount?
Make a full payment within the discount period.
78
What happens to unpaid balances if a prompt payment discount is taken late?
Accrues interest beginning on the date the discount offer expires.
79
What is the role of the comptroller in the payment process?
To ensure payment is made in time to obtain the discount.
80
What section discusses the remedy for vendor's nonpayment?
Section 2251.051.
81
What section outlines the remedy for subcontractor's nonpayment?
Section 2251.052.
82
What section pertains to unsigned change orders?
Section 2251.0521.
83
What section applies specifically to highway-related contracts?
Section 2251.053.
84
What is the primary focus of § 2251.053?
Contracts entered into by the Texas Department of Transportation for highway construction or maintenance ## Footnote This section specifically addresses how vendors and subcontractors must handle performance and notices related to highway-related contracts.
85
When can a vendor or subcontractor suspend performance under § 2251.053?
Not before the 20th day after giving written notice ## Footnote The written notice must comply with § 2251.051(a) for vendors and § 2251.052(b) for subcontractors.
86
How must notices required under § 2251.053 be sent?
By certified mail ## Footnote Notices must be sent to the executive director, the director of construction, or the designated person in the contract.
87
What does § 2251.054 specify about notices to governmental entities?
Must be delivered to the designated person or the executive director of the entity ## Footnote This section outlines the proper delivery methods for notices or written communications.
88
What is the effective date of a notice sent by certified mail according to § 2251.054?
The date it is deposited in the United States mail ## Footnote This detail is important for tracking when a notice is considered effective.
89
What happens if a notice is sent by electronic means under § 2251.054?
Effective on the date received by the designated person ## Footnote The effectiveness of electronic notices is determined by the actual receipt, regardless of other delivery methods.
90
What does § 2251.055 state about rights and remedies?
They are in addition to those provided by other laws ## Footnote This section clarifies that the rights and remedies under this subchapter do not exclude other available legal remedies.
91
What is the definition of 'obligation' as per TX INS § 3503.001?
A bond, undertaking, recognizance, guaranty, or other obligation required or permitted by law or charter to guarantee performance or refraining from an act. ## Footnote Added by Acts 2005, 79th Leg., ch. 727, § 3, eff. April 1, 2007.
92
Which entities may execute an obligation according to TX INS § 3503.002?
A surety company authorized to engage in business in this state. ## Footnote Each municipality and organization must accept an obligation executed by a surety company as compliant with relevant laws.
93
What is required for a corporate surety in sealed bids according to TX INS § 3503.003?
The corporate surety must designate an agent who is a resident of the county where the municipality is located. ## Footnote The agent is responsible for receiving notices and service of process.
94
What condition must be met for obligations exceeding 10 percent of a surety company's capital and surplus as per TX INS § 3503.004?
Written certification that the surety company has reinsured the excess risk with authorized reinsurers. ## Footnote This section was repealed by Acts 2011, 82nd Leg., ch. 1147.
95
What additional requirements are there for bonds exceeding $100,000 according to TX INS § 3503.005?
The surety company must hold a certificate of authority from the U.S. Secretary of the Treasury or have reinsurance for liabilities exceeding $1 million. ## Footnote A party can rely on the list published in the Federal Register to determine compliance.
96
Define 'claimant' as per TX INS § 3503.051.
A person directly entitled to payment under a construction payment bond. ## Footnote This definition is part of the subchapter regarding prompt payment of construction payment bonds.
97
What is a 'construction payment bond' as defined in TX INS § 3503.051?
A surety agreement issued to guarantee payment for work performed or materials supplied for a construction project. ## Footnote This term is significant in the context of construction obligations.
98
What does 'notice of claim' refer to in TX INS § 3503.051?
A written notification by a claimant making a claim for payment from the surety company. ## Footnote This does not include routine statutory notices required by other sections.
99
What is the purpose of TX INS § 3503.052?
To encourage prompt payment of just claims made under construction payment bonds. ## Footnote It does not create a private cause of action or diminish other legal obligations.
100
According to TX INS § 3503.053, what happens to terms inconsistent with the subchapter?
