Texas SB 1040/HB 3874 (2025) - No Vote this Session

The Texas Legislative session adjourned sine die on Monday, June 2, concluding the 89th Regular Legislative Session. SB 1040/HB 3874, which I wrote about earlier this year, was not brought to a vote this session, and did not make it out of committee in the Senate. If passed, this bill would have required any document incorporated by reference in a construction contract to be provided to the counterparty at least ten days before the contract is signed. While a mandatory ten-day review period could help clear up contract obligations, it could also delay contract negotiations, project startup, and tight construction schedules. Governor Greg Abbott can still summon the Legislature to address specific issues of his choosing, but I would bet against him using a special legislative session to address construction contract incorporations by reference.

While this might mean business as usual for contract negotiations, here are some best practices when negotiating contracts that incorporate other contracts by reference:

• Request and Review All Referenced Documents Early
  Don’t wait until after signing—ask for every incorporated spec, schedule, exhibit, or standard up front so you know exactly what you’re agreeing to. If the document isn’t available yet, that’s all the more reason to carve it out of the list of incorporated documents.

• List Referenced Documents Clearly and Specifically
  Try to avoid vague phrases like "all applicable standards" or "industry norms." Instead, name the standards, norms, and documents explicitly with titles, dates, and version numbers.

• Resolve Conflicts Between Documents in Writing
  Clarify which document controls if there's a conflict (e.g., the contract vs. the drawings vs. the specifications). Ambiguity here often leads to disputes.

• Limit Incorporation to What’s Necessary
  Push back on sweeping “catch-all” language that ropes in unrelated or unnecessary documents. Tailor the list to the actual scope of the project.

If you need help with negotiations, please reach out.