texas assignment of rights

Tex. Bus. & Com. Code Section 2.210 Delegation of Performance; Assignment of Rights

Source: Section 2.210 — Delegation of Performance; Assignment of Rights , https://statutes.capitol.texas.gov/Docs/BC/htm/BC.2.htm#2.210 (accessed Jun. 5, 2024).

Accessed: Jun. 5, 2024

§ 2.210’s source at texas.gov

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Assignees May Sue for Breach of Contract Under Texas Law

Written by John McConnell on June 8, 2021 . Posted in News .

The original parties to the contract are not the only parties who can sue on a contract. Assignees and third-party beneficiaries may also sue. This article deals with the rights of assignees.

Assignments are governed by general contract law. Cadle Co. v. Henderson , 982 S.W.2d 543, 546 (Tex. App.—San Antonio 1998, no pet.). “As a general rule, all contracts are assignable.” Crim Truck & Tractor Co. v. Navistar Intern. Transp. Corp. , 823 S.W.2d 591, 596 (Tex. 1992). Assignments may be whole or partial. Ins. Network of Tex. v. Kloesel , 266 S.W.3d 456, 465 (Tex. App.—Corpus Christi 2008, pet. denied). An “assignment” is a transfer of some right or interest to an assignee who receives the authority to assert that right. Matter of Estate of Abraham , 583 S.W.3d 374, 379 (Tex. App.—El Paso 2019, pet. denied).

“[T]here are no required forms or formalities by which an assignment must be made.” In re Cooper Mfg. Corp. , 344 B.R. 496, 508 (Bankr. S.D. Tex. 2006) (applying Texas law). Like contracts in general, assignments need not be in writing, can be oral, do not need any particular form of words, and can even be inferred from circumstances showing the intent to assign. Banco Longoria, S. A. v. El Paso Nat. Bank , 415 S.W.2d 1, 5 (Tex. Civ. App.—Eastland 1967, writ ref’d n.r.e.); Brown v. Mesa Distributors, Inc. , 414 S.W.3d 279, 285 (Tex. App.—Houston [1st Dist.] 2013, no pet.); Escalante v. Luckie , 77 S.W.3d 410, 418 (Tex. App.—Eastland 2002, pet. denied); Adkins Services, Inc. v. Tisdale Co., Inc. , 56 S.W.3d 842, 846 (Tex. App.—Texarkana 2001, no pet.).

An assignment is created upon a manifestation of intent to transfer a right to another – that’s it. Miller v. Bank of the W. , 01-88-00195-CV, 1988 WL 88320, at *2 (Tex. App.—Houston [1st Dist.] Aug. 25, 1988, no writ); Banco Popular, N. Am. v. Kanning , 638 Fed. Appx. 328, 334 (5th Cir. 2016) (applying Texas law). An assignment may be proven by oral testimony. Adkins Services, Inc. v. Tisdale Co., Inc. , 56 S.W.3d 842, 846 (Tex. App.—Texarkana 2001, no pet.). An assignment may be shown or proven by circumstantial evidence. Banco , 638 Fed. Appx. at 334 (5th Cir. 2016).

“A plaintiff establishes standing to maintain a breach-of-contract action by demonstrating that it has an enforceable interest as a party to the contract, as an assignee of a party , or as a third party beneficiary.” Republic Petroleum LLC v. Dynamic Offshore Res. NS LLC , 474 S.W.3d 424, 430 (Tex. App.—Houston [1st Dist.] 2015, pet. denied) (emphasis added). See also , Foster v. Nat’l Collegiate Student Loan Tr. 2007-4 , 01-17-00253-CV, 2018 WL 1095760, at *8 (Tex. App.—Houston [1st Dist.] Mar. 1, 2018, no pet.) (since assignee stands in shoes of assignor, assignee has privity and may sue for breach of contract); Frontier Communications Nw., Inc. v. D.R. Horton, Inc. , 02-13-00037-CV, 2014 WL 7473764, at *1 (Tex. App.—Fort Worth Dec. 31, 2014, no pet.) (“To establish standing to assert a breach of contract cause of action, a party must prove its privity to the agreement or that it is a third-party beneficiary or assignee.”). An assignment places the assignee in privity of contract with the other contracting party. Stark v. Am. Nat. Bank of Beaumont , 100 S.W.2d 208, 213 (Tex. Civ. App.—Beaumont 1936, writ ref’d); Dodd v. Terrill , 05-93-00268-CV, 1994 WL 24378, at *5 (Tex. App.—Dallas Jan. 28, 1994, writ denied).

