Construction Contract - Kentucky

CONSTRUCTION SERVICES AGREEMENT

(Kentucky – Private Nonresidential Project)

THIS CONSTRUCTION SERVICES AGREEMENT (the “Agreement”) is made and entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and between:

1. [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Owner”); and

2. [CONTRACTOR LEGAL NAME], a [STATE] [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Contractor”).

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

Applicability screen (complete before use):

• ☐ The Project is private, nonresidential construction. This form must not be used for residential construction or a public project without a project-specific rewrite.
• ☐ The Project is not excluded from KRS 371.400 to 371.425 by KRS 371.425(3) or (4), including the identified Rural Utilities Service and KRS Chapter 278 facility exclusions.

RECITALS

A. Owner is the fee simple owner and/or duly authorized representative of the property located at [PROJECT ADDRESS / LEGAL DESCRIPTION] (the “Property”).
B. Owner desires to engage Contractor to furnish all labor, materials, equipment, and services necessary to construct [PROJECT DESCRIPTION] (the “Project”).
C. Contractor represents that it has obtained every license, registration, and local authorization required for the Work, if any, and is qualified to perform the Work.
D. In consideration of the mutual promises herein, the Parties agree as follows:

TABLE OF CONTENTS

1. Definitions
2. Scope of Work
3. Contract Documents & Order of Precedence
4. Contract Sum, Retainage & Payment Procedures
5. Time for Performance; Schedule
6. Lien Compliance & Payment Bond
7. Representations & Warranties
8. Covenants
9. Changes in the Work
10. Insurance & Risk Allocation
11. Indemnification
12. Limitation of Liability
13. Events of Default & Remedies
14. Suspension & Termination
15. Dispute Resolution
16. General Provisions
17. Execution

1. DEFINITIONS

For purposes of this Agreement, capitalized terms shall have the meanings set forth below.

“Applicable Law” means all federal, state, and local statutes, ordinances, regulations, building codes, and case law applicable to the Project, including without limitation Kentucky lien laws (currently codified at KRS Chapter 376).
“Change Order” means a written modification to the Contract Documents executed by authorized representatives of both Parties pursuant to Section 9.
“Claim” means any claim, demand, cause of action, loss, damage, liability, cost, or expense (including reasonable attorneys’ fees).
“Contract Documents” has the meaning given in Section 3.1.
“Contract Sum” means the lump sum of $[AMOUNT] (subject to adjustments only as expressly permitted herein).
“Day” means a calendar day unless otherwise specified.
“Final Completion” means completion of all Work, correction of all punch-list items, and delivery of all required close-out documentation.
“Force Majeure Event” has the meaning given in Section 10.4.
“Retainage” has the meaning given in Section 4.2.
“Substantial Completion” means, for purposes of statutory Retainage, the point certified in writing by Owner at which the Project is in strict compliance with this Agreement, necessary regulatory approvals have been given, Owner has received all required warranties and documentation, and Owner may beneficially use or occupy, operate, and maintain the Project for its intended purpose, consistent with KRS 371.410(2). Partial use or occupancy does not necessarily establish Substantial Completion.
“Work” means all labor, services, materials, tools, equipment, and other items furnished by Contractor under this Agreement.

2. SCOPE OF WORK

2.1 Performance. Contractor shall diligently perform and complete the Work in strict conformity with the Contract Documents and Applicable Law, using its best skill and workmanship.

2.2 Standard of Care. Contractor shall perform the Work (a) in a good and workmanlike manner, (b) in accordance with generally accepted construction industry standards, and (c) consistently with applicable manufacturer requirements and building codes.

2.3 Supervision & Labor. Contractor shall provide competent supervision and sufficient qualified personnel to timely perform the Work.

2.4 Safety. Contractor is responsible for safety precautions and programs relating to its Work and shall comply with applicable workplace-safety law. This contractual allocation does not relieve Owner or any other person of a duty that Applicable Law makes nondelegable.

2.5 Cleanup. Contractor shall keep the Project free from accumulation of waste materials and debris resulting from the Work and shall remove all such debris at its own cost upon Final Completion or as otherwise required.

3. CONTRACT DOCUMENTS & ORDER OF PRECEDENCE

3.1 Contract Documents. The following, collectively, constitute the “Contract Documents”:

a) This Agreement (including all exhibits and attachments);
b) The Drawings and Specifications prepared by [ARCHITECT/ENGINEER NAME], dated [DATE];
c) Approved Change Orders and written amendments;
d) The Project schedule attached as Exhibit ☐;
e) Any other documents listed in Exhibit [___].

