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ARTICLE · 06 JULY 2016

HHG Construction Law series: Part Six: Liquidated Damages (LDs)

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Liquidated damages give powerful relief for delayed construction works, but the right to LDs can be quite vulnerable.

AustraliaReal Estate and Construction
Murray Thornhill
Murray Thornhill
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Liquidated damages (LDs) give powerful relief for delayed construction works. But the right to LDs can be quite vulnerable because of the prevention principle and the doctrine of penalties. Principals should therefore take care to protect their LDs entitlements and contractors should do what they can to avoid an LDs liability. The following case scenario shows why.

Say construction works have been delayed for a period of 8 weeks and the time to complete has only been extended for three weeks. The head contractor did not cause any part of the remaining five weeks' delay and the LDs rate of $1,500 per working day is not so high as to constitute a penalty. So it is enforceable.

In this case, the head contractor's entitlement is simple: 25 working days' delay times $1,500 equals $37,500.

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