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371.405 Conditions governing enforceability of construction contracts -- Payment
of amounts due.
(1) All payments on construction contracts entered into after June 26, 2007, shall be
made pursuant to the terms of the contract and as required in this section and KRS <br>371.410.
(2) The following provisions in a contract for construction shall be against the public
policy of this Commonwealth and shall be void and unenforceable: <br>(a) A provision that purports to waive, release, or extinguish the right to resolve
disputes through litigation in court or substantive or procedural rights in <br>connection with such litigation, except that a contract may require binding <br>arbitration as a substitute for litigation or require nonbinding alternative <br>dispute resolution as a prerequisite to litigation;
(b) A provision that purports to waive, release, or extinguish rights provided by
KRS Chapter 376, with the exception of partial waivers of lien rights provided <br>by the contractor or subcontractor for progress payments; or
(c) A provision that purports to waive, release, or extinguish the right of a
contractor or subcontractor to recover costs, additional time, or damages, or <br>obtain an equitable adjustment of the contract, for delays in performing the <br>contract that are, in whole or part, within the control of the contracting entity. <br>Unusually bad weather that cannot be reasonably anticipated, fire, or other act <br>of God shall not automatically entitle the contractor to additional <br>compensation under this paragraph.
(3) Subsection (2)(c) of this section shall not render null, void, and unenforceable a
contract provision that: <br>(a) Permits a contractor or subcontractor to recover that portion of delay costs
caused by acts or omissions of the contracting entity;
(b) Requires notice of any delay by the party affected by the delay; <br>(c) Provides for reasonable liquidated damages; <br>(d) Provides for arbitration or any other procedure designed to resolve contract
disputes; or
(e) Specifies which costs are recoverable by a contractor or subcontractor for
delay.
(4) If a provision of a construction contract is found to be null and unenforceable, that
provision shall not affect other provisions of the contract that are in compliance <br>with this section and, to this end, the provisions of the contract are severable.
(5) Except as provided in subsection (7) of this section, all contracts for construction
shall provide that payment of amounts due a contractor from a contracting entity, <br>except retainage, shall be made within thirty (30) business days after the contracting <br>entity receives a timely, properly completed, undisputed request for payment.
(6) Except as provided in subsection (7) of this section, if the contracting entity fails to
pay a contractor within thirty (30) business days following receipt of a timely, <br>properly completed, undisputed request for payment, the contracting entity shall pay
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interest to the contractor beginning on the thirty-first business day after receipt of <br>the request for payment, computed at the rate of twelve percent (12%) per annum on <br>the unpaid amount. Twenty-five (25) business days following the submission of a <br>timely, properly completed, undisputed request for payment, the contractor shall <br>notify the contracting entity by certified mail if payment has not been received. The <br>notice shall also include the date on which interest shall begin to accrue.
(7) For purposes of subsections (5) and (6) of this section, a postsecondary institution
and a board of education shall have forty-five (45) business days to make the <br>payment required by those subsections. For purposes of payments by a board of <br>education, the Department of Education shall have ten (10) business days, including <br>the day the undisputed request for payment is received, to complete the final <br>approval and application for payment and return it to the board of education. The <br>ten (10) business days shall be included in the forty-five (45) business days. If the <br>contracting entity fails to pay a contractor within forty-five (45) business days after <br>receipt of the timely, properly completed, undisputed request for payment, the <br>contracting entity shall, beginning on the forty-sixth day after receipt of the request, <br>pay interest to the contractor computed at the rate of twelve percent (12%) per <br>annum on the unpaid amount.
(8) A contractor shall pay its subcontractors any undisputed amounts due within fifteen
(15) business days of receipt of payment from the contracting entity, including <br>payment of retainage if retainage is released by the contracting entity, if the <br>subcontractor has provided a timely, properly completed, and undisputed request for <br>payment to the contractor.
(9) If a contractor fails to pay a subcontractor any undisputed amounts due within
fifteen (15) business days of receipt of payment from the contracting entity, the <br>contractor shall pay interest to the subcontractor beginning on the sixteenth business <br>day after receipt of payment by the contractor, computed at the rate of twelve <br>percent (12%) per annum on the unpaid amount.
(10) Subsections (8) and (9) of this section shall apply to all payments from
subcontractors to their subcontractors.
Effective: June 26, 2007 <br>History: Created 2007 Ky. Acts ch. 136, sec. 2, effective June 26, 2007.
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