Do new government purchasing rules apply to a contract that was signed before the law took effect?

Texas AG Opinion JM-1218: Does a New Purchasing Rule Apply to a Contract Signed Before It Took Effect?

Plain-English summary

The Harris County district attorney had bought something using forfeiture funds his office administered under article 59.06 of the Code of Criminal Procedure. The contract was signed and the goods were delivered in August 1989, but the bill had not yet been paid. Meanwhile, on September 1, 1989, a new statute (section 140.003 of the Local Government Code, added by House Bill 1434) took effect. It required a district attorney to make purchases following the same competitive-bidding rules that apply to a county under the County Purchasing Act. The district attorney's office held back payment, worried that paying after September 1 would violate the new rule because the purchase had not gone through competitive bidding.

The Attorney General concluded the new rule did not reach this purchase. At the time the contract was signed and the goods delivered, district attorney purchases with forfeiture funds were not subject to the County Purchasing Act's bidding requirements. Applying section 140.003 after the fact, so as to block payment on a contract that was already valid and performed when it was made, would violate article I, section 16 of the Texas Constitution, which prohibits retroactive laws and laws impairing the obligations of contracts. That the contract was made by a public entity did not take it outside that constitutional protection.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

District and criminal district attorneys: The opinion told a district attorney that the new competitive-bidding requirement in section 140.003 did not apply to purchases already contracted for and delivered before September 1, 1989, so payment on those existing obligations could be made without violating the statute.

County auditors and payment officers: For officials worried about approving payment on a non-bid purchase after the new law took effect, the opinion concluded the payment did not violate section 140.003, because the contract's validity was fixed by the law in force when it was signed and performed.

Anyone contracting with a public entity around a statute's effective date: The opinion reinforced that a contract valid and performed under the law in force when made is protected by the constitutional bar on retroactive laws and impairment of contracts, even when the other party is a government body.

Common questions

Can a new law change the rules for a contract that was already signed?
Not so as to defeat a contract that was valid and already performed under the earlier law, according to this opinion. The Attorney General relied on article I, section 16 of the Texas Constitution, which bars retroactive laws and laws impairing the obligations of contracts.

Does it matter that one side of the contract was a government office?
No. The opinion stated that a contract made by a public entity is still within the scope of article I, section 16's protections, citing Fazekas v. University of Houston.

Why wasn't the district attorney's purchase subject to competitive bidding in the first place?
Because, as the opinion explained, purchases made with forfeiture funds administered under article 59.06 of the Code of Criminal Procedure were not subject to the County Purchasing Act at the time of this contract. Section 140.003 changed that going forward, effective September 1, 1989.

Were the parties "on notice" of the coming law when they signed in August 1989?
The opinion rejected that argument, quoting Purser v. Pool for the proposition that the passage of an act does not give contracting parties notice of anything until it actually becomes law on its effective date.

Background and statutory framework

Section 140.003 of the Local Government Code, added in 1989 by House Bill 1434, required a "specialized local entity," including a district or criminal district attorney, to purchase items under the same procedures and requirements a county follows under subchapter C, chapter 262 of the Local Government Code, the County Purchasing Act. That Act generally requires purchases over a set amount to go through competitive bids or proposals. The act took effect September 1, 1989.

The purchase at issue was made with funds the district attorney administered under article 59.06 of the Code of Criminal Procedure, which governs disposition of forfeited property. A prior opinion, JM-783 (1987), had indicated that purchases with forfeited funds were not subject to the County Purchasing Act as it then stood. So when the contract was signed and the goods delivered in August 1989, no competitive-bidding requirement applied.

The constitutional analysis turned on article I, section 16 of the Texas Constitution (with a parallel reference to the federal Contract Clause, U.S. Const. art. I, § 10). The opinion cited a line of Texas cases holding that a contract entered into before a new statute takes effect is generally governed by the law in force when it was made: Hutchings v. Slemons and Spires v. Mann (contracts predating a statute of frauds provision), and Cardenas v. State (a statute enacted after a bond forfeiture could not impair rights the state had already acquired). It distinguished laws that merely make procedural or remedial changes, which can sometimes apply to existing matters, citing Caruthers v. Bd. of Adjustment of City of Bunker Hill Village and Commercial Insurance Co. of Newark, N.J. v. Lane, but concluded that blocking payment here would impair a vested contractual right rather than adjust a procedure. Finally, quoting Purser v. Pool, the opinion rejected the idea that the parties were bound by the new law simply because it had been passed before their August contract, since a statute does not operate as notice until its effective date.

