Can a Texas county pay an invoice on an amended contract for work that was done before the amendment?

Plain-English summary

Maverick County hired a law firm, Bracewell, to serve as bond counsel for a project, agreeing in 2017 to a $70,000 fee. Two years later the commissioners court authorized certificates of obligation for the project and then amended the engagement, and the firm submitted an invoice for $135,000 plus fees and expenses. The county auditor worried that much of the work had been done before the amendment, under the original agreement, and asked, through the district attorney, whether paying the larger amount would violate article III, section 53 of the Texas Constitution.

The AG started by drawing a line he draws often: whether a specific invoice is lawful turns on the facts and is for the commissioners court, not something the AG resolves as a matter of law in an opinion. So he gave general advice on the constitutional provision instead.

Article III, section 53 bars the Legislature from letting a county or municipal authority grant "extra compensation" after a service has been rendered or a contract has been entered into and performed in whole or in part. The point of the clause, the AG explained, is to keep local governments from giving away public money for work already done, or for which there was no valid authorization, where the public gets nothing in return. "Extra compensation" means any sum paid on top of the contract price. So a government cannot pay more for performance an existing contract already required.

But the clause does not freeze contracts in place. The AG noted that the State and its subdivisions may modify their contracts as long as any added payment is matched by new consideration, meaning the payee gives something more in exchange. He pointed to earlier opinions: one approving added payments to school employees who offered additional consideration under an early-exit plan, another saying a school district could not raise salaries mid-year without new consideration but could renegotiate a partly performed contract where new consideration passed to the district. Applying that to Maverick County, the AG said paying the amount owed under the original contract for the services that contract required is not extra compensation, and that paying more would be extra compensation only if it bought the same scope of services the original contract already covered. If the amendment changed the scope of work, adding services in exchange for the additional payment, that likely supplied adequate consideration, but whether it did was a question for the commissioners court in the first instance.

Currency note

This opinion was issued in 2020. 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.

What the opinion meant for those who asked

For the Maverick County auditor and the commissioners court, the opinion did not bless or condemn the Bracewell invoice. It set the test and handed the decision back to the county. At the time, the rule the AG laid out was that paying what the original contract already required is not a constitutional problem, and that an amendment calling for a larger payment is permissible only if the county received new consideration for it, such as additional services. The opinion flagged the danger zone: paying more for the very same work the original contract already covered would be the kind of extra compensation article III, section 53 prohibits. For local officials and the lawyers advising them, the practical takeaway recorded in the opinion was that the commissioners court itself had to find adequate new consideration before approving the higher invoice; the AG would not make that factual call for them.

Common questions

Q: Does article III, section 53 stop a county from ever amending a contract?
A: No. The AG explained that the clause bars paying extra for work an existing contract already required, but it does not prevent a county from modifying a contract so long as any additional payment is supported by new consideration.

Q: What counts as paying "extra compensation"?
A: The AG quoted the rule that "extra compensation" is any sum given in addition to the contract price. Paying more than the original contract required for the same scope of services is extra compensation; paying the amount the original contract already owed is not.

Q: Who decides whether an amendment had enough new consideration?
A: The commissioners court, in the first instance. The AG said the propriety of paying a particular invoice is a factual matter outside the scope of an AG opinion, and that whether a change in the scope of work supplied adequate consideration was for the court to determine.

Q: Why didn't the AG just say whether the $135,000 invoice was legal?
A: Because, as the opinion put it, whether a specific payment complies with the law is a factual determination based on the surrounding circumstances and is beyond the scope of the opinion process. The AG could give general legal advice on the constitutional provision but not rule on the invoice itself.