This article represents one author’s viewpoint and is not a substitute for legal advice .

assignees , breach of contract , contract law , rights under contract , texas contract law

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assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Assignment Of Rights Agreement

Jump to section, what is an assignment of rights agreement.

An assignment of rights agreement is a written document in which one party, the assignor, assigns to another party all or part of their rights under an existing contract. The most common example of this would be when someone wants to sell their shares of stock in a company.

When you buy shares from someone else (the seller), they agree to transfer them over and give up any control they had on that share. This way, another party can take ownership without going through the trouble of trying to buy the whole company themselves.

Common Sections in Assignment Of Rights Agreements

Below is a list of common sections included in Assignment Of Rights Agreements. These sections are linked to the below sample agreement for you to explore.

Assignment Of Rights Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.(H)(7) 5 dex99h7.htm FORM OF ASSIGNMENT AGREEMENT , Viewed December 20, 2021, View Source on SEC .

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment Of Rights Agreement Lawyers

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Richard A. Mathurin is as a member of the professional team at Sage Law. Since graduating cum Laude from The University of Notre Dame and UCLA School of Law, Rich has enjoyed an exciting and diversified career in the practice of law. In his early career, he assisted several energy companies all over the world in the development and funding of major wind energy and other green technology projects. Following an assignment by his firm to their Far East offices in Tokyo and Singapore, Rich represented global corporations such as Hitachi, UPS, and Fuji-Xerox in major commercial transactions. More recently, Rich returned to his native San Diego to care for an ill family member and work in the local community. Rich specializes in tax resolution, bankruptcy and small business services helping clients get in compliance with complex tax laws and manage their personal and business finances. When he is not working servicing his valued clients, Rich is an ardent golfer and enjoys rooting for his favorite Boston sports teams.

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Cross-Examination: Don’t Mess with Texas Contract Law

How to prosper with proper documentation for cat losses.

Photos credit: BrAt_PiKaChU/Stock / Getty Images Plus via Getty Images and Ed Crosss

“Don’t mess with Texas” has been the unofficial slogan of the Lone Star State since 1985. While the rest of the country thinks it’s just a catchphrase, true Texans know it actually began as an anti-littering campaign. The saying is especially fitting now because the State of Texas does not want remediation contractors littering the state with contracts that do not comply with its unique laws. These laws are traps for the unwary.

Follow the Special Rules for Disaster Remediation Contracts

Texas is the only state I know of that has a separate body of statutes specifically targeting “disaster remediation contracts.” The rules are very specific and have more twists than a pretzel factory, particularly when it comes to lien rights. The state is on the lookout for crooked contractors, and violators can land in the hoosegow.

In the aftermath of Hurricane Harvey, some contractors pressured Texans to provide upfront payments for work that was never performed. The state took a rather dim view of that, and made it a crime for a contractor to require full or partial payment before work is performed. Texas Disaster Remediation Contracts must state that the contract is subject to Chapter 58 of the Texas Business & Commerce Code, that the contractor may not require advance payments, and that progress payments must be in reasonable proportion to the amount of work actually performed, including materials delivered.¹ A violation of any of these requirements is deemed a “deceptive act” that may have serious legal consequences.

Contractors will march into Texas with good intentions and traditional work authorizations that fail to specify material terms, making them difficult or impossible to enforce. Think of a contract as a list of everything you would want a court to give you in the event the customer does not pay. If it’s not in a writing signed by the customer, the court probably won’t give it you. When a Texas judge sees an old fashioned work authorization, they’ll might think the contractor just fell off the turnip truck.

