This Much And No More? Liquidated Damages And Capping Damages For Delay

Readers will be familiar with liquidated damages ("LDs") as a mechanism for managing the risk of delay on a construction project. The purpose of LDs is for the parties to agree in advance the relevant quantum of damages that will be payable to the Employer in the event of delays to completion of the works beyond the contractual date for completion.

LDs are generally considered to benefit both parties - the Contractor gains certainty as to their financial exposure in the event of delays, and the Employer is relieved of the burden of proving and quantifying their loss.

In order for LD provisions to be enforceable, however, it is essential that they are clearly drafted and that the quantum of damage is appropriate. This has been the topic of various cases in the UK and Ireland, with an interesting recent UK development.