Background and statutory framework

The question arose under article III, section 53 of the Texas Constitution, which prohibits the Legislature from authorizing a county or municipal authority to grant extra compensation after service has been rendered, or a contract has been entered into and performed in whole or in part. The AG drew the purpose of the clause from Lee v. El Paso Cty. and the definition of "extra compensation" from Rhoads Drilling Co. v. Allred and Dallas Cty. v. Lively. The principle that contracts may be modified where additional payment is matched by new consideration came from City of Greenville v. Emerson and the AG's own prior opinions (GA-0204, JC-0165, MW-68, MW-91). The footnote on what consideration is, and the rule that doing what one is already bound to do is not sufficient consideration for a modification, came from McCoy v. Alden Indus., Inc. The AG also relied on JC-0221 and LO-93-057 for the limits of the opinion process and the original-contract analysis. The opinion declined to decide the specific invoice, treating it as a fact question for the commissioners court.

Citations and references

Constitutional provision:

• Tex. Const. art. III, § 53 (extra compensation prohibited after service rendered or contract performed)

Cases:

• Lee v. El Paso Cty., 965 S.W.2d 668 (Tex. App.-El Paso 1998, pet. denied)
• Rhoads Drilling Co. v. Allred, 70 S.W.2d 576 (Tex. [Comm'n Op.] 1934)
• Dallas Cty. v. Lively, 167 S.W. 219 (Tex. 1914)
• City of Greenville v. Emerson, 740 S.W.2d 10 (Tex. App.-Dallas 1987, no writ)
• McCoy v. Alden Indus., Inc., 469 S.W.3d 716 (Tex. App.-Fort Worth 2015, no pet.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0315
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2020/kp-0315.pdf

Original opinion text

June 15, 2020

The Honorable Roberto Serna
District Attorney
293rd Judicial District
458 Madison Street
Eagle Pass, Texas 78852

Opinion No. KP-0315

Re: Application of article III, section 53 of the Texas Constitution to invoices submitted to a county under an amended service contract for services performed prior to the amendment (RQ-0323-KP)

Dear Mr. Serna:

On behalf of the Maverick County Auditor, you ask whether approval and payment of certain Maverick County ("County") invoices is lawful.[1] You describe an invoice pertaining to the County's retention of a law firm to serve as bond counsel for a pending project.[2] See Request Letter at 1-3. You recite the following facts:

On June 19, 2017, Maverick County approved the terms included in an engagement letter from Bracewell dated June 12, 2017, with provision[s] including a fee of $70,000 [and expenses and reimbursements for the project;]

The Commissioners Court on May 13, 2019, approved an Order authorizing issuance of Certificates of Obligation relating to [the project];

On September 23, 2019, the Commissioners Court approved an Order amending its May 13, 2019 Order and authorizing amendment of the agreement with counsel;

On September 26, 2019, . . . the first installment of the funding relating to the project was transmitted to the County . . . ;

By invoice also dated September 26, 2019, Bracewell requested payment of $135,000 plus [fees and expenses related to the project];

A Letter of Engagement from Bracewell dated October 23, 2019, included provisions for payment of $135,000 plus [fees and expenses] to Bracewell for its work on the project.

Id. at 1-2. You state the auditor is concerned that "payment by the County of the amount as requested by Bracewell would be in violation" of Texas Constitution, article III, section 53. Id. at 2. You explain the auditor recognizes the contract was amended on September 23, 2019, but is concerned that it appears a great part of the work on the project was done before the amendment and performed pursuant to the terms of the previous agreement. See id. While the propriety of payment of a particular invoice is a factual matter not for resolution as a matter of law in an attorney general opinion, we can provide general advice on article III, section 53. See Tex. Att'y Gen. Op. No. JC-0221 (2000) at 8-9 (considering the question whether a particular payment complies with the law and recognizing it "is a factual determination based on a review of the surrounding circumstances and is beyond the scope of the opinion process").

