Liquidated Damages & Penalty Clauses In The Construction Industry

The construction industry is a significant component of the Bahraini economy with local and foreign investment in new residential and commercial projects continuing to proliferate through the years. GDP from construction in Bahrain averaged BHD214.06 million from 2012 until 2022, reaching an all-time high of BHD240.49 million in Q2 of 2022. Yet with the important part of the Bahraini economy comes an ever-lasting concern on the issues that may arise during the course of construction projects. Contracts concluded between parties factor in the risk of disruptions and delays that may affect projects, which is why the FIDIC contracts envisage concepts such as time extensions. Liquidated damages are an amount determined by the Employer as a reasonable assessment of the actual damages he would suffer in the event of delay in the completion of the works. Article 225 of Decree Law 19/2001 on the Issuance of the Civil Code ("BCC") provides "Unless the obligation is payment of