CONSTRUCTION SERVICES AGREEMENT

(Arizona Private Project ‒ Mechanics’ Lien & Prompt-Pay Compliant)

[// GUIDANCE: This template is intentionally broad. Delete any bracketed guidance before final execution. Confirm all project-specific facts and statutory citations prior to use.]

TABLE OF CONTENTS

1. I. Document Header
2. II. Definitions
3. III. Operative Provisions
   3.1 A. Scope of Work
   3.2 B. Contract Time & Schedule
   3.3 C. Contract Price & Payment
   3.4 D. Lien, Bond & Retainage Compliance
4. IV. Representations & Warranties
5. V. Covenants & Restrictions
6. VI. Default & Remedies
7. VII. Risk Allocation
8. VIII. Dispute Resolution
9. IX. General Provisions
10. X. Execution Block

I. DOCUMENT HEADER

1.1 Agreement. This Construction Services Agreement (“Agreement”) is made and entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and between:

(a) [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE] (“Owner”); and
(b) [CONTRACTOR LEGAL NAME], a [STATE] [ENTITY TYPE] (“Contractor”).

Owner and Contractor are sometimes referred to individually as a “Party” and collectively as the “Parties.”

1.2 Recitals.
A. Owner is the fee simple owner of the real property located at [PROJECT ADDRESS] (the “Site”).
B. Owner desires that Contractor furnish all labor, materials, equipment, and services necessary to construct the improvements described in the Contract Documents (defined below) (the “Project”), and Contractor is willing to do so upon the terms and conditions herein.
C. The Parties enter into this Agreement for good and valuable consideration, the sufficiency of which is acknowledged.

II. DEFINITIONS

Capitalized terms have the meanings set forth below or elsewhere in this Agreement. Undefined capitalized terms used in a section shall have the meaning assigned in the Definitions or the referenced section.

“Applicable Law” means collectively all federal, state, county, and local statutes, regulations, codes, ordinances, orders, and common-law requirements governing the Project, including without limitation Arizona mechanics’ lien statutes (A.R.S. § 33-981 et seq.) and prompt-pay statutes (A.R.S. § 32-1129 et seq.).

“Change Order” has the meaning in Section 5.1.

“Contract Documents” means, collectively, (i) this Agreement and any properly issued amendments and Change Orders; (ii) the Drawings and Specifications listed on Exhibit A; (iii) the Project schedule on Exhibit B; and (iv) any other documents expressly incorporated by reference.

“Contract Price” means the not-to-exceed amount of $[CONTRACT PRICE] for completion of the Work, as adjusted by approved Change Orders.

“Final Completion” means the date on which (i) the Work is fully performed; (ii) all inspections are passed; (iii) final lien waivers/releases are delivered; and (iv) all close-out deliverables listed in Exhibit C are approved by Owner.

“Substantial Completion” means the date certified by Owner’s Representative when the Work is sufficiently complete in accordance with the Contract Documents such that Owner can occupy or utilize the Project for its intended purpose, notwithstanding minor punch-list items.

“Work” means all construction and related services required by, or reasonably inferable from, the Contract Documents.

[// GUIDANCE: Expand or modify definitions as needed.]

III. OPERATIVE PROVISIONS

A. Scope of Work

2.1 Contractor shall diligently perform and complete the Work in strict conformity with the Contract Documents, employing only qualified, properly licensed, and adequately supervised personnel.

2.2 Contractor shall comply with all Applicable Law, including obtaining and paying for all permits, inspections, and licenses required for the Work.

B. Contract Time & Schedule

3.1 Commencement. Contractor shall commence the Work within [NUMBER] calendar days after the later of (i) the Effective Date or (ii) receipt of written Notice to Proceed from Owner.

3.2 Substantial Completion shall occur no later than [DATE] (“Substantial Completion Date”). Final Completion shall occur within [NUMBER] days after Substantial Completion.

