A legal rule that says money paid for a project must be passed down to subs and suppliers, not diverted by the contractor.
A construction trust fund is a legal mechanism in some states that treats construction contract funds as trust funds held by the contractor for the benefit of subcontractors and suppliers. Under trust fund statutes, a general contractor who diverts funds intended for subs and suppliers to other uses can face criminal liability for theft in addition to civil liability. Texas, New York, and several other states have robust construction trust fund statutes.
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