3.2 Order of Precedence. In the event of a conflict among the Contract Documents, the document higher in the list of Section 3.1 shall control unless expressly stated otherwise.

4. CONTRACT SUM, RETAINAGE & PAYMENT PROCEDURES

4.1 Contract Sum. Owner shall pay Contractor the Contract Sum, subject to additions and deductions as provided herein.

4.2 Retainage. Until fifty percent (50%) of the Project has been completed in accordance with this Agreement, Owner may withhold no more than ten percent (10%) retainage (“Retainage”) from an undisputed payment due. Retainage held after fifty-one percent (51%) completion shall not exceed five percent (5%) of the total Contract Sum. If this Agreement is for $2,000,000 or more and Owner holds Retainage, Owner shall place it in the separate Kentucky escrow account required by KRS 371.160. Within thirty (30) Days after Substantial Completion as defined in KRS 371.410, Owner shall release Retainage except that Owner may retain no more than two hundred percent (200%) of its reasonable estimated cost of contractually required but unfinished Work. Owner's agent shall determine that estimate, and the affected Parties shall mutually agree on a completion schedule. These terms are governed by KRS 371.160 and KRS 371.410.

4.3 Schedule of Values. Contractor shall submit a schedule of values (SOV) acceptable to Owner within five (5) Days after the Effective Date. The SOV shall allocate the Contract Sum among labor and materials in a form suitable for progress payments.

4.4 Progress Payments.

a) Application. On or before the [DAY] day of each month, Contractor shall submit an application for payment covering Work performed during the preceding period, supported by (i) a sworn statement; (ii) the conditional partial progress-payment waivers permitted by Section 6.2; and (iii) such other documentation as Owner may reasonably require.
b) Review & Payment. Within seven (7) Days after receipt, Owner shall review the application and notify Contractor of any genuinely disputed items. Owner shall pay each timely, properly completed, undisputed request within fourteen (14) Days after approval and, in every event, within the thirty (30) business-day outer limit in KRS 371.405(5).

4.5 Final Payment. Contractor shall be entitled to final payment of the unpaid Contract Sum, including any amounts still lawfully held, upon (a) Final Completion; (b) submission of as-built drawings, warranties, operation manuals, and all close-out documents; and (c) delivery of a final affidavit identifying the status of payrolls, material bills, and other indebtedness connected with the Work. This Agreement does not require a prospective final waiver of rights under KRS Chapter 376.

4.6 Interest; Statutory Notice. A timely, properly completed, undisputed request not paid within thirty (30) business days after receipt accrues interest beginning on the thirty-first business day at twelve percent (12%) per annum under KRS 371.405(6). If payment has not been received twenty-five (25) business days after submission, Contractor shall send the certified-mail notice that subsection requires, including the date interest begins. This section does not postpone an earlier contractual payment due date.

4.7 Set-off. Owner may offset only a documented amount that Contractor presently owes Owner and may not use set-off to withhold an otherwise undisputed payment contrary to KRS 371.405.

5. TIME FOR PERFORMANCE; SCHEDULE

5.1 Commencement & Substantial Completion. Contractor shall commence the Work within [X] Days after receipt of a written Notice to Proceed and shall achieve Substantial Completion by [SUBSTANTIAL COMPLETION DATE].

5.2 Time Is of the Essence. Time is of the essence for all milestones set forth in the Project schedule.

5.3 Delays & Extensions. Contractor is entitled to an appropriate extension of time for delays caused by (a) Force Majeure Events, (b) unanticipated concealed conditions, or (c) Owner-caused delays, provided Contractor gives the reasonable notice required by this Agreement. Nothing in this Agreement waives Contractor's right under KRS 371.405(2)(d) and (3) to recover allowable costs, additional time, damages, or an equitable adjustment for delay within Owner's control. Unusually bad weather, fire, or another act of God does not automatically create a right to additional compensation.

6. LIEN COMPLIANCE & PAYMENT BOND

6.1 Contractual Subcontractor List; Statutory Notices. Within fifteen (15) Days after first furnishing labor or materials, Contractor shall give Owner a current list of first-tier subcontractors and material suppliers. That list is a contractual project-control requirement, not the statutory notice of intent to claim a lien. Each potential lien claimant remains responsible for the notices KRS 376.010 requires, including the seventy-five-day or one-hundred-twenty-day post-last-furnishing notice applicable to specified claimants without direct owner privity.