Citations

Statutes:

• Local Gov't Code § 140.003 (specialized local entity purchasing requirements)
• Local Gov't Code § 262.023 (County Purchasing Act competitive-bid requirement)
• Local Gov't Code § 262.033 (taxpayer suit to enjoin a violating contract)
• Tex. Code Crim. Proc. art. 59.06 (disposition of forfeited property)
• Tex. Code Crim. Proc. art. 59.01 (seizure and forfeiture of property)
• V.T.C.S. art. 4476-15, § 5.08 (former forfeiture provision)
• V.T.C.S. art. 2368a.5 (former location of the County Purchasing Act)
• Tex. Const. art. I, § 16 (prohibition on retroactive laws and impairment of contracts)
• U.S. Const. art. I, § 10 (Contract Clause)

Cases:

• Hutchings v. Slemons, 174 S.W.2d 487 (Tex. 1943)
• Cardenas v. State, 683 S.W.2d 128 (Tex. Civ. App. - San Antonio 1984, no writ)
• Spires v. Mann, 173 S.W.2d 200 (Tex. Civ. App. - Eastland 1943, writ ref'd)
• Fazekas v. University of Houston, 565 S.W.2d 299 (Tex. Civ. App. - Houston [1st Dist.] 1978, writ ref'd n.r.e.), cert. denied, 440 U.S. 952
• Caruthers v. Bd. of Adjustment of City of Bunker Hill Village, 290 S.W.2d 340 (Tex. Civ. App. - Galveston 1956, no writ)
• Commercial Insurance Co. of Newark, N.J. v. Lane, 480 S.W.2d 781 (Tex. Civ. App. - Dallas 1972, writ ref'd n.r.e.)
• Purser v. Pool, 145 S.W.2d 942 (Tex. Civ. App. - Eastland 1940, no writ)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1218
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1218.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

September 10, 1990

Honorable John B. Holmes, Jr.
Harris County District Attorney
District Attorney's Building
201 Fannin, Suite 200
Houston, Texas 77002

Opinion No. JM-1218

Re: Authority of a local governmental body to pay for an item purchased under contract executed prior to the effective date of section 140.003 of the Local Government Code (RQ-2017)

Dear Mr. Holmes:

You ask whether section 140.003, Local Government Code, applies to a purchase, made with funds administered by the district attorney under article 59.06 of the Code of Criminal Procedure, where the contract was executed, and the goods delivered, prior to the effective date of the provisions of section 140.003, but payment has not yet been made. The provisions of section 140.003 were added in 1989 by section 1 of House Bill 1434. Acts 1989, 71st Leg., ch. 1250, § 1, at 5046. Section 22 of the act provides that the act takes effect September 1, 1989.

Section 140.003 requires that a "specialized local entity," defined in subsection (a) to include a "district or criminal district attorney," "shall purchase items in accordance with the same procedures and subject to the same requirements applicable to a county under subchapter C, chapter 262" of the Local Government Code. Subchapter C of chapter 262, known as the County Purchasing Act, imposes detailed requirements on county purchases, including the requirement that, with certain exceptions, purchases over a certain amount be made pursuant to competitive bids or proposals. See Local Gov't Code § 262.023.

Presumably, the cause of your concern is that the acquisition in question was not made in accordance with the requirements of the County Purchasing Act, which section 140.003 makes applicable to district attorney purchases as of September 1, 1989. You indicate that since the performance of the parties was not completed, by payment, prior to September 1, 1989, payment has to date been withheld out of a concern that making payment for the items after September 1, 1989, would violate section 140.003.

It appears that at the time the contract in question here was executed and the items delivered, purchases with district attorney funds administered under article 59.06 of the Code of Criminal Procedure were not subject to the competitive bidding and other requirements of the County Purchasing Act. Article 59.06 provides for the disposition of forfeited property by law enforcement agencies. See art. 59.01 et seq., Code Crim. Proc. (seizure and forfeiture of property used or intended to be used in the commission of certain offenses, or of the proceeds or property acquired with the proceeds gained from the commission of such offenses). Attorney General Opinion JM-783 (1987) indicated that purchases with forfeited funds, under V.T.C.S., article 4476-15, § 5.08, (now article 59.01 et seq., Code Crim. Proc.) were not subject to the requirements of the County Purchasing Act, then found at article 2368a.5, V.T.C.S.

