ARCO Construction Company, Inc. v. Americon Services Company, Inc.
Texas Court of Appeals, 1st District (Houston) | 2008
What This Case Means for Subcontractors
ARCO, a general contractor, withheld payment to subcontractor Americon unless Americon signed away its right to dispute claims. The Texas court ruled this violated the Prompt Payment Act and awarded Americon $61,417.70 plus interest and attorney's fees. The court also excused Americon's breach of an indemnification clause because ARCO's own violations were so serious. This case protects subcontractors from being forced to choose between getting paid and keeping their legal rights.
Key Takeaways
- •Never accept a condition that you must waive disputed claims to get paid for undisputed work. This violates Texas law and you can sue for damages.
- •Document everything in writing. Keep records of what work was completed, what was paid, and what remains owed so you can prove which amounts are truly undisputed.
- •If a contractor breaches the Prompt Payment Act, you may be excused from performing your own contract obligations, including indemnification duties. Consult an attorney immediately if payment is withheld.
Contractor cannot condition payment of undisputed funds on relinquishment of disputed claims.
Frequently Asked Question
Can a contractor force me to sign away my right to dispute claims in order to get paid?
No. Texas law prohibits contractors from conditioning payment of undisputed funds on your release of disputed claims. If a contractor tries this, you can sue for breach of the Prompt Payment Act and recover damages, interest, and attorney's fees. Document the demand in writing and contact an attorney immediately.
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