Contractors must provide their residential customers with a list of subcontractors, or get a waiver of the right to the list. However, most or all of the other requirements cannot be waived. Before a residential contract is executed by the owner, Texas requires the contractor to provide a written statement substantially similar to the text of Texas Property Code Section 53.255, indicating that:

Texas law requires contractors to provide owners with an overview of their rights, responsibilities, and risks in the transaction.
The contractor may not require the owner to convey the property to the contractor as a condition to the agreement to perform work.
The owner should investigate the contractor and obtain references before signing the contract.
The owner should insist on a written contract that explains what the contractor will do, when it will be done, and the cost of work or an explanation of how the cost will be determined.

Give Notice of the Right to Cancel

Consumers in Texas may cancel a consumer transaction up to three business days after signing the agreement. Contractors have to provide a notice of the right to cancel, and it must be in same language used in the principal sales presentation, e.g., Spanish. The form of the notice is dictated by the Texas Business and Professions Code and must be in boldface type in a minimum size of 10 points. The contractor must also provide a Notice of Cancellation form for customers to sign in the event they elect to cancel.

Hold Harmless Provisions and Releases of Liability

Texas courts generally don’t want you to hang your wash on someone else’s line. The EPA and OSHA, in addition to local and state authorities, have specific and stringent requirements for the removal of materials that contain lead and asbestos. Contractors should also follow the applicable federal and local regulations for preventing silica dust exposure to workers and occupants. In light of recent weather activity, when the restoration industry is overtaxed, there is a temptation to rush in without following proper procedures. Some jurisdictions require asbestos surveys and a notification process many days before work begins. Some good-intentioned contractors may try to expedite demolition projects by seeking waivers or releases of liability to skirt the rules. Not so fast! Some releases are enforceable in Texas, but many are not!

It is not unusual for businesses to seek releases of liability for negligence or even gross negligence. The more serious the wrong, the more difficult it is to be released from liability for it. Some courts in Texas believe that releases for gross negligence violate public policy and should not be enforced. Definitely ask for a release if the customer refuses your recommendations on an issue that could lead to secondary damage or bodily injury.

Releases are subject to the Texas Fair Notice Requirements, which essentially stands for the proposition that a business must have very good evidence that a customer was aware of a release and had a good understanding of what rights were being released. Written releases must be specific and conspicuous. This means that they must not be buried in fine print. A good practice is to put them in bold, capital letters. They must be presented in a way that would capture the attention of a reasonable person.

Add Some Teeth to Improve Collection Chances

Contractors have much better leverage in collections when their contracts contain provisions for attorneys’ fees, collection costs, late fees, service charges, and interest. Unlike many states, Texas has some serious teeth to its lien statute, which states that the court “shall” award costs and attorney’s fees in a lien foreclosure action.²

Customers Must Pay Deductibles

It’s a crime in Texas to pay or offer to pay policyholder’s deductible or to rebate all or part of a deductible. It’s also a crime for a policyholder to submit a claim for charges that have been padded to offset the deductible. Texas allows insurers to deny claims when the deductible is not paid. The deductible protects the carrier by ensuring the policyholder has some skin in the game. Contractors are coming to Texas in droves from all of the country, in response to the catastrophe resulting from the severe winter weather of 2021. Unfortunately, some of these contractors are “all hat and no cattle.”

The Texas Hold’em: Mechanic’s Liens

Of course, the most powerful collection tool is the mechanic’s lien. A lien is a legal hold on property to secure a debt. To fix a lien on Texas residential property, a written contract must usually be executed before the work is performed. Unlike any other state law I have seen, to protect the right to lien the home of a married person, the remediation contract must be signed by both spouses, even if the other spouse’s name is not on the property! Further, the contract must be filed with the county clerk where the homestead is located.³

Use Lump Sum Prices Whenever Possible

Everyone hates sticker shock. After decades of collecting money for remediation contractors, I cannot overstate the point that fixed price contracts are much easier to enforce than “time and materials contracts.” I

know what you’re thinking: “Ed, it’s impossible to state a price for emergency service before work begins!” I respectfully disagree. The problem is that emergency service work authorizations often obligate the contractor to return the property to its pre-loss condition. The price for that is usually impossible to accurately determine at the outset, but it’s not necessary to commit to that result the moment you walk on the job.