6.2 Monthly Partial Lien Waivers. As a condition to a progress payment, Contractor shall deliver a conditional, partial waiver limited to the work and amount covered by that payment, together with equivalent conditional partial waivers from subcontractors and suppliers included in the application. A waiver becomes effective only to the extent the identified payment is actually received. Nothing in this section prospectively waives future lien rights or requires a waiver broader than the progress-payment exception permitted by KRS 371.405(2)(b).

6.3 Payment Bond [OPTIONAL CONTRACT TERM]. ☐ Contractor shall furnish, concurrently with execution of this Agreement, a payment bond in the penal sum of [AMOUNT OR PERCENTAGE], written by a surety reasonably acceptable to Owner and maintained for [PERIOD]. This is a negotiated private-project requirement; this form does not represent that Kentucky law imposes a contract-value threshold requiring a payment bond on every private project.

6.4 Filed Liens. Contractor shall, at its sole cost, promptly satisfy, bond off, or otherwise obtain lawful discharge of any valid lien filed against the Property arising from amounts Contractor was obligated but failed to pay. This provision does not waive a claimant's rights under KRS Chapter 376 or require Contractor to satisfy a lien attributable to Owner's failure to make a payment due.

6.5 Owner's Right to Pay & Deduct. If Contractor fails, after written demand and a reasonable opportunity, to satisfy, contest, or lawfully bond off a valid lien attributable to Contractor's unpaid obligation, Owner may pay the amount Contractor owes the claimant and deduct that payment and reasonable resulting costs from sums otherwise due Contractor, subject to Applicable Law.

7. REPRESENTATIONS & WARRANTIES

7.1 Contractor represents and warrants that:

a) It is duly organized, validly existing, in good standing, and qualified to do business in Kentucky;
b) It holds each professional, trade, business, and local license required for the Work, if any;
c) It has the expertise, financial capacity, personnel, and equipment to perform the Work;
d) All materials and equipment furnished shall be new and of good quality unless otherwise specified;
e) The Work shall be free from defects in material and workmanship for a period of one (1) year after Substantial Completion (“Warranty Period”);
f) Performance of the Work will not infringe any patent, copyright, or trade secret.

7.2 Survival. The representations and warranties of this Section 7 shall survive Substantial Completion and any termination of this Agreement.

8. COVENANTS

8.1 Compliance with Law. Contractor shall strictly comply with all Applicable Law, including prevailing wage obligations (if any), environmental requirements, and lien statutes.

8.2 Permits & Taxes. Contractor shall obtain and pay for all permits, licenses, inspections, and taxes required in connection with the Work, except those expressly required by contract to be obtained or paid by Owner.

8.3 Labor Harmony. Contractor shall take all reasonable steps to prevent labor disputes and strikes that could affect the Project.

8.4 Notice of Events. Contractor shall promptly notify Owner in writing of (a) any material deviation from the schedule, (b) accidents or injuries on the Project, (c) violations or potential violations of Applicable Law, or (d) any Claim that may give rise to Owner liability.

8.5 Non-Assignment. Contractor shall not assign this Agreement or subcontract all or substantially all of the Work without Owner’s prior written consent.

9. CHANGES IN THE WORK

9.1 Owner-Directed Changes. Owner may, without invalidating this Agreement, order changes in the Work by issuing a written Change Order.

9.2 Contractor-Requested Changes. Contractor shall not perform any change in the Work without a Change Order signed by Owner.

9.3 Pricing of Changes. Adjustments to the Contract Sum shall be (a) by mutual lump-sum agreement, (b) by unit prices stated in the Contract Documents, or (c) on a time-and-materials basis with a markup of ☐% for overhead and profit.

9.4 Disputed Changes. If the Parties disagree on entitlement or price, Contractor shall proceed with the changed Work and shall keep contemporaneous records for later resolution pursuant to Article 15.

10. INSURANCE & RISK ALLOCATION

10.1 Contractor Insurance. Contractor shall, at its own expense, maintain insurance in the following minimum limits:

a) Commercial General Liability: $[___] per occurrence / $[___] aggregate;
b) Workers’ Compensation: statutory limits;
c) Employer’s Liability: $[___];
d) Commercial Automobile Liability: $[___];
e) Umbrella/Excess Liability: $[___].

10.2 Evidence of Coverage. Contractor shall deliver certificates evidencing the required coverage before commencing the Work. If the Parties require advance notice of cancellation or material change, that obligation must be stated in the applicable policy or endorsement; a certificate alone does not amend coverage.

