Is there a better alternative to liquidated damages on construction projects?

Liquidated damages have long been used in the construction industry to compensate principals for late completion of building work.

However, on projects where timeframes are tight and disputed extension of time claims are likely, liquidated damages can be difficult and time consuming to enforce. In these circumstances, an incentive scheme may offer a better alternative.

DELAY LIQUIDATED DAMAGES

In most cases, delay liquidated damages (Delay LDs) offer benefits to both parties. Principals avoid the difficulty (and expense) of proving actual damages and contractors have certainty as to their potential exposure in the event of late completion of a project.

Provided the Delay LDs are a genuine pre-estimate of the loss likely to be incurred by the principal due to delayed completion, they will generally be enforced by the courts.