It’s totally unnecessary to scope an entire project just to start the stabilization process! The better approach is to go in stages, pricing each one as you go. Write a scope for an initial set of services that will definitely be necessary, and agree on a lump sum price for that. Explain that water damage is progressive, and establish an understanding that drying times are difficult to predict. Return on day two or day three, taking moisture meter readings, revisiting the scope and executing change orders as necessary to bring the project to conclusion. For example, an initial scope could be six air movers and a dehumidifier for three days, and ten labor hours for the lump sum price of x dollars, to be followed by a change order for additional services, if needed. If you have the customer’s agreement to the price for each stage of work, they have no argument that they “would not have hired you if they knew it was going to cost so much.”

Assignment of Benefits

A great way restoration contractors keep insurance companies honest is to obtain an assignment of rights under a claim. A properly drafted assignment allows the contractor to make a claim directly against an insurance company that would otherwise be impossible.

Most insurance policies contain provisions stating that the policies cannot be assigned. Most states do not apply these “anti-assignment” provisions to the assignment of rights under an individual claim. These are called “post-loss assignments of benefits.” Texas is in the minority of jurisdictions that apply the anti-assignment provisions to post-loss assignments, so the typical assignment of benefits probably will not work in Texas. However, Texas law allows the written assignment of an interest in a cause of action, which means that a contractor can receive the right to pursue a claim against an insurance company for breach of the policy.

Encourage customers to read the contract! Do not rush a customer into signing a contract. Texas is wary of contractors who get signatures on contracts with blanks in them, especially when the blanks are later filled in with terms that are not favorable to the customer. This can lead to severe legal consequences for the contractor, so simply don’t ask a customer to sign a contract with blanks in it. If space is inadvertently left blank, immediately bring this to the attention of the customer, explain how you believe the blank should be filled in, and try to reach an agreement, memorialized in a signed change order. In an impasse on a fundamental term of the contract, contact a Texas lawyer and discuss whether it is best for all concerned to cancel the contract.

Whether required by law or not, all restoration contracts should be in writing.⁴ Thorough communications and good contracts mirroring those communications greatly reduce the chance of conflict and collection problems.

This article is for general information and is not intended to be legal advice. Rather than relying on hearsay or entertaining magazine articles, to start getting the slack out of your rope, read the actual law. If you’d like a free copy of some of the important Texas rules for disaster remediation contracts, just send an email to [email protected] with “Texas Rules” in the subject line.

If you’re working on the 2021 Texas freeze, just remember: this ain’t their first rodeo. Git-R-Done!

¹ Texas Business & Commerce Code Section 58.003

² Texas Property Code Section 53.156

³ Texas Property Code Section 53.254

⁴ This is not to say that the failure to execute a written contract will always deprive contractors of the right to payment in all jurisdictions.

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Ed Cross, “The Restoration Lawyer,” represents restorers nationwide from offices in Palm Desert, California and Honolulu, Hawaii. His firm drafts restoration contracts, collects money for restorers and represents them in litigation. He is the Restoration Contractor Advocate for the Restoration Industry Association. He can be reached at (760) 773-4002 or by email at [email protected]. For information about how to document a file to accelerate collections, visit EdCross.com/collections.

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New Texas Patent-Case Assignment Order Targets ‘Related’ Cases (1)

By Lauren Castle

Patent cases filed in the Waco Division of the Western District of Texas will be randomly assigned among a dozen judges in the district under a new order to challenge plaintiffs seeking to try cases in Judge Alan Albright’s popular courtroom.

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Albright has received almost a third of the nearly 500 patent suits filed in the Western District in ...

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Major voting rights trial is unfolding in Texas: What to know

The argument is whether the law promotes "integrity" or makes it harder to vote.

A federal trial is unfolding over whether a 2021 voting rights law in the state violates the U.S. Constitution.

The suit -- brought on behalf of La Union del Pueblo, or LUPE, and other groups -- argues that certain provisions of Texas Senate Bill 1 have made voting more difficult, especially for less-educated, non-English-speaking and disabled populations in need of voting assistance.

The trial began on Sept. 11 and is expected to continue for the next few weeks.

S.B. 1 further empowers partisan poll watchers and further enhances ID requirements for voting by mail. It also bans balloting methods that places like Harris County, the third most populous county in the U.S. and the largest in Texas, implemented in response to COVID-19, such as drive-through and 24-hour voting.