You do not raise or provide us with sufficient facts to address issues as to the propriety generally of the use under article 59.06 of forfeited funds for the acquisition in question. We address here only the narrow legal question you raise: whether the purchase by the district attorney of items for which a contract was executed and of which delivery was taken, prior to the effective date of the provisions of section 140.003, but for which payment was not made before such date, is subject to the provisions of that section.

You suggest that application of section 140.003 to the transaction in question would violate the prohibition in article I, section 16 of the state constitution on retroactive laws or laws impairing the obligations of contracts. See also U.S. Const. art. I, § 10.

Assuming that the August 1989 contract in question was validly entered into and delivery of the subject merchandise properly taken in August, under the laws then in force, we agree that application to the transaction of the subsequently effective provisions of section 140.003 -- so as to prevent or make subject to injunction,¹ the purchaser's performance, by payment of its obligations arising from such contract and delivery -- would violate the prohibitions in article I, section 16 on retroactive laws or laws impairing the obligations of contracts. See, e.g., Hutchings v. Slemons, 174 S.W.2d 487 (Tex. 1943) (broker's oral contract entered into before effective date of statute of frauds pertaining to such contracts not subject to statute of frauds); Cardenas v. State, 683 S.W.2d 128 (Tex. Civ. App. - San Antonio 1984, no writ) (statute authorizing surety to receive a remitter of its bond under stated circumstances, was enacted subsequent to bond forfeiture in case and, since it would impair rights acquired by state under laws at time it entered into contract with surety, was not retroactive in application). See also Spires v. Mann, 173 S.W.2d 200 (Tex. Civ. App. - Eastland 1943, writ ref'd) (broker's contract antedating statute of frauds provision); Attorney General Opinions JM-897 (1988) and JM-774 (1987) (imposition of fee by Veterans Land Board for delivery of paid-in-full deeds to purchasers under contracts not contemplating imposition of such fee).

That the contract in question here was made by a public entity does not remove it from the scope of the prohibitions of article I, section 16 of the Texas Constitution. Fazekas v. University of Houston, 565 S.W.2d 299 (Tex. Civ. App. - Houston [1st Dist.] 1978, writ ref'd n.r.e.), cert. denied, 440 U.S. 952. Nor, we think, would application of section 140.003 to the transaction in question be in the nature of an exercise of police power or change in procedure or remedy which might be permissible under article I, section 16. See, e.g., Caruthers v. Bd. of Adjustment of City of Bunker Hill Village, 290 S.W.2d 340 (Tex. Civ. App. - Galveston 1956, no writ) (zoning); Commercial Insurance Co. of Newark, N.J. v. Lane, 480 S.W.2d 781 (Tex. Civ. App. - Dallas 1972, writ ref'd n.r.e.) (retroactive law making procedural or remedial change not invalid unless it impairs vested rights or takes away or unreasonably impairs litigant's remedy, right of action, or defense).

It might be suggested that the parties to the contract in question here were on notice at the time of its execution in August, 1989, that the provisions of section 140.003, approved by the governor on June 16, 1989, would take effect September 1, 1989. Addressing a similar situation, with regard to an act taking effect 90 days after adjournment of the legislature, the court in Purser v. Pool, 145 S.W.2d 942 (Tex. Civ. App. - Eastland 1940, no writ) stated that passage of an act does not give contracting parties "notice of anything. It did not operate as notice until it became a law ninety days after adjournment."

Again, we conclude in response to your question, that application of Local Government Code section 140.003 -- requiring that district attorney purchases be made in accordance with the competitive bidding and other requirements of the County Purchasing Act -- to a district attorney purchase for which the contract was executed and delivery of the subject merchandise taken prior to the effective date of the provisions of that section, would violate the prohibitions in article I, section 16 of the constitution on retroactive laws and laws impairing the obligations of contracts.

SUMMARY

Application of Local Government Code section 140.003, which requires that district attorney purchases be made in accordance with the competitive bidding and other requirements of the County Purchasing Act, does not apply to a district attorney purchase for which the contract was executed and delivery of the subject merchandise taken prior to the effective date of the provisions of that section. Application of that provision in such situation would violate the prohibitions in article I, section 16 of the constitution on retroactive laws and laws impairing the obligations of contracts.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General