What are Liquidated Damages?

Liquidated Damages are predetermined amounts outlined in a construction contract, paid by the contractor to the client as compensation for any delays in project completion beyond the agreed timeline.

This clause is a mutual agreement on the consequences of delays, aiming to cover the estimated loss the client might incur due to late delivery.

The Role of Liquidated Damages

Liquidated damages serve as a motivation for contractors to adhere to project schedules and as a form of protection for clients against the inconvenience and costs associated with delays.

They provide a clear, agreed-upon penalty for delays, simplifying the process of compensation without the need for lengthy legal disputes.

Implementing Liquidated Damages

To implement liquidated damages fairly, both parties should agree on a reasonable estimate of damages that could result from project delays.

This agreement should be made during contract negotiations, ensuring clarity and mutual understanding.

Effective project management and communication are key for contractors to minimize the risk of incurring these damages.