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Appropriate times to withhold payment from a subcontractor

On Behalf of | Apr 16, 2015 | Business Litigation

It’s always in a company’s best interests to adhere to the terms of a contract, especially when it comes to payment. Failure to pay someone for the work or service they do can result in business litigation. This can include Houston business owners who don’t pay fair wages to their employees and subcontractors. It also pertains to the payment terms outlined in a contract between a business and a subcontractor company.

In most cases, the law requires businesses to pay subcontractors for their work. According to the Texas Constitution and Statutes, company owners have 35 days after a written request for payment to pay a subcontractor for work or services that were performed according to contract specifications.

Does this mean that a company is bound to pay a subcontractor for all work, no matter how poor or late the work is? Under certain circumstances, states the Houston Chronicle, a company can legally withhold payment. For example, if a construction company performs work that’s substandard or faulty, the company owner may refuse to pay for shoddy work. The company also may withhold payment if the subcontractor fails to get the job done in the time frame outlined in the contract. However, the company is in most cases required to pay the subcontractor for all acceptable work up until the point where it is late or becomes substandard.

It helps to have a clear and concise contract that not only details the job to be done, but outlines the penalties and steps a company owner can take if the work is not performed to expectations. This protects both the company and the subcontractor financially, and can help prevent a contract dispute.


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