Have a customer that requires us to do work off an original PO but drags their feet on issuing a change order for overruns on original PO. Then will not allow us to invoice the change order amount until the PO is issued.
It’s a catch-22 circle. We would like to issue an official invoice with demand to force them to issue the PO and get the payment terms in play. In Texas & Arkansas.

Answered 1 week ago

1292 Answered Questions

Matt Viator

Legal Associate zlien

I'm sorry to hear about that - it does sound like a vicious and frustrating cycle. First and foremost, attempting to talk out the issue with a customer should just about always be a sound first step. Often, a mutual understanding can be come to if both sides of the issue are made clear and discussed. Situations like delayed change order requests or approvals are avoidable, and explaining the effects they're having on the business should help to iron out the problem. In the event that some agreement or arrangement can't be reached, taking further action may be warranted. One option, while a customer might not like it, could be going over their head to the property owner. If the property owner is aware of payment issues caused by their contractor, and if they're aware of potential outcomes (like project delays or even liens or lawsuits), they may be willing to step in and force a contractor into behaving better. Due to Texas' notice requirements, there's another potential solution sort-of built into Texas projects. In order to preserve the right to later file a mechanics lien, monthly notices must be sent based on any month where work was performed but unpaid. By sending these required notices, a claimant can notify their contractor and the owner of any unpaid amounts, and they can indicate that if payment isn't made, the claimant won't just take the hit laying down. What's more, while not statutorily required in Texas, sending a document like a Notice of Intent to Lien can go a long way toward compelling payment, too. A Notice of Intent to Lien acts as an official lien warning or threat. It states that, if payment isn't made and made soon, then further action (a mechanics lien filing) will be taken. When a Notice of Intent to Lien is sent to both a claimant's customer and the property owner, it can effectively put pressure on that customer from multiple angles and help to compel payment. You can learn more about that process here: What is a Notice of Intent to Lien? Plus, as long as all notice and deadline requirements have been followed, then a claimant could follow up with a TX lien claim if a Notice of Intent isn't enough. While Arkansas has different notice and deadline requirements (including a required Notice of Intent to Lien), the same general themes will apply - proper notices help preserve claims that may be necessary later on, a Notice of Intent to Lien can help to recover payment without the actual need for a lien filing, and, if necessary, a lien claim can help compel payment. You can learn about the notices and deadlines for Arkansas here: Arkansas Lien & Notice FAQs. But with any luck, talking out the issue will be enough to get processes back on track.