Interpreting Kentucky law, the Sixth Circuit determined that the contractor who failed to complete a project was entitled to a defense in an action brought by its performance bond carrier. Phoenix Ins. Co., et al. v. Wehr Constructors, Inc., 2025 U.S, App. LEXIS 9258 (6th Cir. April 18, 2025).

Wehr entered into a contract with St. Claire Medical Center to construct a Medical Services Pavilion as an addition to the main hospital facility. A standard form issued by the American Institute of Architects, AIA document form A101-1997, was used. (Construction Agreement). Section 14.2 of the form contained a termination clause that allowed St. Claire to terminate the contract if Wehr committed a "substantial breach," provided that the architect on the project certified that sufficient cause existed (the Termination Clause). If the Termination Clause was invoked, Wehr would not be entitled to the remaining unpaid balance of the contract and St. Claire could seek damages from Wehr if the cost of completing the project exceeded the unpaid balance.