Article III, section 53, in relevant part, prohibits the Legislature from authorizing a county or municipal authority to grant extra compensation "after service has been rendered, or a contract has been entered into, and performed in whole or in part." TEX. CONST. art. III, § 53. The provision was adopted "to prevent the counties or municipalities from freely giving away public moneys for services previously rendered or for which no valid legal authorization existed and for which the public would receive no return." Lee v. El Paso Cty., 965 S.W.2d 668, 673 (Tex. App.-El Paso 1998, pet. denied); see also Tex. Att'y Gen. Op. No. JC-0376 (2001) at 2. "Extra compensation" means "any sum given in addition to the contract price or salary." Rhoads Drilling Co. v. Allred, 70 S.W.2d 576, 582 (Tex. [Comm'n Op.] 1934); see also Dallas Cty. v. Lively, 167 S.W. 219, 220 (Tex. 1914). The prohibition means that "the state and its political subdivisions may not pay additional funds for contractual performance already required by an existing contract." Tex. Att'y Gen. Op. No. GA-0204 (2004) at 3 (citing Rhoads Drilling Co., 70 S.W.2d at 581).

But article III, section 53 does not prohibit the State and its political subdivisions from modifying their contracts, provided that any additional payments are made in return for new consideration.[3] See id.; cf. City of Greenville v. Emerson, 740 S.W.2d 10, 13 (Tex. App.-Dallas 1987, no writ). As prior opinions from this office illustrate, a contract modification or amendment that involves additional payment for additional services does not violate article III, section 53. See, e.g., Tex. Att'y Gen. Op. Nos. JC-0165 (2000) at 4, MW-68 (1979) at 1. Opinion JC-0165 involved a school district's implementation of an early exit plan for employees. Tex. Att'y Gen. Op. No. JC-0165 (2000) at 1. This office said "where the payee offers additional consideration for the additional payments, there is no violation" of article III, section 53. Id. at 4. Opinion MW-68 concerned a school district's salary increase after the commencement of the school year and the start of the teachers' yearly contracts. Tex. Att'y Gen. Op. No. MW-68 (1979) at 1. The opinion concluded that the school district could not make the increase absent additional consideration. Id. at 2. "The school board may, however, renegotiate a contract already performed in part where new consideration passes to the district in exchange for new benefits provided." Id.

Here, payment of the amount owed under the original contract for services required by that contract is not extra compensation in violation of article III, section 53. See Tex. Att'y Gen. LO-93-057, at 2. It would only be extra compensation to pay more than what was required by the original contract for the same scope of services required by that contract. And though some services may have already been provided under the original contract, if the amended contract was supported by new consideration, payment of an invoice submitted thereunder would comply with article III, section 53 provided the new consideration was sufficient. A change in the scope of work to require additional services in exchange for additional payment likely constitutes adequate consideration in support of the amendment, but that is a question for the commissioners court in the first instance. See Tex. Att'y Gen. Op. No. MW-91 (1979) at 3-4.

[1] See Letter from Honorable Roberto Serna, Dist. Att'y, 293rd Jud. Dist., to Honorable Ken Paxton, Tex. Att'y Gen. at 1-2 (Dec. 6, 2019), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] You indicate the County Auditor has similar concerns about another contract and amendment for a different law firm that serves as general counsel for the same project. See id. at 2-3.

[3] Consideration is "a present exchange bargained for in return for a promise and consists of benefits and detriments to the contracting parties." However, "[w]here a party agrees to do what he is already bound to do by an original contract, there is not sufficient consideration to support a supplemental contract or modification." McCoy v. Alden Indus., Inc., 469 S.W.3d 716, 729 (Tex. App.-Fort Worth 2015, no pet.) (citations omitted).

S U M M A R Y

Article III, section 53 of the Texas Constitution prohibits a county or municipal authority from granting extra compensation "after service has been rendered, or a contract has been entered into, and performed in whole or in part."

A county's payment of an amount owed under a contract for services required by that contract is not prohibited extra compensation. Though some services may have already been provided under an original contract, if an amended contract is supported by new consideration, payment of an invoice submitted thereunder would comply with article III, section 53 provided the new consideration is sufficient. A change in the scope of work to require additional services in exchange for an additional payment likely constitutes adequate consideration in support of the amendment, but that is a question for the commissioners court in the first instance.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy First Assistant Attorney General

RYAN M. VASSAR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee