In an earlier post, I addressed the statutorily-required minimum elements of Arizona construction contracts between contractors and property owners. As a reminder, those minimum elements are set forth in A.R.S. § 32-1158(B). This post will, however, address the other side of that same coin—namely, the relatively few construction contract provisions that are statutorily void and unenforceable in Arizona.
First, A.R.S. § 32-1129.05(A) provides that the following are against Arizona’s public policy and are void and unenforceable:
- “A provision, covenant, clause or understanding in, collateral to or affecting a construction contract that makes the contract subject to the laws of another state or that requires any litigation arising from the contract to be conducted in another state;” and
- “A provision covenant, clause or understanding in, collateral to or affecting a construction contract stating that a party to the contract cannot suspend performance under the contract or terminate the contract if another party to the contract fails to make prompt payments under the contract pursuant to section 32-1129, 32-1129.01 or 32-1129.02.”
Second and finally, A.R.S. § 32-1159(A) provides that indemnification provisions “that purport to indemnify, to hold harmless or to defend the promisee from or against liability for loss or damage resulting from the sole negligence of the promisee or the promisee’s agents, employees or indemnity [are] against the public policy of this state and [are] void” in all private construction contracts and architect-engineer professional services contracts. (Emphasis added).
As both A.R.S. §§ 32-1129.05(A) and 32-1159(A) respectively make clear, the provisions identified above are simply not operative in Arizona construction contracts and will not be enforced. It should be noted that the prohibition against these provisions applies to both prime contracts and subcontracts. Lastly, it should be noted that, consistent with the prohibition in § 32-1129.05(A)(1) against litigation being conducted in another state, A.R.S. § 32-1129.05(B) provides that “[a]ny mediation, arbitration, or other dispute resolution proceeding arising from a construction contract for work performed in [Arizona] shall be conducted in this state.”