Heads in the Sand? Texas SB 1040/HB 3874

Introduced to the Texas Senate on January 31, 2025 by Senator Tan Parker, Senate Bill 1040 (and its House counterpart, House Bill 3874) attempts to add clarity to construction contracts and promote fairness in construction negotiations. If passed, this bill will require any document incorporated by reference in a construction contract to be provided to the counterparty at least ten days before the contract is signed. The consequences of failing to provide these documents? Any document or term incorporated by reference is voidable by the party that did not receive it. You can read the full text of the bill here.

In construction law, incorporation by reference is a standard practice, and if enacted, this bill will have immediate impacts. For example, when a subcontractor is required to comply with the Owner’s requirements from the general contract, SB 1040 mandates the general contractor to provide a copy of the general contract at least ten days before the subcontract is signed (with redactions allowed). The upside? A ten-day review period can help clarify expectations between the parties and reduce the risk of costly surprises, future disputes, or construction litigation. In many cases, this may come at a cost: delaying contract negotiations and, potentially, project startup. Often, subcontracts are negotiated simultaneously with the general contract, so a mandatory ten-day waiting period could disrupt tight construction schedules.

SB 1040 was referred to the Senate Business & Commerce Committee on February 24, 2025, where it remains pending. Because this bill could significantly impact how construction contracts are negotiated and executed in Texas, construction professionals (including developers, contractors, subcontractors, and obviously lawyers) should stay informed. Stay tuned for updates as I track this bill’s progress through the Texas Legislature.