Harris County, home to Houston, has increasingly voted Democratic in the last decade -- at the same time that Texas, while still often voting Republican, has shifted to be less conservative in federal elections.

Additionally, S.B. 1 prevents election officials from promoting vote by mail or distributing unsolicited absentee ballots.

Mail voting has been criticized by some conservatives, like former President Donald Trump, even as it has become more common since the pandemic. Trump and others claim, without evidence, that it's more vulnerable to widespread fraud.

MORE: The reality of Texas' new voting law sets in as some voters have trouble casting ballots

PHOTO: FILE - Voters in cars line up at a drive-through mail ballot drop-off site at NRG Stadium, Oct. 7, 2020 in Houston.

The new suit challenges these and other provisions. In their complaint, LUPE claims S.B. 1 violates the U.S. Constitution's first, 14th and 15th amendments as well as the Voting Rights Act, the Americans with Disabilities Act, and the Rehabilitation Act.

Texas Sen. Bryan Hughes, a Republican, authored the bill, characterizing it as an effort to "protect election integrity" and "prevent fraud."

In an August 2021 post to the Texas Public Policy Foundation's website, Hughes wrote, "I'm proud to have helped lead the effort to restore confidence in our election system. And that's what SB 1 is about, really—it's not an attempt to overturn any prior election, or to ensure any one party has a permanent majority."

MORE: Trump indictment spotlights Georgia voting rights movement, activists say

Hughes wrote that the new identification requirements were the "biggest change in voting in Texas" under the bill. He characterized that specific provision as "the addition of a simple step to help ensure that mail-in ballots are genuine."

But lawyers for the plaintiffs, like Nina Perales, vice president of litigation for the Mexican American Legal Defense and Educational Fund (MALDEF), believe S.B.1 really accomplishes something else.

"It instead restricts the ability to vote in Texas," Perales said.

PHOTO: FILE - Robyn Sanders counsel at the Brennan Center for Justice arrives at the United States District Court for the Western District of Texas before a trial to challenge restrictive voting provisions in Texas Senate Bill 1,, Sept. 11, 2023

Sean Morales-Doyle, an attorney for The Brennan Center, which is representing LUPE, told ABC News that negative repercussions from the bill are already being seen and were apparent in the 2022 local elections, when "tens of thousands of ballots being rejected from eligible voters."

According to Perales, mail-in ballots ask for one of two identifying options, either a driver's license number or Social Security number, leaving many voters guessing which their voter registration is linked to.

Nadia Hakim, director of communications for Harris County's Elections Administration's Office, gave an example as to why those ballots are being rejected, telling ABC News, "So let's say, you have someone who is 70 years old. They're submitting their annual mail ballot application, they send in the last four digits of their Social Security number, but what we have on file is their Texas driver's license number. Those numbers both may be true, but it's not an exact match. So we would have to flag that application for rejection."

"The first major election where we saw the impact of Senate Bill 1, was the March 1, 2022 primaries, and unfortunately our office had to flag, I believe, it was almost 20% of mail ballots that came in. So those are mail ballots that weren't counted because they had to be flagged for rejection," Hakim said.

With the first presidential election since the bill's adoption swiftly approaching, next year, LUPE contends the full restrictive effects of the bill have yet to be seen.

"It [S.B. 1] may have an even greater impact or a different impact on a presidential year when more voters are turning out to vote, and voters who didn't vote in 2022 are likely to be voting, so people who haven't already been through this rigmarole of putting their license number down and having it rejected are going to be going through that for the first time in 2024," Morales-Doyle said.

According to FiveThirtyEight data, the United States saw an unparalleled year of voting restrictions in 2021 spurred by Republicans' false belief that the 2020 election was stolen from Trump. That trend hasn't carried through to 2023, with legislation that instead made it easier for Americans to vote.

"The hope is that this trial will have a big impact, because we'll get a court ruling enjoining the enforcement of a number of provisions of S.B. 1," Morales-Doyle said.

Their case has been consolidated with a number of others that have their own plaintiffs and counsel.

Gov. Greg Abbott, who signed S.B. 1, did not respond to ABC News' request for comment.