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ARTICLE · 09 JULY 2024

L Is For Liquidated Damages

Fenwick Elliott LLP
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Liquidated damages in construction are pre-agreed sums for specific breaches, offering predictability and incentivizing timely performance. They limit liability but can be challenged as penalties or if uncertain. Post-termination, only general damages apply unless otherwise stipulated.

United KingdomReal Estate and Construction
Huw Wilkins
Huw Wilkins
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Introduction

Liquidated damages are common in the construction industry1 and give rise to a number of different issues. This article focuses on the difference between liquidated damages and general damages, whether liquidated damages are an exclusive remedy, how one might challenge a liquidated damages provision and whether one can recover liquidated damages for a period after termination of the contract.

What's the difference between liquidated damages and general damages?

Damages for breach of contract are intended to put the innocent party in the position they would have been in had the breach not occurred. When claiming general damages, the innocent party must prove that the other party's breach of contract caused the loss claimed. The Tribunal (adjudicator / arbitrator(s) / judge) will then decide what level of damages adequately compensates the innocent party for the loss it has suffered.

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