Delay Penalty In Construction Contracts

The construction contract often includes a clause whereby the contractor is obliged to compensate for the delay in completing the works by a certain amount for each day, each month, or for each period of time in which the implementation is delayed. Such a clause could be determined as a penalty under which the parties agree to compensate for the damages resulting from the delay. Also, the clause could be described as a comminatory clause merely designed to threaten the contractor and discourage him from breaching the performance of his obligation. However, the court will decide whether the agreement was a penalty or a comminatory clause in the light of the parties' intention when they entered the contract.