Liquidated damages
Liquidated damages are a pre-agreed sum a contractor pays for each day of delay beyond the contract completion date, instead of the owner proving actual loss.
Liquidated damages are a pre-agreed sum a contractor pays for each day of delay beyond the contract completion date, instead of the owner proving actual loss.
Definition
The parties agree the daily amount in the contract. It is meant to be a fair estimate of the owner's loss from late completion, not a penalty.
A plain example
Illustrative example: a contract sets a daily amount for late completion. If the contractor finishes several days after the agreed date and no extension applies, the owner may deduct that amount for each late day. The numbers here are only for illustration.
Why it matters
It gives both sides certainty about the cost of delay and can affect how contractors price risk.
Common confusion
Liquidated damages are not a penalty, and many places will not enforce a sum that is out of proportion. They also differ from actual damages, which must be proved. Rules vary, so ask a lawyer.
On a project
Read how the daily amount is set, which delays qualify for more time and when it stops, for example at substantial completion.
Quick answers
- Are liquidated damages a penalty? They are meant as a genuine pre-estimate of loss. Courts may reject amounts that look punitive.
- What stops them? The contract says, often substantial completion.
- Can delays be excused? Often for reasons the contract lists, if properly notified.
Related terms
Always check the project drawings and specification, and confirm requirements with the engineer of record and the local authority.
Questions people ask
Are liquidated damages a penalty?
They are meant as a genuine pre-estimate of loss. Courts may reject amounts that look punitive.
What stops them?
The contract says, often substantial completion.
Can delays be excused?
Often for reasons the contract lists, if properly notified.
Sources and further reading
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