3.3 Liquidated Damages. If Contractor fails to achieve Substantial Completion by the Substantial Completion Date, Contractor shall pay Owner liquidated damages of $[AMOUNT] per day, not as a penalty but as a reasonable estimate of damages.

[// GUIDANCE: Insert milestones if phased construction.]

C. Contract Price & Payment

4.1 Schedule of Values. Prior to first payment application, Contractor shall submit to Owner a detailed schedule of values (“SOV”) allocating the Contract Price among cost codes approved by Owner.

4.2 Progress Payments. Owner shall make monthly progress payments based on Work in place, less (i) retainage pursuant to Section 6.3, (ii) amounts withheld for defective Work, disputed claims, or liens, and (iii) prior payments.

4.3 Payment Applications. Each payment application shall (i) be on AIA G702/703 or other form acceptable to Owner; (ii) be supported by updated schedule, SOV, and conditional lien waivers from Contractor, its subcontractors, and suppliers; and (iii) certify compliance with the 20-Day Preliminary Notice and other lien requirements under A.R.S. § 33-992.01.

4.4 Payment Timing. Subject to Section 4.5, Owner shall pay approved amounts within fourteen (14) days of receipt (“Payment Due Date”) in compliance with A.R.S. § 32-1129.02.

4.5 Prompt-Pay Withholding. Owner may withhold payment for (i) defective Work; (ii) third-party claims; (iii) Contractor’s failure to pay subs or suppliers; or (iv) other material breach, provided Owner supplies written notice specifying reasons within seven (7) days as required by A.R.S. § 32-1129.02(D).

D. Lien, Bond & Retainage Compliance

5.1 Preliminary Notice. Contractor shall (and shall cause all tiers of subcontractors/suppliers to) serve a proper 20-Day Preliminary Notice in accordance with A.R.S. § 33-992.01. Contractor shall deliver copies of all such notices to Owner within five (5) days of service.

5.2 Lien Releases. As a condition precedent to payment, Contractor shall furnish partial and final lien waivers in the forms prescribed by A.R.S. § 33-1008, covering itself and every lower-tier claimant.

5.3 Payment & Performance Bonds. Within ten (10) days of the Effective Date, Contractor shall procure and deliver to Owner dual-obligee payment and performance bonds, each in the full amount of the Contract Price, issued by a Treasury-listed surety licensed in Arizona. The payment bond shall comply with A.R.S. § 33-1003.

5.4 Retainage. Owner may withhold retainage not exceeding ten percent (10%) of each progress payment. When the Work is fifty percent (50%) complete and on schedule, and provided Contractor is not in default, Owner shall reduce retainage to five percent (5%) on subsequent payments, in accordance with A.R.S. § 32-1129.03. Retained sums shall be released within sixty (60) days after Final Completion.

[// GUIDANCE: Adjust retainage percentages if project is residential; confirm statutory nuances.]

IV. REPRESENTATIONS & WARRANTIES

6.1 Mutual Representations. Each Party represents that: (i) it is duly organized, validly existing, and in good standing; (ii) it has full authority to enter into and perform this Agreement; and (iii) execution does not violate any other agreement or law.

6.2 Contractor’s Additional Representations. Contractor further represents and warrants that:
(a) It is appropriately licensed under A.R.S. Title 32, Chapter 10 and will maintain such license throughout the Project;
(b) The Work will be performed in a good and workmanlike manner, in accordance with generally accepted construction practices, free from defects, and in accordance with the Contract Documents;
(c) Materials and equipment furnished will be new and of good quality unless otherwise specified;
(d) The Work will comply with Applicable Law and will not infringe any patent, trademark, or copyright; and
(e) It has not and will not employ any person or entity that is debarred or otherwise ineligible to work on state projects.

6.3 Warranty Period. Contractor’s warranties under Section 6.2 survive Final Completion and remain in effect for two (2) years thereafter, or such longer period as may be prescribed by law or by specific guarantees applicable to portions of the Work.

