Topic-06 Liquid Damage.docx

Having read the sources, how should LADs be able to help? How does a contractor need to ensure that all aspects are covered in the contract?

Liquidated damages provisions are commonly used in construction contracts in the United States. Liquidated damages represent an amount of money that the contracting parties agree is an appropriate estimate of the damages a party will sustain if the contract is breached. In construction contracts, liquidated damages most commonly apply when the contractor breaches the contract by not completing the work on time. A formula is generally employed to compute how much a contractor owes for failing to complete on time.

Liquidated Damages are pre-determined damages mentioned in the construction contract agreement which both parties to the contract agree as the amount to recover if the contract is breached. Usually Liquidated Damages are recovered by the Employer if the contractor fails to substantially complete the work within the stipulated time for completion It is a pre-determined amount to cover the possible loss that Employer has to face if the contractor doesn’t complete his work within the time for completion stated in the construction contract. Both contractor and employer knows the amount of Liquidated damages per day or per week if the work is not completed substantially. By signing the contract agreement, contractor agrees on the amount of Liquidated Damages that Employer can recover if the contractor fails to deliver the project within the Time for Completion. If the contractor fails to meet the practical completion by the mentioned project completion date, Employer is entitled to recover the Liquidated Damages from the contractor. Contractor shall allow the Employer to recover the liquidated damages calculated at the rate mentioned in the contract agreement for the period of delay. However such recovery of Liquidated damages by the employer does not relieve the contractor from his liabilities and obligations under the contract. The contractor shall complete the project with accepted quality as per the contract. Liquidated damages save both time and money. Although liquidated damages seems like beneficial for the Employer to recover his loss, this is a pre-determined rate which both parties agree at the time of signing the contract. Therefore both contractor and employer do not need to calculate the loss and damages if the project is delayed by 1 day.

However if the delay of the project is due to a reason that is beyond the contractor, he can claim EOT. Sometimes these reasons and scenario can create environment for disputes. If you are a Main contractor and work with subcontractors to complete the project, then it is necessary to sign your contract agreement with the subcontractor with necessary clauses. In the event that the delay is due to sub contracted work and if Liquidated Damages are mentioned in your subcontractor agreement, then you can recover some part of liquidated damages from the sub-contractor depending on the project and contractual situation https://thecontractsengineer.com/liquidated-damages-in-construction-contracts/

http://www.inhouselawyer.co.uk/wgd_question/do-contracts-commonly-contain-delay-liquidateddamages-provisions-and-are-these-upheld-by-the-courts/