Does the Texas Prompt Payment Act (PPA) apply to out-of-state contracts?
Surprisingly, Texas appeals courts have not answered this question.
The Texas Prompt Payment Act (“PPA”) is a law that provides (in relevant part):
(a) If an owner or a person authorized to act on behalf of the owner receives a written payment request from a contractor for an amount that is allowed to the contractor under the contract for properly performed work or suitably stored or specially fabricated materials, 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 owner receives the request.
Tex. Prop. Code § 28.002. Violations of the PPA can have significant consequences, including statutory interest, and a possible award of “costs and reasonable attorney’s fees as the court determines equitable and just.” Id. § 28.005.
Several Texas-based owners and contractors choose to enter contracts in Texas (and under Texas law) for construction projects in other states. Does the PPA apply to these contracts? Houston’s 1st Court of Appeals recently had an opportunity to answer this question in Arrow Field Services, LLC v. Linde Engineering North America, Inc., __ S.W.3d __, 2024 WL 5126923 (Tex. App.—Houston [1st Dist.] Dec. 17, 2024, no pet. h.). There, the parties disputed whether the PPA applied to the construction of a natural gas liquid (NGL) processing facility in North Dakota. The court ultimately held that the PPA did not apply to this facility because of an exemption in the PPA for mineral development and oilfield services — and chose not to answer whether the PPA applies outside of Texas.