Such terms are considered void. ## Footnote This ensures that the provisions of the subchapter are upheld.
101
What happens if a term in a construction payment bond is inconsistent with this subchapter?
The term is void.
102
What should a surety company do within 15 days of receiving a notice of claim under a construction payment bond?
Acknowledge receipt of the claim, begin a review or investigation, and request necessary documents from the claimant.
103
When is a notice of claim effective?
On the date the notice is received at the specified address.
104
True or False: A claimant is exempt from statutory or contractual notice requirements under this subchapter.
False.
105
What is the time limit for a surety company to notify a claimant of acceptance or rejection of a claim?
Not later than 30 days after receiving all requested documents.
106
If a surety company rejects a claim, what must the notice include?
Specific reasons for the rejection known by the company at the time.
107
Fill in the blank: A surety company must notify the claimant in writing if it is unable to accept or reject the claim within ___ days.
30
108
What additional information must the surety company provide if it cannot accept or reject the claim within the specified period?
Reasons for needing additional time and a request for more information.
109
What must a surety company do within 30 days after notifying a claimant that it needs more time?
Notify the claimant of acceptance or rejection of the claim.
110
Under what condition can a surety company reject a claim?
If there is a legitimate dispute between the principal obligor and the claimant or if the claimant fails to provide requested supporting documents.
111
What is the payment timeline for a claim accepted by a surety company?
Not later than 15 days after the date of the notice.
112
If payment is conditioned on a document execution, when must payment be made?
Not later than 7 days after receiving the executed document.
113
Fill in the blank: Payment of a claim occurs when the surety company places the check in the mail to the claimant's _______.
address
114
Who can adopt rules enforcing this subchapter?
The commissioner.
115
What is the maximum amount a surety company can guarantee for a bail bond certificate issued in a year?
$200.
116
What is required for a bail bond certificate to be valid?
It must be issued by an authorized automobile club or truck and bus association and include a guarantee statement.
117
Where must a suit on a bond or other obligation be filed according to § 3503.151?
In the county where the bond or obligation is filed.
118
What defines the residence of an insurance company as per § 3503.152?
A county in which the company engages in business.
119
What sections outline the service of process in a suit described by § 3503.151?
Sections 804.003, 804.101, 804.102, 804.103, 804.201, 804.202, 804.203(a), (c), (d), and 804.204.
120
What is considered an acceptance of the provisions of this subchapter?
The doing or performance of any business in any county.
121
What is considered an acceptance of the provisions of Subchapter D?
The doing or performance of any business in any county. ## Footnote This is according to V.T.C.A., Insurance Code § 3503.154.
122
What must happen when companies merge or consolidate according to § 3503.201?
They must enter into a total reinsurance contract under which the merged company is dissolved. ## Footnote This is outlined in V.T.C.A., Insurance Code § 3503.201.
123
What is the role of the commissioner in the merger or consolidation of companies?
The commissioner authorizes the comptroller to retain the greatest deposit and permit withdrawal of duplicate deposits. ## Footnote This process is detailed in V.T.C.A., Insurance Code § 3503.201.
124
Is a surety company required to maintain an unearned premium reserve for bail bonds?
No, a surety company is not required to maintain an unearned premium reserve for a bail bond. ## Footnote This is stated in V.T.C.A., Insurance Code § 3503.202.
125
How is the direct written premium calculated according to § 3503.203?
It can be calculated excluding premiums or service fees retained by a bail bond surety or property and casualty agent. ## Footnote This is specified in V.T.C.A., Insurance Code § 3503.203.
126
What must a surety company disclose in its financial statement when delivering a bail bond?
The aggregate amount of gross premium, premium or service fees retained, and net premium for bail bond business. ## Footnote This requirement is outlined in V.T.C.A., Insurance Code § 3503.204.
127
Fill in the blank: A surety company executing a bail bond must disclose the aggregate amount of _______.
gross premium for bail bond business, premium or service fees retained, premium for bail bond business received net of amounts retained.
128
True or False: The merger of two surety companies requires the dissolution of one company.
True. ## Footnote This is indicated in the provisions of V.T.C.A., Insurance Code § 3503.201.
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