V. COVENANTS & RESTRICTIONS

7.1 Safety. Contractor shall initiate, maintain, and supervise all safety precautions and programs and comply with OSHA, ADOSH, and all Site-specific rules.

7.2 Environmental & Hazardous Materials. Contractor shall (i) properly handle, store, and dispose of any hazardous materials brought onto or encountered at the Site, and (ii) immediately notify Owner of any suspected hazardous conditions.

7.3 Labor Harmony. Contractor shall use commercially reasonable efforts to prevent strikes or work stoppages and shall be responsible for any additional costs arising from labor disputes within its control.

7.4 Recordkeeping & Audit. Contractor shall maintain complete cost records for at least six (6) years after Final Completion and shall provide Owner audit access upon seven (7) days’ prior written notice.

VI. DEFAULT & REMEDIES

8.1 Events of Contractor Default. The occurrence of any of the following constitutes a “Contractor Default”:
(a) Failure to prosecute the Work diligently or achieve milestones;
(b) Failure to pay subcontractors or suppliers when due;
(c) Filing of a mechanics’ lien or stop notice by Contractor or its lower tiers that is not released or bonded off within ten (10) days;
(d) Failure to maintain required bonds or insurance;
(e) Material breach of any representation, warranty, or covenant; or
(f) Insolvency, bankruptcy, or assignment for the benefit of creditors.

8.2 Notice & Cure. Owner shall give Contractor written notice specifying the default. Contractor shall cure within seven (7) days (or sooner if emergency). If Contractor fails to timely cure, Owner may (i) supplement the forces of Contractor and deduct costs; (ii) terminate for cause; and/or (iii) exercise any other remedy available at law or in equity.

8.3 Termination for Convenience. Owner may, at any time, terminate the Agreement for convenience upon seven (7) days’ written notice. Contractor shall be paid (i) for Work executed, (ii) reasonable demobilization costs, and (iii) a termination fee of [__]% of unperformed Work, capped at the aggregate retainage withheld.

8.4 Attorneys’ Fees. The prevailing Party in any dispute arising from this Agreement shall be entitled to recover its reasonable attorneys’ fees and costs.

VII. RISK ALLOCATION

A. Insurance

9.1 Contractor shall maintain, at its sole cost, insurance of the types and minimum limits set forth below and shall furnish ACORD 25 certificates prior to commencing Work:
(a) Commercial General Liability: $[AMOUNT] per occurrence / $[AMOUNT] aggregate;
(b) Commercial Automobile Liability: $[AMOUNT] combined single limit;
(c) Workers’ Compensation: statutory limits; Employer’s Liability: $[AMOUNT];
(d) Builders Risk/Installation Floater: full replacement cost of Work;
(e) Professional Liability (if design services provided): $[AMOUNT].

9.2 All policies shall (i) name Owner, [LENDER NAME], and their respective officers, directors, and agents as additional insureds (CG 20 10 & CG 20 37 or equivalent), (ii) be primary and non-contributory, and (iii) waive subrogation.

B. Indemnification

9.3 To the fullest extent permitted by law, Contractor shall indemnify, defend, and hold harmless Owner, its affiliates, and their respective directors, officers, employees, and agents (“Indemnitees”) from and against any and all third-party claims, damages, losses, liabilities, fines, penalties, judgments, and expenses (including reasonable attorneys’ fees) arising out of or relating to (i) bodily injury, sickness, disease, or death of any person, or damage to or destruction of tangible property (other than the Work itself) caused by the negligent acts, errors, or omissions of Contractor or its subcontractors/suppliers, or (ii) any breach of this Agreement by Contractor. The foregoing indemnity shall not apply to the extent caused by the negligence or willful misconduct of the Indemnitees.