10.3 Builder’s Risk. Owner [CHECK ONE] ☐ shall ☐ shall not provide an “all-risk” builder’s risk policy covering the Work. If Owner does not provide such coverage, Contractor shall obtain equivalent insurance and may include the cost in the Contract Sum.

10.4 Force Majeure. Neither Party shall be liable for delay in performing a contractual duty due to a cause beyond its reasonable control (“Force Majeure Event”), including natural disasters, acts of terrorism, riots, war, or widespread labor strikes, provided the affected Party gives prompt written notice after becoming aware of the event. This section does not waive Contractor's rights for a delay within Owner's control under KRS 371.405 or excuse payment, safety, or other duties that Applicable Law makes nonwaivable.

11. INDEMNIFICATION

11.1 Contractor Indemnity. To the fullest extent permitted by law, Contractor shall indemnify and hold harmless Owner, its lenders, consultants, and agents (collectively, the “Indemnitees”) from third-party Claims, but only to the extent caused by the negligence or willful misconduct of Contractor or a person for whom Contractor is legally responsible. Contractor has no obligation to indemnify or hold harmless an Indemnitee from that Indemnitee's own negligence or the negligence of that Indemnitee's agents or employees. KRS 371.180 controls over any inconsistent wording.

11.2 Defense Costs. Contractor shall reimburse reasonable defense costs to the same proportionate extent that Section 11.1 requires indemnification. Contractor has no immediate duty to defend a Claim that alleges only an Indemnitee's own negligence or other conduct outside Section 11.1.

11.3 No Limitation. The indemnity obligations herein shall not be limited by any insurance requirements, limitations of liability, or caps on damages.

12. LIMITATION OF LIABILITY

12.1 Cap. Except for liability that Applicable Law does not permit the Parties to limit, the cumulative liability of Contractor to Owner for direct damages arising out of this Agreement shall not exceed the Contract Sum. This cap does not enlarge the indemnity in Section 11 or protect an Indemnitee from its own negligence.

12.2 Exclusion of Consequential Damages. To the extent permitted by Applicable Law, neither Party shall be liable to the other for consequential or incidental damages, including lost profits, loss of financing, or loss of use, except for damages arising from (a) fraud, (b) willful misconduct, (c) indemnification obligations for third-party claims, or (d) liability that Applicable Law does not permit the Parties to exclude. Punitive damages are governed by Applicable Law and are not contractually created or waived here.

13. EVENTS OF DEFAULT & REMEDIES

13.1 Contractor Default. Each of the following constitutes a “Contractor Default”:

a) Failure to prosecute the Work diligently or in accordance with the schedule;
b) Failure to pay subcontractors or suppliers when due;
c) An insolvency event, but only to the extent Applicable Law permits that event to constitute a contractual default;
d) Material breach of any covenant, representation, or warranty, if not cured within seven (7) Days after written notice;
e) Failure to maintain required insurance.

13.2 Owner Remedies. Upon a Contractor Default, Owner may, after two (2) Days’ notice, without prejudice to any other right or remedy:

a) Suspend the Work;
b) Perform or procure performance of the defaulted obligations and deduct the cost from payments due Contractor;
c) Terminate this Agreement for cause under Section 14.1;
d) Seek specific performance, injunctive relief, and/or damages.

13.3 Owner Default & Contractor Remedies. Owner shall be in default if it fails to make payment of undisputed amounts within fourteen (14) Days after written notice. Contractor may suspend the Work or terminate under Section 14.2 after an additional seven (7) Days' notice, and may pursue any other remedy or owner-delay recovery that this Agreement and KRS 371.400 to 371.425 preserve. The listed remedies are not exclusive.

13.4 Attorneys' Fees. For an action or arbitration to enforce KRS 371.400 to 371.425, the court or arbitrator shall award costs and reasonable attorneys' fees to the prevailing Party only if the losing Party is deemed to have acted in bad faith, as provided by KRS 371.415. For another claim, fees and costs are recoverable only where this Agreement or Applicable Law authorizes them.

14. SUSPENSION & TERMINATION

14.1 Termination by Owner for Cause. Owner may terminate this Agreement upon a Contractor Default that remains uncured after the notice and cure periods of Section 13.1. Owner may finish the Work by whatever method it deems expedient, and Contractor shall be liable for all costs in excess of the unpaid balance of the Contract Sum.

14.2 Termination by Contractor for Cause. Contractor may terminate this Agreement if (a) Owner fails to make timely payment of undisputed amounts, or (b) Work is stopped for more than sixty (60) Days due to no fault of Contractor.

14.3 Termination for Convenience. Owner may, at any time and for any reason, terminate this Agreement for convenience upon seven (7) Days’ written notice. Contractor shall be entitled to (a) payment for Work properly executed, (b) reasonable demobilization costs, and (c) a markup of ☐% on uninstalled materials specifically fabricated for the Project, provided Contractor transfers title and delivers such materials to Owner.

15. DISPUTE RESOLUTION

15.1 Step-Negotiation. As a condition precedent to arbitration or litigation, senior executives of the Parties shall meet within seven (7) Days after a Party issues a written notice of dispute and attempt in good faith to resolve the dispute.

15.2 Mediation [OPTIONAL]. If the dispute is not resolved within fourteen (14) Days, either Party may demand non-binding mediation administered by [MEDIATION PROVIDER] in [CITY, KY]. Costs shall be shared equally.

15.3 Arbitration [SELECT ONE]:

☐ (a) The Parties agree that any dispute not resolved through negotiation or mediation shall be finally resolved by binding arbitration administered by the American Arbitration Association in accordance with its Construction Industry Arbitration Rules. Judgment on the award may be entered in any court having jurisdiction.

☐ (b) Arbitration is expressly rejected. Disputes shall be resolved in a Kentucky court with subject-matter jurisdiction and proper venue.

15.4 No Standalone Jury Waiver. If the Parties select litigation rather than binding arbitration, this Agreement does not waive either Party's right to a jury trial or another substantive or procedural litigation right. KRS 371.405(2)(a) makes such advance waivers void in a covered construction contract while permitting binding arbitration as a substitute for litigation.

15.5 Injunctive Relief. Nothing herein shall limit either Party’s right to seek temporary restraining orders, preliminary injunctions, or other interlocutory relief to prevent irreparable harm.

15.6 Governing Law & Forum. This Agreement shall be governed by the laws of the Commonwealth of Kentucky, without regard to conflicts-of-law principles. Subject to a valid arbitration selection in Section 15.3, an action shall be filed in a Kentucky court with subject-matter jurisdiction and proper venue. The Parties may identify [COUNTY], Kentucky as their intended venue only if that selection is valid for the particular dispute.

16. GENERAL PROVISIONS

16.1 Independent Contractor. Contractor is an independent contractor and not an agent or employee of Owner.

16.2 Assignment. Neither Party may assign its rights or obligations without the prior written consent of the other, except that Owner may assign this Agreement to its lender or to an affiliate without Contractor’s consent upon written notice.

16.3 Entire Agreement. The Contract Documents constitute the entire agreement between the Parties and supersede all prior negotiations and understandings.

16.4 Amendments & Waivers. No amendment or waiver shall be effective unless in writing and signed by authorized representatives of both Parties. Waiver of any breach shall not constitute waiver of any other breach.

16.5 Severability. If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force, and the Parties shall negotiate a valid substitute provision consistent with the original intent.

16.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts. Signatures may be transmitted electronically (for example, by PDF or an electronic-signature service) to the extent permitted by Applicable Law.

16.7 Notices. Contractual notices shall be in writing and delivered (a) personally, (b) by certified mail, return receipt requested, or (c) by nationally recognized overnight courier, to the addresses set forth in the preamble (or as later changed by notice). A notice governed by KRS 371.405, KRS Chapter 376, a court rule, or another law must also satisfy that law's content, timing, and delivery requirements; this section does not replace them.

16.8 No Third-Party Beneficiaries. Except as expressly provided in Section 11, nothing in this Agreement creates any duty to, or right in favor of, any third party.

16.9 Interpretation. Headings are for convenience only and do not affect interpretation. The terms “include,” “includes,” and “including” are deemed to be followed by “without limitation.”

16.10 Survival. Provisions that by their nature should survive termination, including Sections 4, 6, 7, 10–13, 15, and 16, shall survive Final Completion and any termination of this Agreement.

17. EXECUTION

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the Effective Date.

[Seal, if applicable]
[Notary Acknowledgment, if required]

Sources and References

• KRS 371.180 — Construction services contracts.
• KRS 371.160 — Escrow of owner-held retainage (effective June 27, 2025 text).
• KRS 371.405 — Construction-contract enforceability and payment (effective June 27, 2025 text).
• KRS 371.410 — Retainage.
• KRS 371.415 — Costs, fees, and Kentucky venue.
• KRS 371.425 — Applicability (effective June 27, 2025 text).
• KRS 376.010 — Mechanics' and materialmen's liens.
• KRS 376.080 — Lien statement and owner copy.