C. Limitation of Liability

9.4 Aggregate Cap. Except for (i) indemnification obligations under Section 9.3, (ii) willful misconduct, or (iii) Contractor’s obligation to achieve lien-free completion, Contractor’s total cumulative liability to Owner arising out of or relating to the Agreement shall not exceed the Contract Price.

9.5 Exclusion of Consequential Damages. Neither Party shall be liable to the other for any consequential, incidental, or special damages (including lost profits or loss of use), except to the extent such damages are included in a third-party claim subject to Section 9.3.

D. Force Majeure

9.6 Neither Party shall be liable for delays or damages caused by events beyond its reasonable control, including acts of God, terrorism, or governmental actions, provided written notice is given within five (5) days after the force majeure event. The Contract Time shall be equitably adjusted for excusable delays.

VIII. DISPUTE RESOLUTION

10.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Arizona, without regard to conflict-of-laws principles.

10.2 Forum Selection. Each Party irrevocably submits to the exclusive jurisdiction of the state courts located in [COUNTY], Arizona for all actions arising under this Agreement, except as provided in Section 10.3.

10.3 Arbitration. [SELECT ONE: ☑ Include / ☐ Omit] If selected, any dispute shall be resolved by binding arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules then in effect. The arbitration shall take place in [CITY], Arizona before a panel of three (3) arbitrators with construction law experience. Judgment on the award may be entered in any court having jurisdiction.

10.4 Jury Trial Waiver. [SELECT ONE: ☑ Waive / ☐ Preserve] EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.

10.5 Provisional Remedies. Nothing in this Section restricts either Party from seeking injunctive relief or other equitable remedies in aid of arbitration or to preserve the status quo.

IX. GENERAL PROVISIONS

11.1 Amendments & Waivers. No modification of this Agreement is effective unless in writing and signed by both Parties. No waiver is effective unless in writing and applies only to the specific instance waived.

11.2 Assignment. Contractor may not assign or delegate its rights or obligations without Owner’s prior written consent. Any prohibited assignment is void.

11.3 Successors & Assigns. This Agreement is binding upon and inures to the benefit of the Parties and their permitted successors and assigns.

11.4 Severability. If any provision is held invalid, the remaining provisions remain in full force, and the invalid provision shall be reformed to the minimum extent necessary to achieve its original intent.

11.5 Integration. This Agreement, together with the Contract Documents, constitutes the entire agreement of the Parties and supersedes all prior negotiations or agreements.

11.6 Counterparts; Electronic Signature. This Agreement may be executed in multiple counterparts (including electronic signatures and PDF copies), each of which is deemed an original, and all of which constitute one instrument.

11.7 Notices. All notices shall be in writing and delivered by (i) personal delivery, (ii) nationally recognized overnight courier, or (iii) certified mail, return receipt requested, to the addresses below (or such other address designated by notice). Notice is deemed given: upon delivery if personally delivered; one (1) business day after deposit with courier; or three (3) business days after mailing.

Owner:
[OWNER NOTICE ADDRESS]
Attn: [NAME / TITLE]

Contractor:
[CONTRACTOR NOTICE ADDRESS]
Attn: [NAME / TITLE]

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

OWNER:
[OWNER LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________

CONTRACTOR:
[CONTRACTOR LEGAL NAME]
Arizona Contractor License No. _
By: ____
Name: ____
Title: ____
Date: _____

(Seal, if applicable)

[// GUIDANCE: Add notary block if required for recording or institutional lender purposes.]

EXHIBIT A

Drawings & Specifications
[Attach List]

EXHIBIT B

Baseline Schedule & Milestones
[Attach CPM schedule]

EXHIBIT C

Close-Out Deliverables
• Final unconditional lien waivers/releases
• Certificates of occupancy
• As-built drawings in CAD and PDF
• O&M manuals and warranties
• Surety consent to final payment

[// GUIDANCE: Confirm with lender/owner whether additional exhibits (e.g., insurance certificates, safety plan, subcontractor list) are required.]